Lexicon Tax

Record Keeping

A brief introduction to Bookkeeping, and the tips to follow for a healthy business plan in bookkeeping.


Record Keeping

Keeping track of your records is extremely important for several reasons, such as accuracy and identifying specific details. This may result in a multitude of benefits in the long term, such as paying the right amount of tax to HMRC. In doing so you can have peace of mind knowing all your taxes are properly maintained with no problems. Keeping a record for the past 6 years is necessary for any problems that might occur.


Online Record Keeping

Whether you’re a fan of technology or not keeping a record online can be very useful even if its just a backup. There are many platforms based around keeping a record of your account, invoices and taxes. One of these great websites for record keeping is Nomisma which helps you keep track of all your problems such as CIS, VAT and payroll among many others. These websites are specialised in keeping records whether you’re an employee or employer. Once again there are many places to keep an online record.


Knowledge on Records

It is highly recommended that you keep original copies of certain records, such as CIS, VAT, Bank Statements and Sales invoices. If you are unsure of anything I would highly recommend getting some help from a professional, therefore all your problems can be solved while having no issues with HMRC penalties.


Separate Finances

Making separate accounts for finances is very important and can result in benefits for everyone. Whether you manage your own accounts or have professional help, it can make a worldly difference in keeping track of all the information required. This makes it clear to everyone who has access to the account and HMRC what expenses are strictly business. All this can be done by simply opening a business bank account. These banks will typically start you off with free banking to start your business. The earlier you do this the better as it will separate your receipts and business expenses.


Reviewing Records

Checking up on your records is obviously a good idea. Even though there probably hundreds of software’s out there, it doesn’t hurt to check up on your own records to see anything that might have been missed prior. Reviewing these could identify any issues, review any outstanding payment or even prevent any fraud.


Managing finances

If you run a company big or small its always important to have some insight on the details especially with finances. In doing so you could maximise your tax deduction for the year or keep track of your cash flow. Employee classification is especially important for businesses that have a variety of full time, part time or independent contractors. This is especially important in Construction business or contractors who deal with CIS (construction industry Scheme).


Outsourcing Bookkeeping

Outsourcing bookkeeping is incredibly important as its receiving help from a professional body. As with any other body of employment you specialise in that field, therefore having someone to take care of the books is they’re speciality. Obviously, this could save you hours of time which you can devote to more pressing issues such as your company. Outsourcing is also cheaper than buying an in-house employee resulting in a full salary instead of hours worked.


Cash and receipt

It may not be obvious, but any cash or cheque payed in by clients and customers should be deposited into a bank as soon as possible. Not only does this secure the money from being lost or stolen but gets documented. It is also worth noting that any petty cash receipts should be booked in order to keep track of any amount being spent. Reviewing these receipts could result in a lowered risk of theft.


Forward Planning

Forward planning is especially important if for those who run a business as they are more susceptible to the risks of HMRC fines. Keeping track of multiple taxable payments may result in an incorrect tax year which could result in penalties. This can be avoided by outsourcing employment to keep ahead of the bookkeeping, or by setting aside a small amount of money to deal with any fines.


Cash or Accrual

If you are a small team or one person business from home, then you should be using the cash system of accounting. Using the cash system, you must record any payments when the cash changes hands. On the other hand, using the Accrual accounting you record purchases or sales immediately, even if the cash doesn’t change hand until a later date. If you are a cash-based accounting and the company expands you may want to consider switching over to Accrual. Customer credit or credit from suppliers must be completed on the accrual system.