Bookkeeping Every business needs to keep accurate records.
Without them you will not know how well you are doing. You will not be
able to produce your annual accounts and any VAT returns. If that is not
enough to persuade you then it is now a legal requirement. You could be
liable to a penalty of £3,000 if you fail to keep records.
If your records are poor then it takes longer to draw
up your accounts at the end of the year. This will mean increased accountancy
bills. Even though when you set up in business you have very little spare
time, you should always make time for book keeping. If you cannot afford
the time, hire someone to help you. Once they have set up a good system
you may even be able to take it over yourself once things are more settled.
Many businesses now choose a computerised accounting
package. Used carefully they can be a Godsend. However unless you broadly
understand what they are doing then you can get into a real mess. We have
developed our own package - the Online
Accounting Service - which is designed to make it quick and easy for
you to maintain your business records.
What sort of records should I keep?
A record of all your money going in and out - known
in the business as a Cash Book
A record of all sales - including a note of when
your bill are paid - Sales Ledger
A record of all your purchases - including details
of when they are paid Purchase
Ledger
Larger business with staff may want to keep a separate
record of incidental expenses - Petty
Cash Book
For a small business these records can be merged together
into a single record. However the principle is that keeping separate the
recording of all movements of money - the cash book - from your records
of purchases and sales - the Sales Ledger and the Purchases ledger provides
a double check on the accuracy.
In effect a small business is using an annotated bank
statement as its cash book
Cash book This record keeps track of all your income and
expenditure. This record book should be checked against your bank statements.
The balances will rarely match exactly as your cash book will be include
items which have not cleared the bank and so will not be on any statement
you receive. However you should always be able to write down the uncleared
items. If you hope to produce your own accounts then you will need to
reconcile this at the year end.
If you will use an accountant then the more detail
you include in this book the better. The notes will explain what the money
was spent for and to reduce the number of questions the accountant needs
to ask.
You might want to record
cheque numbers against amounts paid
Invoice numbers paid and the companies who have paid
them
Sales Ledger This book records invoices you have sent to your
customer or clients. It also records who has paid and perhaps most importantly
who has still not paid!!
Keep a duplicate of any invoice you have sent our in a folder or file.
The unpaid invoices can be kept separate and then transferred once they
have been paid. This will avoid confusion and will provide a physical
check of who has not paid so that you can chase them!
You might want to record
Dates invoices were issued
Invoice numbers
Customers Name
Amount due and any discounts for early payment which
you offer
Dates payment is due
Date of payment of invoices leaving the invoices
without a date as those invoices owing
Purchase Ledger This book records invoices you receive for goods
and services which you have ordered. You also record the time of payment
and the difference then reflects the money you owe other companies. If
you keep this up-to-date then this ensures you pay on time.
You might want to record
Invoice or purchase order numbers
Suppliers name and service/goods bought
Amounts owed
Terms agreed
Due payment dates
cheque number and date when paid
As with your sales ledger, it can help if you keep
your unpaid invoices separate from those which have been paid.
Petty cash book
Businesses with employees may wish to keep a book to account for all the
miscellaneous spending in the office, shop etc. This might include: window-cleaning
bills, stationery, postage, cleaning supplies and any other sundry item.
The easiest way is to begin by creating a float. Your float can be anything
from £20 to £100 depending on how much you feel you would
need to spend. This might be kept in a petty cash tin and many businesses
keep the record book in the tin.
Keeping receipts for all these transactions is also important as it will
help you to account for the money used. Sadly not all employees can be
trusted.
Check your records once per week or month and replenish your float at
regular intervals. It should always be possible to reconcile the cash
float. I.e.
Amount brought forward - cash expenditure
recorded = the amount which ought to be in the cash tin.
If this equals the amount which is in
the tin then it reconciles.
To find out more about our Bookkeeping Services, please call us at +44 (0)1223 507080 or email at info@tax.uk.com
What sort of records should I keep?