Record Keeping
 
Business Record Keeping For Accounts and Tax
 
Running a business that complies with the law and common business sense requires the setup and maintenance of some form of accounting system. For any accounting system to succeed, it is vital that some method of keeping account of the financial comings and goings be established, and that records are kept somehow to present a true accounting picture for tax purposes. For the small business owner, this is undoubtedly a burden, but it's important nonetheless to establish an efficient accounting procedure from the start in any business.

Record keeping is an essential part of business life for a number of reasons: for audit, preparation of accounting documents, as the basis for strategic decision making, and in preparing investor prospectus documentation. That said, there are still a number of small business owners that don't keep appropriate tabs on their finances. This can cause a large headache when eventually the taxman comes knocking.

To maintain sufficient accounting records, you should firstly adopt a policy of keeping receipts and cheque stubs as evidence of monies coming in and out. These should be compiled daily, entered onto a central spreadsheet, and filed for later reference by date. This should enable you to prepare a basic cash flow account, showing monies coming in offsetting monies going out on a day-to-day basis. Keeping on top of this can be a great help in dealing with the administrative side of running your business.

You should also calculate a monthly profit and loss account, taking into consideration the cash flow statements you prepared daily and any other financial information relevant to your business. Calculate gross profit initially by subtracting direct costs of sales from the total sales figure - the total amount you sold less what it cost to sell those goods in terms of raw materials. After that, you can continue to find your net profit figure by deducting all other expenses relevant to your business, including heating and lighting, wages and interest repayments. This will give you your net profit figure and allow you to see how much money you've made over the given sampled period.

Finally you should also frequently prepare a balance sheet as part of your accounting system, which keeps a note of all the assets and liabilities of your business. In accounting terms, only short term liabilities are included (i.e. liabilities to expire within 6 months) in the deduction from total assets - long term liabilities are added as if they were considered an asset.

Keeping appropriate accounting records in business is as vital as marketing, operations, or customer service, particularly when it comes to submitting statutory accounts and tax returns. Not only is it good business, but it is also your legal responsibility to make sure you're up to speed with your record keeping and accounting documentation, to prevent deemed tax evasion or fraud. Likewise for auditing purposes, appropriate documentation prevents any problems, any embarrassing investigations or notes in the auditors' report, thus it makes good all-round business sense to maintain suitable records.
 
 
Record Keeping For Small Business: Advantages and Tips

In order to be a success in the business world, you need to keep track of all the sales, proceeds, and turnover of your business. Here we are discussing what you need to know about record keeping for small business: methods, indicators, and advantages.

Advantages of Record Keeping for Small Businesses

There are several advantages to keeping proper records of transactions for your small business.

Financial Statements

Financial records help you prepare financial statements. These records are needed when borrowing from a lending agency or getting audits done.

Business Analysis

Financial Statements help you in business analysis and in checking the health of your small business. You can see which sectors are bringing in more profits and where your business is suffering losses.

Cash Flow

Proper records help you keep track of the cash flow to your small business and of the sources of payment.

Tax Returns

While filing tax returns, a detailed financial record helps you keep track of your expenditures and file for appropriate rebates.

Because record keeping is so crucial to almost all aspects of your small business, what is the optimal way of keeping records? The following section discusses some record keeping tips.

Tips for Record Keeping

Update Daily

Daily updates keep you from being buried under a mountain of paperwork at the end of the month or at the end of the financial year.

File Receipts Under Proper Headings

Keep track of who gave you which receipt, when, and why.

Keep a Record of Expenses

Keep track of all your expenses and where and when you spend money.

Different Businesses

If you own more than one small business, keep separate records for each.

Documents Needed for Record Keeping

You need to file certain documents in the proper places if you wish to maintain a proper record of your finances.

Purchases, sales, payrolls, and receipts must be preserved safely.
Keep a separate folder for these documents.

Keep records of bank receipts, cash register bills, and credit card receipts that are proof of your income.

