Essential Record Keeping
Whether you run a large company or operate as a sole trader, the law states that you must keep records of all the incomings and outgoings related to your business. Keep all the documentation that you need for completing your tax return because if you are unable to show it to HMRC upon request, you may have to pay a penalty. You should also keep your personal and business records separately from each other and make sure the information is well organised, as this will save you time and help you to manage your business more efficiently.
The main forms of financial records that every business should keep are as follows:
- Cash sales and purchase books
- Cash book summary
- Sales and purchase ledgers
- Wages book (if you employ staff)
Depending upon your circumstances, you may also need to keep the following:
- Till rolls
- Stock inventories
- Statements from banks or building societies
- Proof of any private money taken out of or brought into the business
- Business mileage incurred in private vehicles
- Capital gains
As a virtual assistant, you will most likely find it easiest to have everything coming and going from one business bank account and record ALL the money you earn against all the money you spend in order to make it. You’ll need to track all your invoices which you send to clients, all receipts for purchases you make and any other monies coming into or out of the business.
If you don’t have proof of some of your transactions, try to make a note of what was purchased and its retail price.
How long should you keep records for?
- Individuals – 22 months after the tax year that they relate to
- People who are self employed or in a partnership – at least 5 years from 31 January following the tax year that your return relates to
- Companies – 6 years from the end of the accounting period that they relate to
The exception to this is if HMRC are carrying out an investigation into your tax return, when you might need to keep your records for longer.
As a general rule, always ensure that you keep a record of any transaction that occurs, whether it relates to money coming in, or money going out of your business. If you need advice about any aspect of record keeping, tax returns, or your business in general, your accountant should be happy to help.
Steve Knowles