The first results of the 'Test and Learn' phase of the Business Records Check (BRC) that HMRC recently commenced have started to come through.
The BRC is intended to improve general record keeping by businesses in an attempt to reduce errors in tax returns.
From the post review letters that have been issued so far, HMRC have made some common suggestions across the board. For example, all letters seen so far recommend that sales invoices are issued with consecutive number and that a cash book is maintained. Other recommendations include maintaining of business mileage logs and writing up business records at least weekly.
Whilst the underlying aim of HMRC is to reduce the tax losses that results from poor record keeping, the maintenance of appropriate and accurate accounting records is fundamental to every successful business. The nature and complexity of the records will vary but the reasons for keeping them are common: am I making a profit; who owes me money; who do I owe money to; will I have enough cash to pay the people I owe; what do I have in stock etc.
At the entry level, a simple manual cash book may be sufficient although automating this by using a spreadsheet will save time. However, cash books, whether manual or computerised, are only really effective for small businesses that dont give or receive credit. Once you need to record amounts owed from clients and owed to suppliers, it is time to consider using accounting software.
There are a number of cloud based solutions that are ideal for your first foray into accounting software. The software is rented so there are no upfront costs, does not require a powerful computer as the processing is undertaken remotely, can be accessed from any machine with an internet connection, is always the latest version, is automatically backed up and allows you to share live information with others such as your accountant. Both Orbit Accounts and QuickBooks are worth a look if this is something of interest. As these solutions have been built for the online world, they have facilities to seamlessly create and email sales invoices to clients without ever having to print them.
If you would prefer to own your own software and have it on your computer, there are again a number of solutions. My preference is QuickBooks as it has very powerful reporting functionality although Sage still has the lions share of the market for small and medium businesses.
Before selecting any solution, you need to have a clear idea of what you want from the software. Tracking debtors, creditors, and VAT is a given, as is a monthly profit and loss and balance sheet. But what else? Do you need to track profits by client or project? Is stock control key to what you do? What about tracking sales by employee for calculating commission? A well planned accounting system can make your life much easier and save significant amounts of time by capturing the data in the right format first time. If you would like any advice on the selection and implementation of accounting software, please contact Darren Austin.
Darren Austin
Synergee CharteredAccountants
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