Most operators of a new and growing business have a flair for the environment in which the business operates. They may be a great salesperson, an outstanding mechanic, carpenter, solicitor, or inventor. Unfortunately, most people don’t like to keep the books. As an owner of a business, you must remember that your company’s books and financial statements represent a score sheet which tells how you are progressing, as well as an early warning system which lets you know when and why the business may be going amiss. Financial statements and the underlying records will provide the basis for many decisions made by outsiders such as banks, landlords, potential investors and trade creditors, as well as taxing authorities and other governing bodies. The necessity for good, well-organised financial records cannot be over-emphasised. One of the greatest mistakes made by owners of small businesses is not keeping good financial records and making improper or poor business decisions based on inadequate information.

Quality financial information does not necessarily translate into complicated bookkeeping or accounting systems. Far too often owners of businesses become overwhelmed by their accounting system to the point where it is of no use to them. An accounting or book-keeping system is like any tool used in your business; it needs to be sophisticated enough to provide the information you need to run your business and simple enough for you to run it (or supervise the book-keeper). Questions you should ask in developing an accounting and financial reporting system are:

  1. Who will be the users of the financial information?
  2. What questions do I need answered to manage the business?
  3. What questions should be answered for HMRC authorities? It should be noted that HMRC are increasingly making Business Records Checks of those businesses they reckon could have poor records

As your business grows, you should work closely with your accountant to ensure that your accounting system is providing you with appropriate information.

The Government proposes to require businesses to submit accounts information to HMRC quarterly as part of the “Making Tax Digital” project. This was planned to start in 2018 but has now been deferred apart from VAT reporting. You should therefore consider a computerised accounting package from the outset that enables you to comply with these new obligations. We can advise on the most suitable accounting software for your business.