Okay, I know this is the least favorite part of running your own business, having to keep ‘the books’.
As a practicing accountant I can also say it is my least favorite part when a client turns up with records that are in a mess, and as a result of sorting this mess out, I am then left with the quandary of a level of fee that does not represent any value for the poor client.
It is so important, boring and dull maybe, but, it is important that you understand you have to keep proper records, not only for the tax and vat man, but also for yourself, yes yourself, how else do you know who you owe, who owes you, or if your actually making or worse losing money.
You need to look on your books as your very own window on the health and well being of your business.
So, now you know why you need to keep books, but how do you go about it.
There are many ways to keep records, from nothing (not recommended), then there is manual and next you have countless software packages, all varying in price.
Nothing at all
Worth a mention I guess – DO NOT USE THIS METHOD! There, mention over.
If you have decided that pen and paper is your preferred choice then it would be easiest if your records are maintained on what is called a ‘receipts and payments basis’.
You will record who you pay, and who pays you when the transaction takes place, and if you are vat registered your vat will be accounted for at this time also.
You can of course run your vat on what is called an ‘invoice basis’. This method involves you claiming vat back on expenditure and paying vat on sales when the invoices are raised, irrespective of when payment is made. This would mean you need an extra couple of books for this alone, and can lead to making the whole issue far more complex.
Manual records are great if you run a small business with little real need for tracking a significant number of transactions, but once your business starts to grow getting the right information from a set of manual records will prove time consuming, and time is something you may not have a lot of.
This is my preferred choice; using the right package for your needs and with suitable training and support of course.
This method allows you to keep your records in either the ‘receipts and payments basis’ or the ‘invoice basis’ as mentioned above, but which ever method you opt for it will not become a messy and complex affair because the software system will deal with everything for you behind the scenes.
Computerised systems now fall into two very different camps, the first are those that sit on your computer, and as such you need to take responsibility for ensuring you back your data up on a regular basis. Also, when you buy such a system the up front costs can be expensive.
Next is the new generation of SaaS (Software as a Service) offerings, these operate in much the same way those that sit on your computer do, except you use them over an internet connection . They come with the distinct advantages that backing up of data is dealt with for you, you pay a low monthly cost (note: winweb is free for one user) and not an up front cost, you can access your records from anywhere in the world as long as you have access to the internet and your accountant can also log in and see what is going on financially in your business in real time.
You also need to decide who will keep your records, will this be you or your spouse? Keeping your books can be very time consuming, don’t under estimate this.
Some people will use their accountants and other will use bookkeepers. If you are going to use a bookkeeper, the first port of call should be a Professional Book-keeping Institute.
Which ever method you decide you are going to use take professional advice first, it may save you a lot of time and effort and maybe money to.
Tags: Business Development, Business Idea, Business Start Up, Entrepreneur, Micro Business, Self Employed, Small Business, SME, OMB, Book-keeping, Book-keepers, Accountants, Winweb, Twinfield, Liberty Accounts, KashFlow, Sage, TAS, Clearlybusiness, VT transaction, SaaS