Maintaining Accounts for the Self-Employed & Small Businesses

The first thing to recognise when running your own business is that it is a legal requirement that you keep financial records relating to the business. The law also states that these records must be retained by you for six years.

To be successful in your business you must . . . . be in control of your business at all times

and one cannot do that without . . . . maintaining a firm grip of the finances of the business

and that requires you to . . . . keep the books and receipts of the business in good order.

Each small business is different and the level of record keeping required will vary considerably.  There are no set rules about what format you must use to keep your records.  Some people like to keep paper manual records, some are quite happy using a spreadsheet on a computer, e.g. Microsoft Excel, and others prefer to use one of the proprietary Computer Software programmes such as Quickbooks, Sage or MYOB.

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Let's start with three simple rules: -

1. Whatever system you use it is very important to keep accurate and relevant financial records.
2. Don’t make the mistake of keeping personal and business finances together.  You should always separate personal from business finances, apart from anything else it will save you money if you use an Accountant to prepare your End-of-Year Accounts.
3. Keep your records updated on a regular basis. You can be penalised if you are unable to back up statements you make in your VAT and/or Income Tax returns.

Our advice is quite straightforward, whatever records you keep, keep them simple, safe and secure.

Working from Home

If you work from home, and many small businesses start off based from home, you will be able to claim a proportion of your home expenses against the profits of your business.  This basically means that you would be able to subtract these costs from your total income when filing your Self-Assessment Tax Return. In your Accounts this is often referred to as “Use of Home as Office”. Click on the following link to be taken to a new piece of news relating to this important subject.

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