How would you fare if HMRC decided to come and inspect the records that back up your accounts? It states that it finds failings in nearly 50% of the businesses it investigates. If it finds untidy records haphazardly stored in boxes, inaccurate or rounded amounts listed, cash books not in the right order, or any other incorrect aspect of record keeping, it has the power to fine offenders up to £3,000. It doesn’t matter how small your business is, you must comply with the record keeping regulations.
Other Reasons to Keep Good Records
That is only one reason why good financial record keeping is important to any business. Unless you or your bookkeepers keep all your records in good order, you could find your business hitting all sorts of challenges, like getting all your VAT and tax returns in on time, being able to source the materials you need for production or to fulfil your orders, and then having the cash available to meet your obligations.
Do you know how much revenue you are generating and where it is coming from; where the most profit lies; what you are spending on, and how much; what your imminent liabilities are; how much you are owed; whether debtors are paying up on time? If you don’t know these things, you won’t be in a position to recognise cash flow difficulties looming and be proactive in fending them off. Your financial fog will have you deep in the mire and floundering to get out.
Know the State of your Business
It’s much better to be always aware of the cash flowing in and out of your business, so that you know whether performance levels are stable or moving up or down. You can have this awareness if your records show daily cash and credit or debit card transactions, from small sales to major payments for stock. You need to make sure your bookkeepers always receive all the information they need to properly maintain your records.
Help to Stay Compliant
All records must be kept accessible for at least the six years before the date your tax return is due. Anything pertaining to earlier dates can be destroyed. Your outsourced bookkeepers will be happy to deal with this for you. They know exactly how long you must keep all your invoices, banks statements, payroll details, bills and expenses receipts.