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Record Keeping For Sole Traders

Starting up your own business can be daunting and stressful. Not only do you need to get it off the ground, attract new customers, and work hard to offer your product or service; you re also responsible for the record keeping. Read our blog and discover the best ways and benefits of good record keeping.
With sole trader accounts, organisation is the key to keeping good records. Roger Hatherall & Co can offer expert advice regarding record keeping.

Why Is It So Important?

Good record-keeping is a key part when it comes to running a successful business. Accurate and organised records make it quicker and easier to prepare your accounts at year-end, help you monitor your company s cashflow and ensure your business is tax-efficient.

Keeping accurate records is also a legal requirement and poorly kept data could result in a fine from HM Revenue & Customs. So, in the interest of staying fine-free, it s important to tackle that mountain of paperwork before it all gets too much.

How To Record Keep Effectively

The records regarding your business cut across several categories. Arranging them accordingly is a good first step in organising what will amount to a small mountain of important records.

Knowing what to record and how to record it is crucial, here are some of the things which need to be recorded in order for your business to be as successful as possible:

Gross Receipts These reflect your business income, on which its taxes are based.

Purchases Record what you buy and resell to customers, things such as raw materials or components that are included in finished products. Some purchases could be considered part of the cost of goods sold, meaning they could be eligible for a tax deduction.

Expenses Expenses are the costs of running a business, from salaries to rent, most are tax deductible. In addition to records such as cancelled account statements and checks; use petty cash slips or log to record your small purchases.

Employment Records It is important to keep complete records of wages, benefits and tips paid to your employees, including dates and amounts. Make sure you keep the names, addresses and Social Security numbers of your employees, and of course their dates of employment.

Benefits Of Good Record Keeping

  1. It enables you to manage your business and make it grow If you don t have good records, you ll find it much harder to make good decisions.
  2. Helps you stay organised when dealing with customers and suppliers Producing invoices, estimates and quotations promptly is vital.
  3. Makes it easier to find important information and documents quickly Is someone disputing your invoice? By being organised you can quickly and easily find the information you re looking for.
  4. Makes it easier to prepare management accounts Have you ever wondered whether you are losing or making money? Having well-kept records can help to tell you how your business is performing; this also gives you the choice of comparing one period with another, this year with the previous year for example.

Don t make the mistake of not keeping your records up to date, as you can see it has plenty of benefits behind it, so prevent yourself from being fined and help to make your business more successful!

Consequences Of Bad Record Keeping

Many consequences can arise as a result of bad records management. Everything must be tracked in a business because of taxes and budget concerns. Not keeping good records can result in businesses ignoring their budget, which causes them to spend more than what is coming in. This can result in problems with suppliers, payroll, utilities, and more.

Your reputation and recognition as a business can become tarnished if any problems arise regarding record keeping.

More importantly it is a legal requirement to keep good records, whether you agree or not, you basically have no choice but to keep up to date with your records. If you don t, you could be looking at up to a 3000 fine from HMRC or even have your business disqualified.