Your accounts can only ever be as accurate as the books you keep. In this section we explain the books you will need if you’re trading – and those you won’t. Remember that although some records can be kept for less time, generally you’ll need six years of records for HMRC purposes.
For a business, this is your single most important ‘book’. It records all of the payments made into and out of your business bank account. It is crucial to set up the book appropriately at the commencement of business. We provide clients with a bookkeeping spreadsheet. At the end of each month the totals for each column for that month will automatically be calculated.
Sales invoice file
It is both very helpful to your business, and reassuring to HMRC, if you issue your sales invoices in strict numerical order. You should also set up a file with dividers for each month and file your sales invoices in strict numerical order. The only exception to this rule is that unpaid invoices should be kept in a special section at the front of the file until they have been settled, at which point you should mark the invoice ‘paid’ and also write on it the date paid, and then file it in strict numerical order.
Purchase invoice file
This would be a file divider for each month and a front section file for unpaid bills. On receiving an invoice, file it in the unpaid section until such time as you pay it. On paying the invoice you should write ‘paid’ and the date on the invoice itself, and then transfer it from the unpaid section of the file to the section for the month in which you made the payment. You should also, of course, ensure that the payment is recorded in your cash-book.
If you’re not a business, or if you have a personal tax return to do, keep a tax file with all information relevant to your personal tax circumstances. This will include bank interest received (not ISAs), dividends, Child benefit, P60s, P45s and P11Ds etc from employment, and things like Charitable donations, pension contributions etc. You’ll usually receive all this around April – May each year.