What is the best way to keep accurate records for your business?  There are many ways, simple paperwork (receipts, invoices, printed paypal and bank statements) are perfectly acceptable to HMRC, however you should make sure they are filed and kept in a safe and secure manner. 

Electronic receipts are also acceptable to HMRC and with the huge choice of apps available for smartphones it is a very simple process to keep electronic copies of receipts and statements. 

To record cash income and outgoings, simple spreadsheets are an effective and extremely cheap way of producing simple income statements and balance sheets, however for your business you may need something more sophisticated.  As with everything it pays to talk to someone who can help you decide what is best for your business.

It is vitally important to keep accurate records for your business (whether sole trader or limited company),  the penalties for failing to do so can be very strict – including a jail sentence!

It is so much easier if you start keeping records from the very beginning of your self-employment or start of business and keep the habit going….keep all receipts for purchases and records of sales to customers using a method that suits you (can be electronically or paper receipts but it must be done). HMRC will accept small mistakes if you can prove you have tried to keep full and accurate records, but there is no excuse at all for failing to keep reasonable records.

As with everything, there are many ways to records the necessary transactions for your trading activities and it pays to take advice on what will suit you and your business.

You are not legally obliged to register for VAT unless your turnover exceeds the VAT threshold (currently £81,000 during 2014).  Note that this turnover is calculated on a rolling 12 month period so it could be that you hit this threshold within a calendar year, if you think you might exceed this limit it is important to keep accurate sales records.    There might be advantages to voluntarily register for VAT, for example:  giving the impression to customers that your company is larger than it really is, or when claiming input VAT back on purchases may exceed output VAT on sales (eg zero or reduced rate sales).  IF you are at all unsure what’s best for you, you should always take proper advice.

There are important steps to take when thinking about setting up your own business.  Firstly, you should decide whether to be a sole trader, a limited company or a social enterprise (sometimes called not for profit businesses).  The legal structure you decide upon will have implications for how you run your business, how you employ people and the type of documents you will need to produce.  Note that if you decide to be a sole trader,  you and the business are not separated legally, therefore all profits and conversely all debts are yours as well as the business’s.  Depending on the type of trade, you might decide it is advantageous to act through a separate legal entity to provide your product or service,  this can be done through a limited company or a social enterprise.  In this case, the company exists as a separate legal entity and will therefore have specific legal obligations.

Regardless of what you decide, it is important to take advice on what is best for you and your business and most important of all you must inform HMRC as soon as possible after you start trading.