I have recently started a small business and am wondering what books and records I need to keep? Can you offer some guidelines?
Record keeping often falls to the bottom of the list when starting a new business and it certainly won’t be the most exciting of your tasks as a new entrepreneur. However, it’s essential for the survival of your business that you keep accurate records of income and expenditure from the beginning.
From a tax point of view, you are obliged to keep full business records, which enable you to prepare a tax return each year for submission to Revenue. The figures in this return and any supporting accounts must be correct, so it’s crucial that you have all relevant records and documentation to back them up. Failure to maintain proper records is a Revenue offence, with potentially severe penalties. Missing information may also mean you lose out on certain reliefs and credits and could end up paying additional tax.
You must retain your books and records for six years. Should your business ever undergo a Revenue audit, all records must be available for inspection. In this situation, an efficient system could save you significant amounts of time and anxiety, as well as helping you avoid costly interest and penalties.
Well-maintained books and records will help you monitor the progress of your business. You will be able to prepare budgets and forecasts, save time and accountancy fees at year end and have good control over your spending and cash flow.
Keep a record of all purchases and sales of goods and services made by your business, together with supporting documentation. This includes bank and credit card statements, till rolls, sales invoices, lodgement slips, receipts, purchase invoices and cheque stubs. It’s also important to keep a record of all cash transactions, as well as any money you introduce into or withdraw from the business.
If you are an employer, you must keep details of gross wages paid to your employees and information regarding tax, PRSI and Universal Social Charge deducted. A business that is VAT registered will also need to maintain the necessary records to enable regular returns to be prepared for Revenue.
Set aside a regular time to file away paperwork and deal with financial transactions and try to be strict with yourself about keeping things organised. It will be much easier to manage your bookkeeping if you don’t let things build up.
You can maintain your records in whatever format you choose, however, it’s best to keep things simple. Manual records may be sufficient, depending on the size of your business, but you could also use a simple spreadsheet, or perhaps one of the many computerised bookkeeping packages that are available. If you decide to go down the computerised route, remember to take regular back ups of all your information.
Financial record keeping for your business can be daunting, but by implementing a simple system from the start and maintaining it regularly, you will save time, money and many potential headaches.