Small transactions and cash withdrawals

[etanku]

I have started a business with one of my close friends and I have a few questions about transactions and record keeping.

My business partner isnt a particual fan of following rules so he freely makes transactions without keeping record (invoices, receipts). He also makes a lot of cash machine withdrawls.

My question is, what are the consequences of not keeping proper records. All our large transactions have receipts and invoices attached to them, but the smaller ones dont. Also what are the accounting rules on cash withdrawls. What records must be kept for these transactions? I have labeled then on FreeAgent as meals and travel which is what they are.

Also is it normal for a business to have constant small transactions of £0.80 on the bank account (would this end up costing more in accountant fees?)

 

[StevensOnln1]

The odd missing receipt won't be a problem but claiming lots of expenses with no proof of what they were will look suspicious. Items paid direct from the bank account/debit card will show on statements but for cash purchases the receipts are your only real proof.

You'll have to ask your accountant if having lots of small transactions will have any impact on their fees.

Sent from my GT-P1000 using UK Business Forums

 

[Caspar]

You haven't mentioned if you are a Ltd Company or a sole trader partnership business? As cash withdrawals in a Ltd Co without receipts could potentially end up in Directors Loan account but sole traders would class these as drawings.

You can't just put the cash to subsistence as there are rules on when you can claim this and at what rate. For example as a sole trader if you were just out and about in the day on business buying coffees & food etc, you can't claim subsidence as HMRC would say everyone has to eat and would expect you to take sandwiches etc to work. Entertaining customers is disallowed for tax purposes and is added back when doing your tax calculation anyway.

Small tranactions are allowed but book keeping is usually charged at an hourly rate, therefore the more transactions, the more costs involved.

I really feel you are starting on the wrong foot. Take professional advice and ask to be shown how to record everything and the best way to do things, as it will save costs, make life easier and potentially save you tax in the long run, most people I see, wait until they've been trading a year before they see me. It is only after this that they see that if they had only known this or that, how it would have helped them from day one. An initial consultation is usually free with a local accountant.
Caspar

 

[joinuniverse]

You must keep records of everything. If you sell online, paypal will save your transactions' records. If you use other gateway, make sure it saves your transactions.

As for bank operations and cash withdrawals, all those will appear in your bank statements.

Bottom line: almost without wanting it, you will have all your transactions saved. I would recommend you just organise yourself for example invoicing all transactions when you receive money, and save all receipts when you pay (especially for VAT claims). You can maybe use programs like PAYMO.