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Book keeping for beginners

Accountants are always a bit anxious about that first meeting with a new client - what will a client think constitutes good book-keeping? A carrier bag full of receipts and a few bank statements? Its often confusing when you start out as to what records to keep. There's plenty of guidance on the net and plenty of software that promises to solve all your book-keeping needs, however, these come at a price and may not be the most flexible solution for your business. So what should your book-keeping system cover? Often a few accurately maintained excel spreadsheets will do the job. The first absolute essential is a cash book. This would often be divided into 2 spreadsheets, one for income and one for expenditure, and simply be a copy of your bank statement, labelled up by income or expense category, for example purchases, drawings, stationery, etc,. Use categories that are relevant to your business, but not so many that it becomes confusing. You should list the date the item appeared on your bank statement and give it a numbered reference which you would also write on your filed copy invoice or receipt so that there's a clear audit trail for your accountant or an HMRC inspector. You should "reconcile" your bank statement to your cash book at least once a month to make sure that the balance on your cash book is the same as the balance on your bank statement. Make sure you record and investigate any differences, which are usually timing such as uncleared cheques and lodgements. Of course, it's not always possible to pay for everything from your business bank account. There may be those times where you happen to buy something with your own cash, or someone else's cash if you're lucky! This might happen when you are out networking at Mums the Boss for example and don't want to pay your £3 as a cheque from the business bank account, but with your own loose change. To make sure you don't overlook these genuine business expenses, you should also keep a purchase ledger. This would include ALL purchases regardless of where the money comes from. This would look very similar to your cash book, but would include all cash book outgoings, as well as purchases you have made but not yet paid for, and things you buy with your own money. Make sure you put the date the item was paid so that at the year end your accountant can work out who your creditors are, ie the people you haven't paid yet. You should also record the VAT as a separate column, whether or not you are registered. Who knows when you might hit that £68k threshold of turnover and have to start declaring VAT inputs and outputs. Again, clearly reference the item and put the same reference on your filed receipt. Next vital spreadsheet is the sales ledger. This will record all your sales by invoice number and customer, and record the date of the sale and the date you were actually paid. Keep track of who hasn't paid, and in these recessionary times, chase for payment when the due date passes and try and work with your customers to set up payment plans if your customers are facing financial hardship. At the end of the year, anyone who hasn't paid will be recorded on your balance sheet as a debtor. Again, keep a separate column for VAT, and keep track of your turnover for important thresholds such as payment of Class 2 NICs and registering for VAT. You must keep these records, as well as all the supporting receipts and invoices for a whopping 6 years, so another business essential is a good sized filing cabinet. Don't forget, a good accountant will guide you through this process and point out any areas of weakness to help you develop a system that works for you, and the taxman. You will feel more confident and you might just become an accountant's perfect customer! For any information regarding records and book-keeping, accounts preparation, tax returns, self-assessment, VAT, payroll and tax advice, please contact Amy Taylor on 01767 260282/ amy@tayloraccountancy.net/ http://www.tayloraccountancy.net/. Amy Taylor Accountancy takes every care in preparing material to ensure that the content is accurate and up to date. However no responsibility for loss to any person acting or refraining from acting as a result of this material can be accepted by Amy Taylor Accountancy.

The team at Amy Taylor Accountancy are dedicated to providing a flexible, efficient, high quality accounts and taxation service which gives you peace of mind, and frees up more of your time to do things you enjoy!