Basic Book Keeping

If left to pile up, paperwork can be the bane of a business's existence. Decide on a method of recording your 'books'. Book-keeping simply makes your paperwork easier to deal with by providing a system that tells both you and your accountant exactly hat is going on in terms of incomings to the business and outgoings from it. This, in turn, helps you keep track of where your business is ultimately going (and makes it much easier, when it comes to tax self-assessment).

All money coming in (incomings) and going out (outgoings) must be recorded in order o keep track of your cashflow situation and to keep tax records (by law). This means you need to keep a record of every sale and every purchase.

Keep:

1. Sales records

2. Purchasing records

3. Bank statements.

How to Keep Sales Records

File Sales paid and Sales unpaid invoices in two separate files. Create a simple procedure as routine, to keep track of all sales you make.

1. For each sale you make, issue an invoice with an original number and keep a copy for your files and place in the Sales Unpaid folder.

2. Once paid, pay the cheque into your bank account and write the invoice number, payment date and amounts on the paying in slip stub.

3. Remove the invoice from the Sales Unpaid file and write 'paid' and the date it was paid in the top right-hand corner.

4. Place the invoice in the Sales Paid folder with the most recent paid invoice at the top, so invoices will appear in order they were paid, rather than in order they were issued.

If you receive any non-sales income, such as grants, tax rebates and so on, simply enter them in the cash book underneath the entries for Sales Income.

Cash Sales

Shops that take cash from sales and spend it on wages can lose track of their accounts and the tax and VAT office will be more suspicious.

To avoid complications:

1. Use till rolls or EPoS cash summaries as sales invoices.

2. Keep records of money going in and out of the till and reconcile daily.

3. Keep any receipts from purchases made using money from the till.

At the end of the month, check both cash book balance and bank statement balance are the same and correct any errors.

Purchases

Receipts or invoices must also be kept for each purchase made, including cash purchases. Keep a cash book to record all cash payments you make and keep any receipts for cash purchases in a box file labelled Petty Cash, or on a spike.

You and your accountant can decide on suitable headings for your cash book, which, computerised or hard-copy, will record all the money coming into and going out of your bank account.

Tax

As a self-employed person you need to pay tax. If forming a limited company you should hire an accountant to do your more complex accounts and work out corporation taxes. However, if a sole trader, you will need to complete a self-assessment once a year and send it to the Inland Revenue. You will also need to save some of your profits each month to pay the tax bill the following January. There are penalties for missing the deadline.

As you register with the Inland Revenue you will automatically receive your Self Assessment Tax Return in good time. Telephone the Inland Revenue helpline for Newly Self-Employed on 0845 915 4515 for more information.