As a business owner, you need to keep financial records. As without them, how can you actually manage your company? How do you know whether you have made a profit, or a loss? How do you know how much to pay your suppliers, or to chase your customers for the debts?
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You also need to keep financial records, for any finance providers, like if you’re going to try and get a loan. And also, you need to get financial records for statutory purposes.
HMRC need you to have them, for your corporation tax, income tax, VAT, your PAYE.
If you are a limited company, then company’s house needs you to keep financial records.
What records do I need to keep?
To be safe, you should keep everything, bank statements, sales invoices and contracts, purchase receipts and contracts, your stock records and your payroll records.
You need to able to back up all the figures in your accounts, and the tax returns. That includes all the sales, all the expenses, and also records for any assets you may own.
Whether that’s plant machinery, office equipment, cars, to be able to back up all the debtors, i.e people who owe you money, so customers. And all the creditors, the suppliers you owe money to, the loans, HMRC themselves, and to also back up any stock you might own, goods you’ve bought that are still on your premises.
What software should I use for record keeping?
We could just keep it simple and keep all the paper. That’s absolutely fine, but it’s better to use some software, something that adds all that paper up, and summarises it into a useful format.
This can be Excel, everyone’s usually got Excel, so you would have probably already paid for it so it’s free, and it can do everything you need.
But even better would be some cloud software, you can access it from anywhere, and it’s easier and less messy than say, Excel.
This is because it’s set up specifically to produce accounts and financial records. So, you don’t have to do the adding up yourself, the software will do it all for you.
What are the benefits of cloud software?
Cloud software is great because you can access it from anywhere as long as you can get an internet connection, on your phone, your iPad, on a laptop or PC.
It also, as well, ties in nicely to making tax digital, which is HMRC’s new initiative, where all business owners are going to have to provide all their accounts and financial records digitally.
You can also do some great things with cloud software. My actual favourite is called Receipt Bank, where rather than having to type everything in manually, you just take photo of your invoices, and it’s all done automatically for you.
Legally, you need to keep your records for six years after your year end. And this is just to give HMRC a chance to look at them later.
What happens if you don’t keep financial records?
Well, first of all, it makes your life harder. As I said earlier, how will you know what your profit and loss is? How do you know what to pay suppliers? How do you know what to ask your customers to pay you?
But separately, you actually could be fined £3000 by HMRC, if you don’t keep proper financial records.
If you’ve got limited company, you can actually be disqualified as a director.
So, my simple advice is, just do it. If you’d like a chat, please contact us on gr****@*********************co.uk or by phone on 0151 380 8081.