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When it comes to running any kind of business, accounting is one key area all owners need to focus on. Accounting plays a pivotal role in helping you track income and expenditures, ensuring statutory compliance, and providing investors and management with quantitative financial information that can be used when making business decisions.
As the head of the company, we appreciate that you may not be an accounting expert. However, having some knowledge and staying on top of operations is key for keeping everything running along nicely. For small businesses, you may not have an accountant to oversee the financial side of things. Whatever your situation, here are some crucial ways to keep on top of your small business accounting, which will help you avoid making costly mistakes.
Simple Ways to Stay on Top of Your Small Business Accounting
Separate Business and Personal Finances
Instead of having your income and other funds being put into a personal account, being a company owner means some business-related finances will combine with personal funds. No one wants to have to sit down and sift through every personal transaction or shopping list to pinpoint that one particular piece of business.
Thankfully, there are things you can do to make this chore less of a hassle. Simply opening a new bank account to house all your business-based expenses is the first step toward getting in control of your small business accounting.
Once you separate your business and personal expenses, this will help you be more organised. Also, this allows your business finances to stay firmly in your business account, and your personal finances stay personal. With no worry about having to shuffle through endless transactions, you’ll wonder why you didn’t do this sooner!
Keep Records Neat and Tidy
Some business heads don’t mind a bit of clutter, whereas others can’t stand it if their documents aren’t tidy, neat, and organised. This may be fine in your personal life. However, when it comes to your accounting and finances, try and keep them in good shape. That way, you won’t be wasting precious time looking for important information.
Neat and tidy records mean you can get on doing other important things in the business, such as attracting more clients and of course, generating more revenue. When the tax deadlines approach, you’ll be happy everything is ready and raring to go.
Streamline Your Operation
As a business owner, you can’t be expected to know the ins and outs of accounting. To successfully streamline your financial operations, looking into expense management solutions could be the answer. You can check out Payhawk, who are experts in this. What’s more, they have a direct integration with Oracle NetSuite, one of the market’s most popular ERPs (enterprise resource planning systems).
Their online accounting software means you barely have to move a muscle! Instead, software automation completes the manual tasks for you. You’ll find businesses all over the country use these platforms to help them with their accounting.
Stick to Tax Deadlines
This one cannot be stressed enough. It’s vital you stick to tax deadlines. One way to remind yourself is by setting phone reminders or using a calendar. When a tax deadline looms, this situation can be quite stressful, especially if you are rushing because you’ve forgotten! What’s more, mistakes can take longer to sort out.
Not down the tax deadline and set reminders beforehand. This gives you plenty of time to fill your tax returns without any mistakes. When you do this, you won’t have HMRC on your back! We get it’s not the most exciting of tasks. But, you’ll be thankful for setting reminders.
Keep Detailed Inventory Records
We aren’t suggesting you keep and file every single receipt following every purchase. However, keeping any business-based purchase receipts is important, especially when it comes to claiming for business expenses. This will all depend on what kind of business you run and if you work from home. For example, you may be able to claim back some domestic bills if you aren’t in an office environment.
This can range from anything like stationary to stamps, so make sure to keep hold of business-related expenses or purchases. Like we’ve already said, keeping your records neat and tidy and archiving your files will mean you have everything you need once the tax deadline arrives.
Attend a Free HMRC Workshop
Let’s be honest – HMRC isn’t going to be your best friend as a business owner. After all, if we could not pay a single penny in tax – we would! However, HMRC do come in handy and can offer great support and advice. They have workshops that are free to attend and could help brush up your accounting skills. Have a look to see if there’s one being held in your local area. Alternatively, you can check out their e-learning tutorials.
HMRC have a wide variety of workshops, which you’re sure to benefit from. This may be introductions to VAT, how to file online, or steps to take to set up a limited company. They always have something going on, so it’s your job to look around!
Budget for Tax
While you may be rolling in cash and making a tidy profit, you must remember that not all the money is yours! Unfortunately, you will have to hand some over to the taxman. A great rule to adhere to is budgeting for this as you go along. That way, when you come to the end of the tax year, there are no massive shocks!
If you’ve got a savings account or something like it, why not set a little bit of your income aside and put it in there? This allows you to pay off your tax bill easily without any stresses and worries. Ultimately, you can enjoy the rest of your profit without the hassle of having to hand over anymore!
Understand Tax Rules
Regarding tax, it’s vital you know exactly which rules apply to you and your company. This will mean you pay the right amount of tax and aren’t paying over the odds. There are all kinds of taxes to familiarise yourself with when running a business. Some of these include income tax, corporation tax, national insurance, and VAT.
It’s your responsibility to research into all of them. As you get to grips with them and understand their purpose, you will figure out exactly how much you need to pay. You shouldn’t cut corners doing this. Take your time to learn about them and you won’t make any errors that could prove costly.
Create Profit and Loss Statements
The primary purpose of a profit and loss statement is to give you an overview of the financial health of your company. A profit and loss statement summarises the expenses, revenues, and costs of your company during a specific time. This will satisfy HMRC and ensure you’re doing everything above board.
Your profit and loss statement should house information like your net profit, gross profit, and profit before tax. When you fill this out, it will be much easier when it comes to showing costs, revenues, and how much profit your company has made over the last 12 months.
We understand that the life of a business owner is already packed with all kinds of jobs linked to the company. However, if you’re a small business and haven’t got the funds to shell out on an accountant, you may need to be in charge of managing your accounting.
Following the above will help in keeping in control of your accounting and finances and ensure everything is up to date.
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