Do your books
step 13
Watching your finances is essential. In this step, we:
1 Devise a simple book-keeping system.
2 Look at the merits of hiring a book-keeper.
3 Cover the pitfalls of dealing in cash.
4 Run through the main tax issues.
5 See how to avoid tax legally.
We’ve skated fairly lightly over paperwork so far. This is because
‘good systems won’t make you a success. However, having
none at all can quickly flatten an otherwise successful business.
Don’t worry, I’ll make this as painless as possible…
Keep your book-keeping system simple
Simple, but disciplined.
Many small businesses operate the ‘box under the bed’ system
of book-keeping. They then turn up at an accountant two
days before a tax deadline with handfuls of paper and ask
them to complete their return. There are obvious downsides
to this approach:
166 brilliant start-up
You’ll rack up large accountancy fees.
You’ll probably come to the attention of the Revenue,
who’ll want to inspect you (and then want to go all the way
back over any previous years’ figures).
There’s the risk of late payment fines and interest payments.
But there is a more important risk:
You won’t know on a day-to-day basis if you are making
It’s like setting off to sea without a map or compass (or whatever
they use these days). To keep the basic systems, do the following.
Keep a record of everything you purchase, and a record of
everything you sell
File all your receipts and invoices in date order. When you pur-
chase things, ask for a VAT receipt and not just a credit card
receipt (this particularly applies to petrol stations and restau-
rants). If you don’t get a receipt, then it’s hard to claim tax
back against your tax bill.
Put a number on the top of each receipt. When you receive
payment, put a note on the invoice and the date of payment.
Your invoices don’t have to be at all fancy (though see Step 16
on branding). You just need the date, your name and address,
your invoice number, the customer
name and the amount. If you are a
limited company, you also need to
include your company number. If
you are registered for VAT, you will also need to include the
amount of VAT and your VAT number.
your invoices don’t have to
be at all fancy
Do your books 167
Enter these records into your ‘books’
This can literally be a set of books. Manual accounting systems
are perfectly acceptable and work fine. Enter all your expenses
into a ‘purchase ledger’, and your sales into your ‘sales ledger’.
Alternatively, buy a simple piece of book-keeping software.
There are many great ones on the market. I’d avoid anything
overly complex at this stage. It’s easy to upgrade your systems
as you grow.
From this, you’ll get a position of your profit and loss on a
month-by-month basis. But that’s not it.
‘Reconcile’ your accounts
This is the bit that can turn you prematurely grey. You’ll often
find that what your books tell you should be in your bank
account, and what’s actually there, are a very different matter.
And your bank balance doesn’t lie. Therefore, you have to go
through your bank statements and tick off every item against
your books. Then go through your books and find any pay-
ments not listed (i.e. those you made with petty cash). Where
the figures don’t tally (i.e. you have a missing receipt), then
make an entry showing this in your books.
At the end of the exercise your sets of figures should match up.
Make sure you hold on to these records at the end of the year.
The Revenue requires you to keep tax records for five years,
and six years for VAT.
Hire a book-keeper
Some people love book-keeping. It gives them a deep sense of
peace that all is right in the world. I salute them. Personally

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