Tips for Good Bookkeeping
Bookkeeping is an important part of the business operations. It aids the directors in keeping a track of the company’s finances, allow reports to be run in an instant to show the strength of the business financially and to budget for tax liabilities. For the reports to be accurate, the bookkeeping must be up to date. A company can hire an employee or a sub-contractor to carry out the work for them if the owners themselves are unable to do so.
Bookkeeping should be consistent as the information is entered. Purchases of the same product should be entered in the same expense or asset category so that if someone was to take over the bookkeeping task it is easy to follow the predecessor’s work.
Any personal and business bank accounts should be kept separate. All items recorded on the business bank statements should be entered on to the bookkeeping so that a bank reconciliation report can be run each month. This will help ensure that all items have been entered as the reconciliation ensures that the bank balance on the statements matches the balance on the software.
If a business dispose of or sell any assets then it’s useful to detail which asset was involved. This can help accountants when preparing the accounts ensure that they have an accurate fixed asset register to support the account figures. Simply disposing of an asset means there likely will not be any transaction entered into the bookkeeping system as no money was received; this asset can still be removed and set against a code for disposals.
Having a set day and time to work on the bookkeeping will set a schedule each week for this work to be done. Generating a timed schedule can be difficult at first but once a system is in place a schedule will become almost second nature. Having dedicated sets of time will help ensure that the bookkeeping is up to date if done frequently such as once a week, or even twice a week if the amount of paperwork calls for extra time.
Once the information has been entered, the paper records of sales invoices and expenses will need to be kept safe for up to 7 years. Having a folder or box to store these in are useful or organisation and tidiness. It is ideal to group the paperwork either by VAT quarters or by accounting period. These would need to be kept on the business premises and presented if HMRC should ask to review the records, or passed along to an accountant when the annual accounts and final tax calculation are being prepared. Applications for mobile phones have been launched which will allow photographs of receipts to be uploaded to the cloud database for safekeeping.
All businesses should start using a cloud bookkeeping software as HMRC are in the process of bringing out their Making Tax Digital regulations. VAT registered businesses must already be using one to upload their VAT returns to HMRC by their chosen software. For self-employed individuals and partnerships this rule will not be enforced until at least after April 2020 although voluntary registration is available. Tags:
Bookkeeping, Sole Trade, Limited Company, Business Set Up