Don’t stress out about the paperwork! In this video, we explain what you need to do to keep on top of your record keeping.

Meet Jeffery! He runs a successful plumbing company. He loves his work, but also understands he needs to make time for record keeping. He keeps a record of every business transaction including all cash and non-cash sales and expenses.
Jeffery always files his paper records as soon as he receives them. If someone sends him a record electronically, he saves it to his computer and regularly makes a back-up. All records must be kept for at least seven tax years.

These days, Jeffrey also enters everything into an accounting software package. He finds it easier as most of the work is done automatically, and he makes far fewer mistakes. At the end of the tax year, Jeffery needs to file the company’s income tax return and an IR10 Financial statements summary form. He needs to prepare his financial statements from the business records he has carefully organised throughout the year.

What are financial statements? They are records that clearly outline the financial performance and strength of your business. Most businesses prepare a profit and loss statement and a balance sheet. The profit and loss statement shows gross income, expenses, and net profit. You include your net profit in the income tax return. The balance sheet shows the business’s assets and liabilities at the end of the tax year.
Financial statements must meet minimum financial reporting requirements to ensure you pay the right amount of tax. You can find more information about these requirements on Inland Revenue’s website.

Preparing financial statements can be a bit tricky, so Jeffery gets his accountant Sarah to do it, allowing Jeffery to focus on what he does best – plumbing! Because his records are so well organised, Jeffery saves money on accounting fees. Sarah prepares the financial statements to meet the minimum requirements. Jeffery makes sure all his records and financial statements are kept safely, just in case Inland Revenue needs to see them.

Financial statements aren’t just about tax. Jeffery can use them to identify potential problems and opportunities in his business. Every year, Sarah advises Jeffery on ways he can grow his business and reduce risks. Jeffery’s plumbing business is going from strength to strength. One reason for his success is a good record-keeping system.