UK Accounting Systems In Business Start Up Packages

A downside of being self-employed is the amount of paperwork needed to comply with United Kingdom legislation. For example, PAYE and VAT. You can find plenty of information on this in many business start up packages. Businesses should always be set up with an accounts system that is suitable for their needs. It is important to ensure that all transactions are correctly recorded without duplication of existing records.

From a tax point of view, it is a statutory requirement to keep adequate business records. In some cases, penalties of up to 3,000 may be levied for a failure to keep proper records. Business records and associated personal tax records should normally be kept until five years after 31 January following the year of assessment.

HMRC can provide information on the latest requirements through their website. Some businesses will require slightly different records to others. Whatever system you adopt it should be able to provide the tools you need to run the business along with the statutory requirements of current legislation.

Whether you choose to use computerised accounting systems or simply keep paper records, take your time to decide carefully what is best for you. The following records should be kept:

1. Cash book: This is used to record all transactions that go into and out of the business bank account. It should be reconciled with your bank statements regularly.

2. Petty cash book: To record all small amounts of sundry expenditure. A float of money should be maintained and replenished at the end of each week/month.

3. Sales book: Use this to keep a record of your daily sales invoices or cash takings. It can also be used for recording your cash banked and cash in hand.

4. Purchases book: Use this to note all purchases made.

5. Ledgers: You shoudl keep detailed records aof all transactions with your customers and suppliers using sales and purchase ledgers and they should be reconciled against the sale and purchases books to keep them current.

6. Wages book: This is essential to maintain a record of all payments to employees, as well as details of deductions made.

7. VAT book: In the event that there is an inspection this record is invaluable in satisfying the HMRC who will be able to use this for reconciliation of the amounts included in returns.

8. Debt control: Cash flow is one of the biggest problems encountered by small businesses, in common with many large concerns. If a small business allows its customers unlimited credit, it will soon collapse through lack of cash or because its debtors have become bankrupt. It is essential, therefore, that a new business establishes a system of debt control. The debtors’ ledger is essential for debt control.

It is essential for small businesses to have their accounts set up in such a way that they are a tool to enhance the company’s efficiency. In this respect business start up packages can be invaluable.

For more information on business start up packages visit our website at Geoffrey Cole & Co. Chartered Accountants of Reading, Berks, UK where David A Griffiths has written a comprehensive guide.