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It is common for someone to set up a business either as a sole trader or limited company without any professional advice in advance. This often means that when they approach an accountant after the end of their year end there are a lot of issues that need to be addressed at extra cost to the business.
I would always recommend that anyone thinking about setting up a business should consult an accountant first and most accountants initial consultations are free and non obligatory, but so much information can be gained in this short meeting.
There are so many areas to cover with a new business but the following covers some of the basic rules for record keeping which is not only a legal requirement for tax purposes but doing it right will help your accountant keep their charges low.
- Keep all your records and if possible organise them in folders, alphabetically and in date order where relevant
- Records include for example invoices, receipts, cheque books, paying in books, lease agreements etc
- Keep a business bank account separate to your personal account and keep business and personal transactions seperate
- Keep a record of all cash income and expenditure, perhaps using an IMPREST system, cash book or excel spreadsheet
- Reconcile the bank monthly (see below)
A bank reconciliation means agreeing the balance per the bank to your accounting records.
If all your income and expenses go through the bank account the total of your income received and expenses paid through the bank should agree to the bank balance subject to timing differences for cheques or income that have not yet cleared the bank. Any other difference is due to unrecorded income or expenses or perhaps interest or charges going through the bank account.
If you can reconcile the bank monthly you can ensure that your records are complete. If you can provide your accounting records to your accountant with the bank reconciled to the year end date this will make preparing the accounts so much easier and hopefully keep the bill down.
Hope this helps.