There are a multitude of reasons why it’s so important to keep your accountancy records on track. For starters – and for the sake of your sanity – always attempt to update your property investment accounts regularly (whenever you receive an expense receipt, monthly income etc). Doing so means there’s no huge panic or mountain of receipts and invoices to face every year when it’s time to report your profits to HM Revenue & Customs (HMRC).
Good accounting records can lead to business success
Another reason for keeping neat and clear records is because you can tell right away how your property business is performing – and on a monthly basis – meaning you can nip any potential financial problems in the bud before they are allowed to take hold. In other words, keeping up to date and good accounting records can actually improve the chances of your property business being a success.
Updating your accounts in a timely manner means more accuracy
It’s also easy to forget about expenses, such as buying stationery, parking, lunch, transport etc. if you don’t record them at the time. They may seem trifling i.e. £1.50 for a packet of envelopes, for instance, but they do add up over a 12-month period. Doing your accounts makes you keep receipts; just remember to file them as soon as you get back to the office (rather than leave them lying around in a jacket pocket where they’re likely to get lost or forgotten about).
HMRC may demand up to six year of accounts evidence
The reason it’s important to keep receipts, as well as invoices and other expenditure related to your property business, is because HMRC have the power to inspect your accounts at any time. And they’ll want to see evidence that you did indeed spend the amount you’ve claimed on expenses etc. They won’t look kindly on a property investor with no receipts and poor written records. And worse, if tax inspectors do come and look at your accounts, they can go back as far as six years.
Good accounts can help with future loan applications
If you’ve just spotted a great development opportunity, but need a loan to help you finance it, then it’s easier to get one if you have excellent, up-to-date accounting records, such as an Income Statement and a Balance Sheet, which you can then show to the potential lender. Neat records also make you, as a person, look more efficient, capable and therefore a better risk as far as the lender is concerned.
Consider using software to manage your accounts
Technology can make many sectors of our life much easier to manage, and accountancy is no exception. Apps which make it simpler to record information and which calculate balances for you as you go along, are great time savers. Some are free, others charge monthly, but they’ll definitely save you time. And it saves having to look for somewhere to store those ledger books and expense receipts.
Author
Chris Kirkwood
