|Published: 14th August 2008 10:50|
Your accounts can only ever be as accurate as the books you keep. In this section we explain the books you will need - and those you won't!
This is your single most important "book". It records all of the payments made into and out of your businesses bank account. It is vitally important to set the book up appropriately at the commencement of business.
At the end of each month the totals for each column for that month should be calculated and checked and a separate page should be started for the next month. You should then also do a bank reconciliation.
Sales invoice file
It is both very helpful to your business, and reassuring to the tax man, if you issue your sales invoices in strict numerical order.
You should also set up a file with file dividers for each month and file your sales invoices in strict numerical order. The only exception to this rule is that unpaid invoices should be kept in a special section at the front of the file until they have been settled, at which point you should mark the invoice "paid" and also write on it the date paid, and then file it in strict numerical order. You should also regularly review the unpaid section of the file and take steps to chase payment as often as possible.
Purchase invoice file
This is a file with a file divider for each month and a front section for unpaid bills.
On receiving an invoice, file it in the unpaid section until such time as you pay it. On paying the invoice you should write "paid" and the date on the invoice itself, and then transfer it from the unpaid section of the file to the section for the month in which you made the payment. You should also, of course, ensure that the payment is recorded in your cashbook.
Whenever you pay any expenses of the business by using your own money you are entitled to ask the company to pay you back. We recommend you do this fortnightly or monthly and use a pre-printed expense claim form.
Most small businesses that use the VAT cash accounting method are likely to find that the books described above will be sufficient for both VAT and basic financial control purposes.
Some slightly larger businesses who do not use the VAT cash accounting method also find it helpful to use a number of other types of books such as a:
- Sales Day Book
- Sales Ledger
- Purchase Day Book
- Purchase Ledger
- Petty Cash Book
- Nominal Ledger.
Whilst such books do undoubtedly have their place in a more sophisticated business and accounting environment, they are often not necessary for many smaller businesses, and the cost of the additional training necessary to master their double-entry bookkeeping foundation often far outweighs their additional benefit.
Information provided by Burgis & Bullock www.burgisbullock.com