Guide to Bookkeeping for New Business Owners
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The guide to bookkeeping for new business owners is provided by Thecbsltd located in Chalfont St Peter, Gerrards Cross to help if you are a new business owner at the start of setting up your business. The bookkeeping paperwork tasks I doubt are your first worry, as other business issues like looking after your employees, purchasing resources and supplies, marketing and distributing the product, taking care of customers are taking up most of your daily time.
But any business has to complete end of tax year final accounts, a Director of a Limited company needs to submit company accounts to Companies House. If a Self-Employed owner you need to know your profit/loss to calculate your self assessment tax return.
Bookkeeping records form the basis of end of tax year final accounts also known as annual accounts or statutory accounts. These accounts should include sales, purchases, expenses, payroll and other bank transactions.
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To do your own Bookkeeping is a business decision not to be taken lightly
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A business may decide to do the basic bookkeeping tasks to keep the cost down but may employ a Bookkeeper or Accountant to assist with certain tasks that may incur a penalty fine if not completed on time. The decision to keep the accounts in house or to outsource may be a financial decision. i.e. need to keep a tight hold on the business expenditure or the time required to do the accounts is better spent on other business activities.
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By law, if your business is a limited company or a partnership whose members are limited companies, you must produce a profit and loss account for each financial year.
Self-employed sole traders and most partnerships don't need to create a formal profit and loss account - but they do need to keep adequate records to complete their Self Assessment tax return fully and accurately.
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If you are running a limited company detailed below are your legal requirements regarding Accounting records as detailed on www.gov.uk.
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https://www.gov.uk/running-a-limited-company/company-and-accounting-records
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Accounting records
You must keep accounting records that include:
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all money received and spent by the company
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details of assets owned by the company
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debts the company owes or is owed
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stock the company owns at the end of the financial year
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the stocktaking's you used to work out the stock figure
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all goods bought and sold
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who you bought and sold them to and from (unless you run a retail business)
You must also keep any other financial records, information and calculations you need to
prepare and file your annual accounts and Company Tax Return.
This includes records of:
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all money spent by the company, for example receipts, petty cash books, orders and delivery notes.
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all money received by the company, for example invoices, contracts, sales books and till rolls.
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any other relevant documents, for example bank statements and correspondence.
You can be fined £3,000 by HMRC or disqualified as a company director if you do not keep accounting record.
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Bookkeeping Service requirements for your business
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The bookkeeping services that are required for Sole Traders and Limited Companies have differences in regard to year end accounts. Using the following guide for daily, weekly, monthly and annual tasks will help to keep your financial accounts in respectable shape. Keeping enough free time for bookkeeping service tasks is the key to maintaining up to date accounts.
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Daily / Weekly Bookkeeping Tasks
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Cash Management - Check that the company has enough cash to cover outgoing payments.
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Accounts Receivable -
Prepare and send invoices has to be a high priority to maintain a healthy cash flow into the business.
It also aids in the ability to track unpaid invoices as unpaid accounts can result in bad debts and other financial problems.
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Record Transactions -
Record all transactions using an Excel spreadsheet or a software package (i.e. Xero, QuickBooks).
The record should include customer receipts, payments to HMRC, suppliers and employees and any other transactions.
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File Documents and Receipts - Keep a hard copy of all invoices sent out and receipts for all expenses.
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Accounts Payable -
Check supplier invoices for early payment discounts, payment due dates and late payment penalties, then make payments as and when required.
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Payroll -
If you pay your employees weekly then you will need to report to HMRC your employees payments and deductions and pay HMRC accordingly.
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Bank Reconciliations -
With online banking you don't have to wait for the monthly bank statement you can check on a regular basis on business transactions.
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Inventory -
Keep up to date records of goods this will enable the business to known when to reorder goods rather than be over ordering and putting pressure on cash flow.
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Cost of Goods - A regular check on the price of goods helps to assess the profit margin of your products.
