The importance of maintaining proper business records
The need to maintain accurate and reliable records is an essential part of running any business. Good records allow businesses and individuals to complete their tax returns correctly and to pay the right amount of tax at the right time.
Accurate records can assist the smooth running of a business in several ways:
> better financial control. For example, good records may allow a business to send out timely statement runs which in turn help collect money, improving cash flow and reducing the risk of bad debts
> access to more timely information. For example, management accounts, which can help facilitate more effective business decisions
> reduced risk of error. For example, when completing VAT returns. This can equally help prevent the business paying too much tax in addition to underpaying tax.
> cheaper accountancy bills! Unfortunately untidy business records can often take many hours to understand and unravel, whereas fully reconciled and tidy records enable accounts to be prepared more quickly and therefore at a reduced cost.
In November 2012 HM Revenue and Customs (HMRC) began rolling out their Business Records Checks (BRC) programme.
Under this programme, HMRC will use business risk analysis to identify possible cases for BRCs, before writing to those identified informing them that they will be contacted by telephone to answer a questionnaire. HMRC will then decide whether there is a real risk that the business records are inadequate and whether the business needs support and advice on record keeping. HMRC may attend the business premises and can, in various circumstances, levy penalties ranging from £250 up to £3,000. HMRC may also arrange another BRC for two years time to check the record keeping has improved.
Businesses need to ensure that the most appropriate accounting systems are in place. All businesses are different and therefore each will require a different accounting solution. Options include a manual cashbook, a computerised spread sheet (e.g. Excel), general computer package (such as Sage or Quickbooks) or a more bespoke software solution.
Should you require any further information on accounting solutions please do not hesitate to contact Alan Taylor at the office.
Author: Alan Taylor FCCA
A former pupil at Ripley St Thomas C of E High School in Lancaster, Alan joined Scott & Wilkinson directly from school in 1994 and qualified as an Accountant in 2001. Alan is the Partner with responsibility for the day-to-day...
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