New business owners are often so focused on marketing and getting their operations up and running that looking after the accounts can take a back seat. However, without careful management, it’s easy for small businesses to lose track of their finances and end up in trouble. To help, here are five essential accounting tips that startups and SMEs can benefit from.
- Open a separate business bank account
If you’re self-employed, it is very easy to use your personal bank account to pay your business bills and deposit your takings. However, when you do this, you create a complicated mix of personal and business transactions that, over the course of a financial year, will become very hard to separate.
At the end of the year, when it is time to prepare your accounts, working out which transactions are personal and which are business can become a challenging and long-winded process. Until the finances are untangled, it is impossible to prepare accurate accounts on which to calculate how much tax you need to pay.
To prevent this happening, you should open a business bank account so that your business transactions are kept completely separate. Ideally, this should be done at the launch of your business so that the money spent on essential items before you begin trading can be accounted for. If you have started trading and are still using a personal account, open a business account as soon as possible.
Separating personal and business finances will make bookkeeping and completing tax returns much easier. It will also enable you to have a better overview of cashflow and overall financial performance.
- Stay on top of your bookkeeping
Looking after the accounts can be one of the most tedious aspects of running your own business but it’s also one of the most essential. The key to making this task easier and less stressful is to be organised.
To achieve this, keep together all the invoices you send and put them in chronological order. Do the same with the invoices you receive as well as all receipts for things you have purchased. You should also make sure you fill in the stubs on your cheque book and keep your bank statements. Finally, keep copies of any wage slips and records of payments for PAYE, VAT, National Insurance, pension contributions, etc.
Together, these items should provide a complete record of all the money that has come in and gone out of the business, either via the bank account or by cash. Keeping your records in chronological order will make bookkeeping easier and quicker.
If you find bookkeeping a challenge, you can hire the services of an accountant, a professional bookkeeper or even use one of the new online bookkeeping applications.
- Take advantage of technology
Accounting software has been around for a long time, with UK company, Sage, being one of the world’s leading providers. Today, much of this accounting is done online, often on apps, making it accessible to a much wider range of users.
There are a lot of advantages to using these applications. They can be used for invoicing, bookkeeping, payroll and even for pension payments. They are able to connect directly to your bank account and can be used to manage VAT, send online returns and for many other useful purposes. Accounting software automates many of the tasks that small businesses find a burden and makes the preparation of accounts much simpler. They can also provide you with a real-time data about your business’s financial standing.
Perhaps one of the biggest advantages of using online accounting applications is that they enable you to share data with your accountant. This makes it easier for them and less expensive for you when it comes to checking accounts, filling in forms and paying tax.
- Don’t miss tax deadlines
HMRC are quick off the mark at punishing those who don’t meet their tax deadlines. Late returns and late payments result in fines and charges that can have a real impact on a small business or the self-employed.
Luckily, HMRC allows plenty of time after the end of the accounting year to get your accounts in order. However, it is down to you to make sure that you know when the accounting year ends and the final dates for submitting forms and paying taxes. It is also your responsibility to meet those deadlines. If you have a small business accountant, however, they will ensure that all paperwork is accurately completed and that deadlines are met.
- Hire a specialist small business accountant
Many new and smaller business shy away from accountancy companies because they believe them to be expensive. Tax, however, is a complicated matter and small businesses can benefit significantly from seeking professional advice, frequently saving money over the long term.
There are some accountancy companies, such as Champion Accountants, that specialise in helping SMEs and entrepreneurs throughout the UK launch and grow their businesses. Accountants like these can do far more than prepare your end of year accounts: they provide services such as business support and advice, accounts preparation, audits and tax compliance. They can even take the burden of payroll off your hands.
Using a specialist small business accountant can provide you with the financial expertise you need to keep your business growing whilst taking away the hard work and worry of doing your own accounts.
Taking care of your business accounts can be stressful, especially if you are just starting out. However, organising your finances better, keeping to deadlines, making use of technology and seeking the advice of a specialist small business accountant will make it easier to manage your finances and help your venture become even more successful.