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Monthly Bookkeeping Service Tasks
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Reconcile Monthly Bank Statement -
Review statement against recorded monthly incoming and outgoing transactions.
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Review Accounts Receivable - Check for unpaid invoices and send polite reminder of overdue payment.
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Review Accounts Payable - Check that all payments falling within that month have been paid.
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Payroll -
If you pay your employees monthly then you will need to report to HMRC your employee payments and deductions and pay HMRC accordingly.
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Review monthly turnover/profit -
If you business has been running long enough compare the months figures the previous couple of months along with the previous years corresponding month to check if the business is meeting its growth figures.
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VAT Tax Return Payments -
Make monthly payment if the VAT tax return plan your company has signed up for requires monthly advance payments.
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Quarterly Bookkeeping Service Tasks
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VAT Tax Return -
Make quarterly payment if the VAT tax return plan your company has signed up for requires quarterly payments.
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Annual Bookkeeping Service Tasks
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Annual Accounts for Sole Traders -
Sole Traders do not have to file annual accounts, but you still require accurate account records to complete your Self Assessment tax return. Income Tax and National Insurance Contributions on your earnings will also require payment.
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Annual Accounts for Limited Companies -
The year end Limited Company Accounts must be filed within 9 months of your year end (within 21 months of your registration date if its your first return) to Companies House. Year end means the day your company's financial period ends. Annual Accounts also known as Statutory Accounts consist of 3 documents.
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Income Statement - This shows the profit/loss for the financial year.
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Statement of Financial Position - This shows the value of your business, using the assets, liabilities, capital and reserves of your business.
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Footnotes -
This shows Advances, credit, guarantees granted to Directors, along with financial commitments, guarantees
and contingencies.
If your company is a Micro Entity only the Statement of Financial Position and the Footnotes need to be filed with Companies House.
To see if your company qualifies as a Micro-Entity under the Financial Reporting Standard 105 (FRS 105), refer to
the Bookkeeping Services page of this website for a definition of FRS 105 Micro Entity.
Corporation Tax Return for Limited Companies -
Corporation Tax is calculated from your company's income minus any tax allowances and expenses.
The resulting figure is the company's profit which is used to calculate how much Corporation Tax is owed.
These figures are detailed on a CT600 form and need to be filed with HMRC within 12 months after the year end date.
Any resulting Corporation Tax is to be paid to HMRC within 9 months and one day of the year end date.
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Failure to meet the filing dates will result in penalty fines, refer to Companies House and HMRC websites for duration of lateness and resulting fine.
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Confirmation Statement for Limited Companies -
A Director of a Limited Company has to file a Confirmation Statement with Companies House, this document confirms your company information. This document needs to be filed at least once a year and within 14 days of its due date, this being a year after your incorporation or the date you last completed a Confirmation Statement. A Confirmation Statement needs to be filed even if there are no changes or if the Company is dormant. Along with submitting the Confirmation Statement you will have to pay the annual fee.
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Failure to file a Confirmation Statement your company and its officers may be prosecuted and your company may be struck of the register.
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VAT Tax Returns - If your business is VAT registered then the year end most likely will have a VAT Tax Return due.
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Inventory - Review your detailed records against actual inventory.
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Review Your Suppliers -
Check the market rates to confirm your service providers are still competitive as increase in cost hit your profit margin.
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Review Your Product Prices -
Having checked your service providers and your competitions prices review your own pricing strategy.
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Budgeting - Review your cash flow for the coming year ahead in order to meet Taxes due within the year ahead.
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Payroll -
Provide all employees with a P60 at the end of the Tax year no later than 31st May. Send your Final Full Payment Submission (FPS) on or before your employees last payday of the tax year (which ends on 5th April).
For each employee working for you on 6th April you will need to update payroll records, also update your software.
If you software is unable to report expenses and benefits to HMRC then provide HMRC with this information by 6th July.