Small Business Record Keeping

Keeping accounting records is important for all businesses.

Legally, there is a requirement to keep adequate records for tax and vat, and in the case of companies there is a Companies Act requirement to keep adequate records for the directors to be able to determine their companies position at any given time.

There are no rights and wrongs on record keeping: at one end your records could be as simple as a diary, at the other end of the scale you may need a sophisticated computerised system which process purchases, orders, jobs and stock records.

Under Making Tax Digital from April 2019 VAT registered businesses will need to be using some type of digital package, and its proposed this extents to other businesses/taxes from somwhen after 2020.

In terms of the current pre MTD period, here are some thoughts:

  • Contractors, freelancers and one person limited companies with a small number of transaction may find our Whitefield PSC Spreadsheet meets your needs.  Its designed for PSCs, but can be used more wider than that.
  • Alternatively, our daughter brand, YogaTax, has a spreadsheet that will suit individuals working as sole traders
  • The very smallest businesses could use something as simple as a large sized week to view diary, and write up income and expenses as they happen.
  • The next level up would be either using a simple excel spreadsheet, or, if you prefer pen and ink, either a cash book in a similar format or if you prefer something more structured a Simplex book.
  • If you are planning to use excel, or a cash book in a similar format, here are a couple of suggested layouts:
    • book keeping template no vat – suitable for non vat registered businesses, or those using the vat flat rate scheme.
    • book keeping template with vat – developed from the above, with traditional vat columns (cash accounting) and segregation of expenses between cash and bank
    • NB these layouts will almost certainly need customising and adapting for your business, please seek advice.
  • For the larger business a more structured accounting system may be needed.  Whitefield can offer FreeAgent which we believe will offer most of our clients an economical way of meeting MTD obligations.  Other contenders are Sage, QuickBooks and Xero in terms of paid software, and possible Wave in terms of free software.  We will endeavour to support all of these, alongside what ever option remains for Spreadsheets.

For all but the smallest business a separate business bank account is a good idea, although not essential – rather than open a specific business account and be charged  for it on banks business tariffs, a second personal account designated for business is fine for a small self employment (but not for a company though – companies must have accounts in the company name).

If you have a business bank account, then segregating your accounts transactions between bank and cash is a good idea.

Similar considerations apply to credit cards  – designating one for business is a good idea.

If your business deals in a lot of cash, eg a retail or service business, then a good record of sales is important, as HMRC may pay a lot of attention to that during an enquiry.  For shops, cafes and similar, a till is almost essential, and for other businesses a proper invoicing system with copies kept is necessary.

Receipts, invoices and vouchers should be kept to support transactions, and a simple cross referencing system is desirable – again there are no rights and wrongs, at its simplest you could just number every item starting from 1, file accordingly, and cross reference to your accounts.

Do you need to keep receipts on paper?  No.  A scanned copy is acceptable for tax, so long as its kept safely.  You could simply scan and save to your computer or a service like Dropbox, or there are receipt keeping apps that interface to software.