Small Business Bookkeeping Deadly Sin #5: Not Recording Cash PaymentsKelly
Many small business owners pay cash out of their pocket for business expenses while out and about, put the receipt in their pocket, and never see it again. This is all fine and dandy until it comes time to make a record of that expense.
This is a problem for small businesses because in order to maintain good financial records, you must keep track of ALL your expenses. Furthermore, poor records equate to thousands of pounds in lost tax deductions.
So how do you stop yourself from committing this bookkeeping deadly sin?
The simple solution is to keep your receipts and tax invoices in order, so you can be sure that you are recording the proper figures in your accounting program. Furthermore, at tax time you will have everything needed to claim your tax deductions and reliefs.
If you don’t know what expenses you can claim, you can find fact sheets online on the HMRC website. Alternatively, if you think that there something you might be able to claim but aren’t sure, show your receipt to your accountant.
Here are three suggestions to help you keep your receipts in check.
Keep an Envelope
One way to keep your receipts in order is to keep an envelope in a strategic place so that all of your cash receipts can be put in the envelope and entered into your accounting program at the same time.
Take a Photo
If you know that you prefer to pay with cash, make an effort to take out your phone each time you make a payment and take a photo of the receipt. To ensure those receipts aren’t deleted, you could save them in a folder on your computer called ‘2104 tax time’.
Use an App
There are many smartphone apps designed to help you scan and store your receipts. Have a look at what is available, select one that will work for you and begin using it. The tax authorities accept scanned receipts as proof of your deduction.
Click here to read the introduction to “The 9 Deadly Small Business Bookkeeping Sins… And How You Can Avoid Them”.
Stay tuned for the Small Business Bookkeeping Sin # 6