Suppliers’ receipts document your buying and selling transactions. These receipts should also be filed separately.

Keep documents related to business expenses.

Small cash payments should also be recorded, and you should have a cash disbursement slip ready.

Documents related to assets, both movable and immovable, should be preserved so that it makes auditing and accounting easy.

If your small business employs other people, you should keep employee compensation records.

Record keeping is crucial if you want to have a clear idea of your financial transactions and save yourself the trouble of locating misplaced documents when it is time to pay taxes. If you need help with record keeping, you can hire the services of a small business advisor or take appropriate software.
 
 
Home Business Record Keeping - Income and Expense

So you've set up the basics - separate checking account, month end bank statement and duplicate checks (see "Home Business Record Keeping - The Simple Way" article for more details) - now how do keep your records? Let's start with expenses.

Use either a file folder or a large envelope. Write "Daily Expenses" on it. Every time you order something through the internet; print out your receipt and stick it in "Daily Expenses". If you go to your local office supply store, as soon as you get home, put your receipt in the folder.

Also set up either an excel spreadsheet or buy the old fashion spreadsheets at your office supply store. They may be old but they work just as well. You'll be recording your expenses daily and totalling your columns at the end of the month.

At the top left corner of your spreadsheet, write the month and year. Down the left side, you'll record the date of the expense and whom you paid. Use separate columns.

Across the top of the page, you'll list your expense categories starting with column 4 if you are using an Excel spreadsheet. Since you are running a home based business and you are a sole proprietor, we are assuming you do not have any payroll. How you pay yourself will be covered in another article.

Write the following categories in your top columns. It's helpful to list them from left to right with left being the most used category. Let's say you begin with Advertising. Then add the following categories (not necessarily in this order): Office Expense, Utilities, Phone, Vehicle Expense, Contributions, Meals/Entertainment, Travel, Taxes, Licenses and Permits, Bank Fees, Credit Card Fees, Legal/Accounting. Skip a few columns and at the far right list your next to last column as Income. List you last column as Total.

Now at the end of the day pull out your receipts and log in your expenses.

What about the good stuff? Your profit! If you are using a credit card service, PayPal or another online processor, you should be able to log online to check you daily balance. If they don't post transactions until the following day, just post it the next morning on your spreadsheet. If you receive checks in the mail, record the total amount of deposit. So at the end of day or the next morning write the date, "Income" and the total of monies received. And as always, keep copies of your records. Make copies of your deposit slips and print out your online processor statements monthly.

And that's the basic information you need to set up your expense and income report. If you are very familiar with software such as Microsoft Money or QuickBooks, go ahead and use them. Unfortunately, many entrepreneurs buy the software and post expense (or what they think are expenses) into categories that may not be correct. When your Accountant has to straighten out these entries it takes his or her office time and that means more cost to you.

That's why a simple system, such as above, will save you time and money in the long run.
 
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Business Record Keeping For Accounts and Tax Naz Daud - founder of CityLocal. CityLocal is much more than just a Business Directory. It is also a great Franchise Opportunity for people that would like to Work from Home & Be the Boss. Article Source: http://EzineArticles.com/?expert=Nazir_Daud
Record Keeping For Small Business: Advantages and Tips Alexander Gordon is a writer for http://www.smallbusinessconsulting.com - The Small Business Consulting Community. Sign-up for the free success steps newsletter and get our booklet valued at $24.95 for free as a special bonus. The newsletter provides daily strategies on starting and significantly growing a business.
Business Owners all across the country are joining "The Community of Small Business Owners” to receive and provide strategies, insight, tips, support and more on starting, managing, growing, and selling their businesses. As a member, you will have access to true Millionaire Business Owners who will provide strategies and tips from their real-life experiences. Article Source: http://EzineArticles.com/?expert=Alexander_Gordon
Home Business Record Keeping - Income and Expense Michael Russell
Your Independent guide to Accounting Article Source: http://EzineArticles.com/?expert=Michael_Russell Michael Russell - EzineArticles Expert Author