Five reasons why up to date bookkeeping practices are important

People vary, everybody is different; some have meticulous personalities, others thrive in chaos. A successfully run business, however, shouldn't be afforded this flexibility. It should always strive to operate as a model specimen of organisation, from its roots to its management.

The effective implementation of an organisational process begins with a well-managed and up to date record of its books, the benefits of which can be numerous, and will impact the business internally and externally.

Tax preparation

One of the major considerations for businesses, whatever their size, is the way that they interact with HMRC. This can be particularly prudent in relation to small business owners and self-employed people that need to consider their Self Assessment at the end of January.

Five reasons why up to date bookkeeping practices are important

The accurate filing of a company's income and expenses can ensure that it has budgeted for its financial deadlines, whether they are tax returns, VAT, or NICs. Likewise, an up to date copy of your books can be used to ensure you are paying the correct rate of tax based upon your profits, and whether your company is entitled to claim tax relief or capital allowance.

Improved cashflow

The fastest way for a company to go out of business, tried and tested, is for it to run out of money. To avoid this unfavourable fate, it's recommended that you establish a budget – and cashflow management comprises a major part of a budget.

The implementation of an up to date filing system ensures that you have the information to hand that communicates your company's revenue, and clarifies whether your business is financially solvent enough to cover its expenses.

Helps to inform future decisions

Your budget is the first port of call when making preparations for the future. A budget and its associated records provide a window into your company's past that reveals relevant growth and losses. It also highlights seasonal changes by revealing fluctuations in trade – it may, for instance, indicate the need for a larger summer workforce.

Trends like these also provide forecasts for a business that can be exploited in upcoming strategies. Though, we're not suggesting that up to date books can be substituted for a crystal ball, nor that they offer a moment of enlightenment. They can however provide an insight to weather hard times and capitalise on good ones.

Helps to prepare for an audit or potential HM Revenue and Customs inspection

The prospect of an inspection can be daunting and can leave you second guessing yourself, even if you know everything is in order. However, with up to date books, this needn't be a concern.

Firstly, small to mid-sized companies are able to qualify for audit exemptions if their annual turnover is less than £10.2 million, they own assets below £5.1 million, and/or they employ fewer than 50 staff. Even so, we recommend that accurate books are maintained because regulations can change, so this serves as a best practice to follow regardless.

Builds business credit

Books tell stories and your company's books are no different. At any point in a business's lifespan it may be necessary to apply for a loan or appeal to prospective investors. When this is required, people like to know where and how their money will be spent – this is true of banks and business people alike. Therefore, the clearer the picture displayed by your books, the clearer the decision to invest becomes.

The team at AMR Bookkeeping Solutions can help you declutter and manage your finances with our Bookkeeping and Budget & Cashflow services. Get in touch with one of our friendly professionals today.

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