Comprehensive financial records are essential for good business
Published 05/05/2009 | 13:14
Question : I have just set up a small business. I am a sole trader and want to find out what financial records I am legally required to keep.
Paul Aldridge from Invest NI's business improvement services team, replies:
By law you have to keep financial records showing all receipts and expenditure, including payroll costs, and recording all goods bought or sold for your business. These records must be kept for six years.
You can keep these records manually or on computer. If you are recording the information manually the minimum you will need is a cash book, a sales ledger, a purchase ledger and a wages book.
However, there is a great deal of benefit to be had from using a computerised accounting package. There are several on the market that are suitable for small businesses.
You will make the same entries as you would in a manual system and the computer will automatically update your accounts ensuring that you can see your correct financial position at any time.
The nibusinessinfo.co.uk website has a good section on ‘Setting up a basic record keeping system’, which gives a good breakdown of all the records you need to keep.
It also gives advice on setting up a system for making entries in your accounts as appropriate on a daily, weekly or monthly basis.
If you are new to financial management and are worried about it, you should consider doing a course on computerised bookkeeping. Many local colleges offer part time courses on this subject.
Question: I own a small business and my employees are very important to the success and profitability of my business. Recently one of them had a health scare and was off for a while. Is there any way I can protect myself in the event of any of them dying or suffering a critical illness?
Claire Geddis, partner with S Hill investment advisers, replies:
Yes, there is. Many businesses forget that the most important asset that they have is its staff.
With that being true, measures should be put in place to protect against the loss of key personnel.
In your case I would advise taking out Key Person Assurance on your most valuable employees. This will ensure that the business will receive some financial compensation in the event of a key person dying or being diagnosed with a critical illness.
The amount that you will receive is usually guaranteed, with the level agreed at the outset.
Without such protection the business can face a number of problems.
Some of these being faced include loss of profits, the need to recruit a successor, the loss of important personal and business connections and the loss of existing contracts as well as many more.
Even if the key employee is likely to return to work they may not want or be able to work full time.
An extra member of staff may also be needed to help out to reduce potential losses.
Also some employers will pay the costs associated with medical care to help support the immediate family of key staff.
To fund this, a policy that provides critical illness benefit should be taken out.
So by having protection in place it will provide financial protection for the business and also reduce the impact of the loss of key personnel.
Question: I am currently levelling a site for construction works and have surplus soil left over that I do not need. Another local landowner has offered to take the soil for free for use in his own construction works. Can I give the soil to him?
Andrew Ryan, associate, environmental law, Carson McDowell solicitors, replies:
Surplus materials — including clean soil and stones — from construction sites are, under current laws, considered waste.
In order to move the material from your site you must use a registered waste carrier to take the waste who must also fill out and give you a copy of a “waste transfer note”.
If you are taking the materials yourself you must register as a waste carrier with the NI Environment Agency.
Also, the site where the soil is sent to must have either a waste management licence to take the material or an exemption from licensing registered with the NI Environment Agency.
If these are not in place both you, the person moving the waste and the receiving landowner could be prosecuted, as well as risking a fine of up to £50,000 for each offence or six months in prison.
This seems very harsh, particularly as you only wish to move clean soil, but the law as it currently stands is extremely strict.