IAB Chief Executive Warns Businesses Of The Importance of Bookkeeping

Anyone running a business understands why it makes good sense to keep adequate company and financial records.

The business itself can operate more effectively and efficiently when records are in good order, accessible and contain accurate and appropriate information. They become a useful tool for decision-making.

But is your business aware that HMRC is now targeting small businesses to check if they are keeping adequate records?

HMRC first piloted its current approach to Business Records Checks in 2011. This involved checks on the adequacy of small and medium-sized business’s records.

The pilots found that around 44 per cent of businesses visited had issues with their record keeping, while around 12 per cent had seriously inadequate records.

At the moment HMRC may only levy a record-keeping penalty. However, in the longer-term, it intends to issue penalties of up to £3,000 for serious inadequacies in record keeping.

In addition, it can impose further penalties and claim back tax if, for example, previous tax and national insurance calculations and payments have been incorrectly calculated due to poor records.

So what financial records are you required to keep, in what form and for how long?

Businesses are not all the same and the range of records of each will differ.  For example, a self-employed individual may need to keep detailed records so that they can calculate their personal tax liability and be able to complete a self-assessment return.

Those records include: cashbooks, invoices and receipts, electronic sales records or till rolls, mileage records, bank statements, P60s (if you are also employed), payroll records (if you have employees), rent books, hire purchase records, an inventory of stock on hand and a record of money taken out of the business for personal use

Records can either be on paper or on computer. Where electronic, the records must capture all the information (including both front and back of paper items), be saved in a readable format and should be backed-up. Further information relating to financial record keeping and bookkeeping for the self-employed, partnerships and limited companies can be found at www.hmrc.gov.uk.

When businesses go beyond the simplest of accounts, they need appropriately qualified and skilled support, either internally or outsourced, who can ensure that they not only comply with HMRC requirements, but also gain the maximum benefit from cash flow and regular financial information to make good and timely business decisions.

Business owners or their staff who have already acquired the necessary financial skills or who use the services of a qualified IAB bookkeeper will already appreciate the value these bring to their business.

The question is not whether a business can afford to keep its finances in good order, but can it afford not to?

To read the column by IAB chief executive, Malcolm Trotter, takea look at the current edition of KoS.

For more information on the importance of bookkeeping for businesses or to find a bookkeeper for your business visit the IAB website.

About The International Association of Book-keepers

The International Association of Book-keepers is the leading professional body for members who provide bookkeeping and accounting services to accounting firms and businesses. The IAB also provides training, courses and qualifications to help members become a certified bookkeeper.