04: Keeping records

All types of businesses are required by law to keep financial records relating to their activities and to retain them for six years.

The types of records kept by each business will differ, depending on its type and size. But, at the very least, records should include details of all receipts and expenditure and all goods purchased or sold.

There are basic financial records that need to be kept in order for a profit and loss account to be produced each year, and these include:

• Sales and all other income.
• Expenses – both day-to-day and major purchases such as equipment, etc.
• Petty cash.
• Records of goods taken for personal use and payment to the business for these.
• Records of money taken out for personal use or paid in from personal funds (this applies to all limited companies).
• Back-up documents for all the above.

There are no actual hard and fast rules about how you record your figures, and there is nothing to stop you simply using paper accounts as long as the information is accurate and regularly updated.

Nevertheless, a computerised system with good software can save you a lot of time and effort. It will allow for quick additions and deletions and for data to be shared more easily, and will also help you to calculate running totals and to file VAT and tax returns online – for which there a growing trend.

A computerised system can also have broader benefits for your business, as it can facilitate communication with your customers.