Are the first few months of the year a truly testing time for your business? If so, you maybe need to start looking at how you process your finances.

Far too many organisations fear the taxman, competing in an annual race against time to meet the January 31st deadline. However, if you start preparing for the next year’s HMRC deadline in advance, you’ll not only see HMRC in a better light, you’ll also gain the freedom to focus on budgeting for next year.

Read on for our guide to crafting HMRC-friendly documents – both physical and digital – that will help you keep things afloat:

 

The general rules

First, the basics. HMRC requires businesses to store invoices in paper or electronic format. Every sales invoice must have its own copy – even if there is a void transaction or one produced in error; you’ll need to hold on to it as evidence.

The same logic applies to any purchases you make; obtain a receipt and keep it stored. This will ensure that you can deduct any allowable expenses, such as VAT on purchases if you’re a VAT-registered company.

All documents should be kept in their original format for at least six years. If it’s a paper copy, store it wisely, and if it’s a PDF/Word file, don’t change the layout for your convenience.

 

Managing paperwork

The best way to keep paper documents organised is by giving each type its own physical pile. Dedicate a fresh tray for invoices, bank statements, bills, expenses and taxes, placing them in order of date (earliest at the bottom) to make navigation a simpler task.

Remember that HMRC does not demand a scanned copy of each physical invoice. While creating two copies is good for peace of mind, it will also create more work, as you will be pressured into ensuring the paper and digital copies of the same transaction match up. Any discrepancies and HMRC will want to know why.

 

Going digital

Of course, nowadays many businesses prefer to manage everything online. From April 2019, the government will be introducing a new initiative, Making Tax Digital, to roll out a new digital tax system.

Should HMRC request evidence of your earnings, scanning invoices (and receipts) will convert old documents into a digital format, but bear in mind that they won’t tolerate any in poor condition. If the scan is illegible or has been stored in an unfamiliar format (outside of conventional types like jpg, Word or PDF files), then you are likely to encounter difficulties. Be sure to use a good scanning machine in every scenario.

To make the whole process simpler, you may want to explore digital accounting solutions. From bookkeeping software and tax-return tools to expense-tracking apps and receipt scanners, there are so many ways to streamline your finances for both income and expenditure.

When it comes to keeping on top of your business’s fuel bills, was can help you maintain accurate, clear records for HMRC. All our cards come with HMRC-complaint invoicing, so have a look at our selection of cards to tick at least one box on your accounting to-do list.