Set up a basic record-keeping system
Record-keeping best practice
To keep good control of your financial record-keeping, you should work towards making the following regular updates to your business records.
From 6 April 2024, cash basis will become the default method of accounting, You must opt out if you want to use traditional accounting or cannot use cash basis accounting. See cash basis changes from the 2024 to 2025 tax year.
Hints and tips for record-keeping
|
What you need to do |
When |
|---|---|
|
Record sales in the sales ledger |
Daily or at least weekly |
|
Record payments received in the sales ledger |
Daily or at least weekly |
|
Record purchases in the purchase ledger |
Daily or at least weekly |
|
Record payments made in the purchase ledger |
Daily or at least weekly |
|
Reconcile the sales and purchase ledgers |
Every month |
|
Chase all outstanding payments |
As soon as they are overdue |
|
Check your cash book against your bank statements and your sales and purchase ledgers against your cash book |
Every time you receive a bank statement |
4 S's of record-keeping
System
Spend time setting up a system that is consistent and reliable. Allocate a regular time every week/month to deal with your financial administration, or make it a key task for a trusted employee. File your records logically - put receipts in date-marked envelopes or folders and file bank statements in chronological order.
Separate
One of the biggest mistakes business owners make is to mix their personal and professional finances. It is best to treat the business as a separate person, from which you only take income in the form of wages, dividends and in claiming back business expenses against receipts. So keep your personal and business records separate.
Security
The fewer people involved in your record-keeping, the fewer the errors that are likely to creep in. Make it very clear whose responsibility it is to maintain records. It is a good idea to password-protect your computer records, and only divulge the password to a small number of people. See IT security and risks.
Safe storage
Even if you choose to keep all your records on a computer, it is vital that you keep a regular (weekly, if not nightly) electronic back-up, and a paper copy elsewhere. Store records that cannot be copied, such as chequebook stubs and paying-in books, in a fireproof box.