CSI Bromley: The evidence
Anyone in business has a need to keep records to satisfy the demands of government, the tax authorities and possibly their accountant. These records provide the evidence of what the business has done and can also provide a guide to what it will do.
But just what does a business need to do to keep everybody happy and also not overburden the small business owner in a web of red tape?
The starting point should probably be our attitude to record keeping. Is it an asset or a liability? A joy or a burden? As accountants we rarely hear clients talking excitedly about their day out with Miss Sage or Mrs Quickbooks!
Record keeping should be looked on initially as the record of our achievements. The source of data that tells us just how well the business is running, how close we are to meeting or even exceeding the milestones we set, to achieve that early, long and well financed retirement.
Having decided on what we need to achieve we can then start to look at the accounting within our business as a means to an end, rather than the thing we do at the end.
But what are the basics we need to build in?
The Companies Act
Most small limited companies will produce accounts which will include a statement on the balance sheet that states “the directors acknowledge their responsibilities for ensuring the company has kept accounting records which comply with sections 386 and 387 of the Companies Act 2006”.
This might sound very legal but in summary form, section 386 requires records to:
- Show and explain the company transactions
- Disclose the company financial position at any one time
- Provide a record of day to day transactions
- List the assets and liabilities of the company
- Keep details of stock and stocktaking
Thus has it always been. As for section 387, this contains the stick. Failing to maintain the records in accordance with section 386 can result in a fine or imprisonment.
Before mass computerisation a simple cash book and a lever arch file would cover most of this. Now there is a wealth of apps and software packages that can take away a lot of the time required to keep you on the right side of section 386.
Her Majesty’s Revenue and Customs
Apart from the Companies Act 2006, the other big influence on record keeping comes from HMRC. Many of us will have felt that cold chill on the back of the neck when being advised of a compliance visit from the VAT or PAYE man.
But what do they require? The Revenue do give a lot of guidance in this area, one of their compliance toolkits lists the key areas they look at.
Certainly on a PAYE compliance visit they will look at such things as:
- Petty cash records
- Expense claims
- Bank statements
- Timesheets and clock cards
- Cheque books
All the secondary paperwork that gets shoved in files and folders. They also look for personal bills going through the business and always home in on mileage records and travel and subsistence payments.
The record keeping should be primarily focused on providing the necessary data to help business owners make the key decisions to maintain or grow that business.
To run a business well requires good systems and good records. This should automatically ensure you meet the requirements of both the Companies Act and HMRC.
A well organised business can call up a record of what has gone on quickly and seamlessly, reveal the financial position, effectively a balance sheet of assets and liabilities, and have the evidence to hand to support this.
This can be all manual, all digital or a combination of the two. Decide, then implement.
At the next Accelerator Club workshop we will be looking at what constitutes the accounting records of a business and how in turn they can be used to boost your business further. The important thing is to get the attitude right. Good accounting records start on a Monday morning and are not left to be crammed into a Sunday night.
Why not join our next meeting on Wednesday 15th June at 8.00am, book via Eventbrite, our website or contact Jane@grugeonreynolds.co.uk