Guide to record keeping for new businesses

Guide to Record Keeping for New Businesses

Whether you have been planning this for a while or your hobby has become your business (remember, any income more than £1,000 per tax year must be declared and may be taxable), you’ve taken the leap, and your passion has become your sole focus in setting up your business.

But if there’s one thing you can’t afford to ignore, its good record keeping. It might sound boring, but trust me, it’s super important.

Why Record Keeping Matters

• Financial Management
• Legal Compliance
• Tax Preparation
• Performance Monitoring

Key Records to Maintain

Money Matters: Keep all your invoices, receipts, bank statements, payroll records, and tax documents.

Customer and Supplier Details: Maintain a database of your customers and suppliers, including their contact info and transaction history. This can help with marketing and managing relationships.

Legal Stuff: Keep copies of your business registration, licenses, permits, tax filings, and any contracts. These are crucial for compliance and if any legal issues pop up.

Employee Info: Store employment contracts, performance reviews, payroll details, and tax forms. This is important for legal reasons and managing your team.

How to Keep Track of it All

My advice, no matter the size of your business (this includes sole traders), is to make use of technology and apps to your advantage with cloud accounting software. Using software will enable you to keep most of your business paperwork in one place. For other documents such as leases, licenses, etc., sign up for cloud storage to keep them all together, password and encryption protected.

My Top Tips

• Before considering software, speak to other business owners you know to see what they are using and the benefits it offers.
• Contact a qualified bookkeeper, have a chat about your business, and ask for recommendations.
• Don’t put it off – start as soon as you make your first purchase; it doesn’t take long to accrue a mountain of paperwork.
• If this side of running your business is not for you, contact a qualified bookkeeper and have a chat about outsourcing.

So, take a deep breath, get organised, and you’ll thank yourself later!

Why every business needs to obtain an invoice or receipt for their purchases

No matter what your business structure (yes, this includes sole traders), it’s essential to have a record of all your business purchases. You only have to ask my clients to know I chase them all the time to make sure we have a receipt for every one of their purchases.

I know it’s easy to forget to ask for a receipt when you are in a rush, but no receipt will have an impact on your business accounts, whether you are VAT registered or not. Here’s why:

Financial Management and Budgeting

Invoices and receipts provide a clear record of your expenditure and what specifically has been purchased, including the VAT element of the items. By having these documents, you can:

• Track spending
• Monitor cash flow
• Analyse your expenditure to help you budget better

VAT Compliance and Deductions

Having an accurate record of all your expenditure is vital for tax compliance. If you are VAT registered, the invoice/receipt will identify the correct VAT amount where applicable, ensuring your VAT return is accurate (we don’t want to be over or under-claiming). Having detailed receipts and invoices will also ensure you and your business don’t miss any deductible expenses, helping to reduce your tax liability.

Efficiency

Keeping track of your purchases can help make your business more efficient:

• Track your purchases, making it easier to manage your stock levels
• Monitor suppliers based on their delivery times, quality, and pricing
• Accurate records help with financial forecasting

In summary, those pieces of paper are vital to your business in so many ways, and it’s your responsibility to ensure you receive an invoice/receipt for each of your purchases.

If you are overrun with paperwork and need help to make sense of it all, book a discovery call to see how I can help.