When it comes to small business accounting, record keeping is everything. Keeping decent records can help minimise your taxable income, can save you a lot of time, and can make things a lot easier when it comes time to file your tax return.
If you are struggling with record keeping, you’re not alone – most small business owners have some sort of trouble keeping the right records, and this often comes back to bite them at tax time. If you don’t really understand what your obligations are when it comes to record keeping, you should think about speaking to an experienced accountant.
What sort of records do I need to keep?
When it comes to record keeping, there are a few things that it is absolutely essential to keep track of throughout the year so you don’t run into trouble at tax time. Some of the most important include:
- Your expenses – When it comes to calculating your taxable income, you will need to know how much money you spent to run your business. Any and all business expenses should be recorded and kept track of. If possible, keep and tax receipts, as they will be needed as proof when you submit your tax return.
- Income – Keeping a clear record of your income, where it came from, and how it needs to be taxed is essential, especially if you have any income from investment.
- Wages paid – When it comes to submitting your tax return, you will need to know exactly how much you paid in wages for the financial year. If you paid nothing, great. However, make sure that you record exactly what wages you paid when, as well as how much tax you deducted from them (if any).
- Any other relevant paperwork – Depending on the type of business you have, you may be able to claim tax credits on certain things. For example, if you use machinery or travel a lot as part of your business, you may be able to claim fuel tax credits. Speak to your accountant about any extra records you need to keep.
What are the benefits of keeping clear records?
If you do manage to keep decent business records, you will find that preparing and submitting your tax return is extremely easy. If you have everything that you need accessible and available, then either you or your accountant will simply be able to sit down and fill out your tax return information. If you use an accountant, you will save a lot of money on accountants fees, as they will be able to sort your affairs out quicker. If you don’t, you will save a lot of time. You may end up with a smaller taxable income due to having clear records of all your tax deductions, which leads to paying less tax.
Really, it is worth learning how to keep decent records for your business.