Page Contents
7 Reasons Why Businesses Should Keep Their Books Clean.
When starting a business the financial records are one of the most important aspects which – if left to the last minute – can end up causing major stress and problems, not to mention potential legal and tax implications if they are not kept properly.
Business books need to accurately reflect all of the business income and outgoings, as well as expenses and they need to match with the actual bank statements as well, to ensure all financial records are up to scratch.
7 Reasons Why Businesses Should Keep Their Books Clean
Here are seven reasons why businesses should always keep their books clean:-
Keeping good accurate records of all of your business income and expenses will make it far easier to identify your tax obligations at the end of the tax year. Having strong records in place will make it much simpler when it comes to filing your tax returns as well.
Having strong record keeping will help to make it very clear where you can claim tax deductions and potentially could save you money and reduce your required tax payments. If your expenses are all carefully recorded and analysed there might be tax deductions available to you which you wouldn’t spot if your books were in a mess. We had another discussion in these topics – 6 Smart Ways to Reduce Your Business Taxes.
Having clean and clear books makes it easier to spot patterns and to help you run your business better. You can spot trends in spending and areas where you might be able to cut back on expenses that you wouldn’t have seen otherwise.
Having clean and clear books will make it much easier to meet HMRC requirements, particularly if your business is subject to any kind of investigation. It will make it much easier to show exactly how your business stands and clear up any potential issues quickly.
Having regularly updated books that reflect your business will make it much easier when it comes to preparing your year-end accounts and creating any required financial reports for the business. Having the books in order makes your financial reporting much easier. There are a handful of tools you can use for this, one of which is Crunch. You can get a glimpse of how it can make your business process easier by going here.
Having accurate books helps you to forecast income and make sure your business is growing and on course to achieve your financial and business targets. Knowing exactly where your business currently makes it much easier to plan ahead from a firm footing.
Our final reason for keeping your books clean is that it can help you to identify any changes in your business, for example, if your income has reached the threshold for paying VAT, or the value of your business if you have decided the time is right to sell it on.
7 Reasons Why Businesses Should Keep Their Books Clean
While keeping business financial records might seem like a complicated issue it is important they are kept accurate and up-to-date for all of the above reasons. If you are keeping them yourself there are a number of options including keeping manual records or using a simple spreadsheet if your business is small. You also need to safely store all receipts, invoices and bank statements to make sure you have recorded accurately.
If your business is more complicated then it might be worth investing in an online accounting system to keep your books and record online receipts and records. Make sure it’s a system that works for you and can grow along with your business.
If all of this feels a bit too complicated then it could be worth keeping all of your information and paperwork and handing it over to a part-time bookkeeper to keep the records for you rather than risk getting it wrong.
Whichever way you choose to record your business finances or Sources of Finance for a Business, you need to make sure you keep all paperwork safely and store it for the required length of time legally to meet HMRC requirements – generally for at least six years.
If you are not sure about keeping your records then the worst thing you can do is bury your head in the sand and let all the receipts pile up around you – it will only make everything harder in the long-term. If you have any doubts at all you should bring in a professional to help you.
There are many different ways to keep accurate bookkeeping records for your business and it’s important that you do, not only for legal requirements but also to help you run your business better and spot any potential trends or changes that need addressing.
Whether you choose to use a spreadsheet, an online accountancy system, or the services of a bookkeeper it’s important that all of the financial information is accurate and up-to-date.
7 Reasons Why Businesses Should Keep Their Books Clean
Other Articles You Might Enjoy: