BOOKKEEPING FOR A SOUND BUSINESS
Monitoring the success of your business.
It's hard to know how your business is doing without a clear financial picture. Am I making money? Are sales increasing? Are expenditures increasing faster than sales?
If you keep good records, you will be able to compare your performance in various years and make plans for improvements.
Determining periodic retail sales fluxuations.
This will help you determine when you can afford to make any large purchases or when you need to order more or less stock, product or materials.
Obtaining bank financing.
A banker will usually want to see financial statements for the most current and prior years, as well as your projected statements showing the impact of the requested loan. A banker may even want to see some of your bookkeeping procedures and documents to verify whether you run your business in a sound, professional manner. The ability to show a firm financial handle on your business may secure the loan or an even more competitive rate.
Complying with payroll tax rules.
PAYE payments must be made according to strict deadlines. Then at the end of the year, you are required to prepare payroll returns. Sound bookkeeping practices will make compliance with payroll rules easy. Poor records will make it impossible.
Completing VAT Returns.
If you are VAT registered, good records will make it easy for you to compute the tax due and complete the required returns. Good records will also help you avoid penalties for late registration and late returns.
If your business is a partnership, you will need good records to determine the correct amount of profits to distribute to each partner. If you are operating as a company, you must determine the company profits that you will be paying out as dividends.
Completing tax returns.
You will want to make sure you are able to track all your company’s deductions so that you do not end up paying more taxes than you absolutely have to. Also, having well organized records for your accountant makes his/her job quicker, thus saving you money.
Should your company ever be audited you will need to provide your financial records in order to verify all your expenses & income.
Should you ever decide to sell your business you will need accurate financial records to show potential buyers.