Keeping the record straight
Fate decrees that one of the least interesting business activities is also one of
the most crucial for its continued success. Keeping records must rank fairly
low in an entrepreneur’s satisfaction rating. It is much more gripping to go
chasing sales or to carry out a negotiation with a supplier that will lower
your costs. But a complete ‘seat-of-the-pants’ approach to business will only
keep you aoat in the short term.
If you hope to avert the dangers of sliding into failure, one thing you
should try to achieve is not to allow yourself to be buried in a quagmire of
bills, invoices and tax demands. Failure to organize your records from day
one may mean just that. However, it is never too late to start; so if you have
been pushing aside that task, now is the time to tackle it.
Allowing yourself to drift into paper chaos is understandable. Discovering
a system for organizing records that is suitable for your business can be dif-
cult. Too simple a system for your particular business may mean that you
cannot derive the information from it that you need. Too complicated a
system may mean that you have to spend too much time keeping it up to
date. There is no one system that will apply to all businesses. You may nd
that you need to adjust yours with the benet of experience until you have
developed one that ts what you want.
What is in this chapter?
why you need records (p. 371).
which records? (p. 371).
Keeping the record straight 371
a very simple system (see p. 372).
when the business is more complicated (p. 377).
Why you need records
Good accurate records are needed for two extremely important reasons.
First, records are needed to substantiate what is in the accounts.
If you are self-employed or a small company (see p. 42), your accounts do
not need to be audited, but they are still required for tax purposes. You do
not necessarily have to send accounts in to your tax ofce, but you must
nevertheless still have them and be prepared to produce them if asked.
There are hefty nes if you can’t.
From 1 April 2009 onwards, you can be asked to provide a tax ofcer with
any information and documents reasonably required for the purpose of
checking your tax position. This is an extremely wide power that can
mean virtually any type of information or document and can relate to
past, present or future tax liabilities. Reinforcing this power above, from 1
April 2009 onwards, the Revenue can enter business premises to inspect the
premises themselves, together with business assets and business documents
kept there. The Revenue also has new powers to specify exactly which
records you must keep, but, at the time of writing, had not yet drawn up
any such lists. HMRC has announced that it intends to carry out checks
on the record-keeping of up to 50,000 small and medium-sized businesses
a year, starting from mid-2011. HMRC will impose nes when it nds sig-
nicant breaches. It estimates that four out of ten such businesses (around
5 million in total) do not keep adequate records and that up to 2 million
small and medium-sized businesses are paying less tax than they should.
The second reason why accurate records are needed is to help you to know
what is going on in your business. This, in turn, means you can keep better
control and you can plan for the future. It is impossible to make realistic
estimates and projections if the basic data are patchy and inaccurate.
Which records?
The rst and most important record you need is for cash. You need some
way of keeping information about payments into and out of your bank
account and also any petty cash that you keep on the premises. The aim of
your cash records is so you know at any moment how much cash you have.

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