A guide to organising accounting records
Accurate accounting records are essential for any business, as they provide a clear picture of the financial health of your organisation. Organising your accounting records can be a daunting task, especially if you have never done it before. However, with the right approach, you can complete the task efficiently and effectively.
It goes without saying that organisation is key – whatever records you need to keep, it makes sense that you develop a system and keep good records in an ordered way from the outset. In this guide, we will outline some of the key considerations you need to take when organising your accounting records.
Is organising your records the same as book keeping?
In a way, yes, essentially book keeping is the way in which you record and organise your financial transactions. You can look at it as the first step in the process of accounting. It is particularly important that you organise your records ready for filing your annual accounts or self-assessment returns.
When running a limited company, it is important that you keep several accounting records – HMRC lists out the requirements on its website. HMRC has also put together a general guide to keeping records for your tax return which can be found online here.
Understand the basics of accounting
Before you start to organise your accounting records, it is advisable to have a basic understanding of accounting principles. This includes understanding the difference between credits and debits, how to create charts of accounts, and how to organise different types of expenses.
If you are new to accounting, it might be a good idea to take an online course or read up on the subject in more detail, so you have a better idea of the fundamentals.
Get the right software for your business
With the move by HMRC to making tax digital, it is far more efficient to keep your records digitally, especially as so many submissions and transactions are made online these days. There are a whole range of accounting software programmes available to use which can help you to organise your records.
Popular options include QuickBooks, Xero and Sage are just three of the platforms available on the market, but you will need to find the right software for your business. It might depend on the size of your business, budget and how complex your needs are. Look for software that is easy to use, does what you need it to do and provides good support for your business.
Set up a chart of accounts
A chart of accounts is a list of all the accounts used by your business. It works as a framework for organising all your financial transactions, so when you are setting one up you will need to make sure that you include all the accounts necessary. This might include accounts for your revenue, expenses, assets, liabilities, and equity.
Keep on top of entering your transactions
It is important that you regularly update your accounting records and keep on top of this. Entering your transactions regularly is key to staying organised throughout the financial year. Record transactions as they happen to ensure they stay up to date and accurate.
It definitely makes it easier to reconcile your accounts and prepared financial statements at the end of the financial year or when you need to submit your returns to your accountant or HMRC directly. If you are using one of the accounting software programmes that we mentioned earlier, many will include automatic transaction feeds, so your records will continually be updated.
Reconcile your accounts regularly
As well as recording your transactions and keeping them updated, it is also important that you reconcile your accounts, so they match your records with bank statements or other external records. Again, if you keep on top of this regularly, it will be much easier when it comes to year-end.
Reconciling your accounts is also essential to identify any errors or discrepancies at an early stage – it’s essential in good accounting practice. Reconciling regularly will mean your records are much more accurate.
Back up your records
Most of us have experienced that moment of dread and panic, that feeling in the pit of your stomach when you suddenly realise you’ve just lost something you’ve been working on because your computer crashes or you’ve forgotten to save it.
The last thing you want is to lose all your hard work, so backing up your accounting records on a regular basis is essential – it also helps to protect the financial data you hold for your business. It is a good idea to back up your records daily, so you can be sure you have accurate records in the event of the worst happening.
Store your records safely
This goes hand in hand with backing up your records – make sure you store your accounting records securely. You don’t want your financial information falling into the wrong hands. Make sure you store your records in a secure location, either physically or digitally, or both. If you do use a cloud-based accounting software programme, make sure their security measures are robust to protect your sensitive data.
When you are running a successful business, keeping accurate accounting records in an organised way will stand you in good stead. Ultimately it can save you time and money in the long run if you update your records on a regular basis.
Stay up to date with the latest accounting principles and software to make sure you are using the right tools for your business and organising your accounting records will be more manageable as a result. For more help and advice on this subject contact Matt Crabtree.