Guide
Organising your business finances
Essential financial management practices - bank accounts, bookkeeping, and record keeping.
Good financial organisation is fundamental to business success. It keeps you compliant with tax obligations, supports better decision-making, and makes life easier when you need to provide financial information to banks, investors, or HMRC.
Why financial organisation matters
- Legal compliance: You must keep records for tax purposes (minimum 6 years)
- Tax efficiency: Claim all allowable expenses by tracking them properly
- Better decisions: Understand profitability, cash flow, and where money goes
- Easier funding: Banks and investors need organised financial data
- Reduced stress: Tax returns and accounts are simpler with good records
Business bank accounts
Do you need a separate account?
Limited companies: Yes - legally required. Company money must be kept separate from personal funds.
Sole traders/partnerships: Not legally required but strongly recommended. Most personal account terms prohibit business use. Mixing funds complicates tax filing.
Choosing an account
Consider:
- Monthly fees: Some accounts are free, others charge £5-30/month
- Transaction limits: Free accounts may limit transactions
- Integration: Does it connect with accounting software?
- Card payments: If you need to accept cards, check merchant services
- Overdraft facilities: Useful for managing cash flow gaps
Record-keeping requirements
What records to keep
- Sales and income: Invoices, till records, bank statements showing deposits
- Purchases and expenses: Receipts, supplier invoices, contracts
- Bank and credit card statements: All accounts used for business
- Payroll records: If you have employees
- VAT records: If VAT registered
- Asset records: Equipment, vehicles, property purchases
How long to keep records
- Sole trader/partnership
- 5 years from 31 January following the tax year
- Limited company
- 6 years from end of accounting period (some records may need longer)
- VAT records
- 6 years
- Payroll records
- 3 years after end of tax year they relate to (6 years recommended)
Bookkeeping basics
Methods
Cash basis: Record income when received, expenses when paid. Simpler but less accurate picture of profitability. Available to most sole traders/small partnerships.
Accrual basis: Record income when earned, expenses when incurred (regardless of payment). Required for companies, gives more accurate profitability view.
Accounting software options
For most small businesses, accounting software beats spreadsheets:
- Automatic bank feed imports
- Invoice generation and tracking
- VAT calculation and MTD compliance
- Financial reports at a click
Popular options: Xero, QuickBooks, FreeAgent, Sage, Wave (free)
Making Tax Digital (MTD)
Already applies to VAT-registered businesses. Extending to income tax:
- April 2026: Sole traders/landlords earning £50,000+
- April 2027: Those earning £30,000+
- April 2028: Those earning £20,000+
MTD requires digital record-keeping and quarterly reporting via compatible software.
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Open a business bank account
Required for companies, recommended for all. Compare options - some free accounts available for new businesses.
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Choose an accounting system
Accounting software, spreadsheet, or paper records. Software saves time and supports MTD compliance.
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Set up a filing system for receipts
Digital storage is fine - take photos of receipts. Many apps integrate with accounting software.
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Reconcile bank accounts regularly
Monthly at minimum. Match bank statements to your records to catch errors and maintain accuracy.
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Understand your tax deadlines
Calendar key dates - VAT returns, Self Assessment, Corporation Tax, annual accounts. Set reminders.
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Consider professional help
Accountants can save more than they cost through tax efficiency and time savings. Essential for limited companies.