Setting Up A Uk Accounting System In Business Start Up Packages
Setting up in business for yourself can involve a great deal of paperwork and record keeping in order to satisfy UK legislation
. Business start up packages can provide plenty of assistance to you. Your PAYE and VAT requirements should be met by whatever system you decide to adopt and also your systems should enable you to run the business effectively.The tax authorities will require you to keep detailed and accurate records which must be retained for at least 5 years. You could be fined up to 3000 if your systems are inadequate.
Whatever system is adopted, it must be maintained regularly to provide accurate details of the trading performance. Some consideration should be given to the nature of the goods and services that the business will trade. For example, if the business deals in second-hand goods, a comprehensive stock book has to be maintained so that the correct amount of output VAT can be calculated. Please see the current relevant leaflets available from HMRC. For dealers specialising in low value bulk volume goods, for example, stamps, a method of global accounting has now been introduced for VAT purposes.
A list of essential books and their purposes follows. You may also wish to consider computerisation. Many different programs are available and you should consider your business requirements carefully before making a decision.
1. Cash book: This is used to record all transactions that go into and out of the business bank account. It should be reconciled with your bank statements regularly.
2. Petty cash book: To record all small amounts of sundry expenditure. A float of money should be maintained and replenished at the end of each week/month.
3. Sales book: To record sales invoices or daily cash takings. This book can be used to note amounts banked and cash-in-hand.
4. Purchases book: Use this to note all purchases made.
5. Ledgers: Where the business is offering credit to customers, it should maintain a debtors' ledger, which will record details of transactions with each customer, for example, invoices, credit notes and payments received. Similarly, a purchase ledger should be maintained if the business has several suppliers. These ledgers must be reconciled regularly with the sales and purchase day books.
6. Wages book: This is essential to maintain a record of all payments to employees, as well as details of deductions made.
7. VAT book: A record summarising the make-up of amounts included in each VAT return is helpful to satisfy HMRC that VAT has been accounted for correctly.
8. Debt control: Cash flow is one of the biggest problems encountered by small businesses, in common with many large concerns. If a small business allows its customers unlimited credit, it will soon collapse through lack of cash or because its debtors have become bankrupt. It is essential, therefore, that a new business establishes a system of debt control. The debtors' ledger is essential for debt control.
One of the key aspects of business start up packages is to get your accounting system set up to suit your needs. Once this is done you can concentrate on running your business successfully.
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