Finally it comes to light that all the receipts are lost or in complete dis-array. Sorting it out is a real chore.
But is there an easy way to do bookkeeping for small business? And what do you need to keep for the tax man? Follow our 5 step action plan and you will be in control!
1. Take action
Don’t delay! Follow this simple step by step guide today, or put a time in your diary this week to make a start to your bookkeeping.
2. Tools Of The Trade
a) A lever arch file, one you will enjoy using
b) Plastic punched pockets
c) A set of dividers, labelled for each month
3. Get Filing
For each month, start with the business bank statements at the front. Behind that, copies of any invoices you have sent, and then bills like telephone. Finally at the back, the loose receipts in the plastic punched pocket. Remember, any expense in your accounts without the receipt could be disallowed against your profits by the taxman. So this filing and sorting can really save you money.
4. Start A Spreadsheet
A spread-sheet is great place to start until your business is big enough to warrant an accountancy package. If you are not VAT registered you will need just one worksheet. Simples. First, label the columns. You need a date column (A), a payee/payer column (B), an amount column for expenses (C), and an amount column for income (D).
If you are VAT registered, separate out income and expenses on two worksheets so you can add Net, VAT and Gross columns. If you want to get more sophisticated you can add more columns (E, F, G etc) to create a table with expense headings at the top, like direct expenses; postage, package and stationery; telephone/internet. You can then get an idea of what you’re spending on each.
Copy the transactions from your bank statement on to your spreadsheet.
5. Total The Lists
For each month, check the beginning bank balance plus the income, less the expenses equals the bank balance at the end of the month. Cash expenses can be listed separately (preferably on a separate worksheet).
Please note that following the five steps above will give you your income and expenses on a cash accounting basis (recording the income or expense on the date you receive or pay it). Only certain businesses can record their accounts for their self assessment tax return this way. Who is eligible? Unincorporated businesses beneath the VAT registration threshold will be able to start accounting for their income and expenses using a simplified cash-based regime for financial years starting from 1 April 2013.
Don’t despair however. By keeping a running total of income and expenses and you have made a start to your bookkeeping for your small business! Congratulations! This will help you keep track of your income and expenses, so you can make the right decisions for the future. For further information or advice, contact us! Or just let us know if this blog has been helpful. We would love to hear from you!
By Claire Georghiades FCA, Co-Founder of Accounts Resource.
Accounts Resource is a pro-active accountancy practice based in South West London. Accounts Resource are specialists in providing Accounting and Tax solutions to small and startup businesses and won The Best New Startup Award at the Richmond Business Awards 2012.