The number of small businesses in the UK has been steadily increasing since 2017 and now stands at six million. The recession kick-started the rise, encouraging many people to become self-employed after finding it more difficult to secure full-time jobs.<\/p>\n
Setting up in business can be exciting and is a significant and proud milestone for any owner. However, as you excitedly start winning new clients, you shouldn\u2019t keep your eye off the ball and neglect the basic and essential tasks such as the financial aspects. If you don\u2019t properly manage your finances from the start, issues may come up that will seriously affect your profits and tax payments.<\/p>\n
Think of the finances as the foundation for your business. By setting them up properly, your earning potential can rise and lead to greater business opportunities. You don\u2019t need to do the books. However, it\u2019s better to have at least some basic knowledge of bookkeeping and finance. Such knowledge will come in handy when talking numbers with accountants and bookkeepers.<\/p>\n
You may think of bookkeeping as the tedious part of running a business. If you\u2019re a people person, you\u2019d perhaps rather focus on making sales. However, it\u2019s also the crucial part where you record your sales and expenses, which in turn tells you if the business is making money or not.<\/p>\n
There are numerous tasks involved like writing invoices, reporting expenses, monitoring payables and preparing employees\u2019 salaries but instead of manually conducting these tasks you could choose to use:<\/p>\n
This will free up more of your time to focus on your business operations.<\/p>\n
Here are some ways to help you keep on top of your financial records and reports.<\/p>\n
Regular bookkeeping schedule<\/strong><\/p>\n As mentioned earlier, many business owners view bookkeeping as a tedious task. However, just think that the consequence of sloppy bookkeeping could be a fine from HMRC. Furthermore, the longer you put off sorting through and organising paperwork, the more difficult it will be to keep it in order.<\/p>\n Schedule a date to update books<\/strong>. Just set aside an hour of your time, daily or weekly, to keep timely and accurate records of your profits and expenses.<\/p>\n Recording and keeping correct records<\/strong><\/p>\n Even if you choose to hire an accountant, you still have to maintain accurate financial records. If you don\u2019t, the bookkeeper will have a harder job of determining the essential information. This may result in you being invoiced a higher bill for their time. <\/p>\n To avoid this happening, get hold of your financial records and check:<\/p>\n You may want to invest in a simple but robust bookkeeping system that allows you to easily enter data. To keep your information records accurate, avoid changing any figures you log every month. It will also help your accountant to find out any errors quickly.<\/p>\n Be consistent<\/strong><\/p>\n If your business has regular transactions, like \u2018monthly rent\u2019, organise them under the same category title. It will help shorten the time and effort spent by your accountant when checking your accounts. Also, consistently using the same category makes it easier to import your bank data into your accounts.<\/p>\n Simplify your records<\/strong><\/p>\n Even if you\u2019re using bookkeeping software, it\u2019s best not to post entries that aren\u2019t relevant to your business. For example, if you\u2019re still planning to pay a supplier, there\u2019s no need to record it your system. Once you\u2019ve paid, you can then record the transaction as a payment. <\/p>\n Automate your bookkeeping<\/strong><\/p>\n There\u2019s no need to record every transaction manually when software can make the task easier. For example, some expense management software allows you to take photos of expenses and automatically upload them into your account. Such a process saves you from having to keep hold of receipts.<\/p>\n Also, an online accounting system lets you view and pull your bank data automatically without having to download or upload your bank statements.<\/p>\n Annual financial statements are common regulatory requirements. You\u2019re also expected to present them in a prescribed and formal format. Often, these documents show your various accounts like assets, liabilities, sales, and costs.<\/p>\n The due date for submission will depend if you\u2019re operating as a sole trader or limited company.<\/p>\n Specific information for: <\/strong><\/p>\n Sole traders <\/strong><\/p>\n If you\u2019re a sole trader, you have the option of choosing your accounting year. However, you must calculate your taxable income every year from 6 April to 5 April. Your accounts are used to back up your tax returns. So most sole traders and even partnerships prefer to use the 1 April to 31 March accounting year.<\/p>\n Make sure you complete all your relevant accounts before the following 31 January. You\u2019ll need them to complete your self-assessment tax returns.<\/p>\n Limited companies <\/strong><\/p>\n You can also choose the accounting year that will suit your business. However, you still have to submit your accounts annually with Companies House. <\/p>\n Corporation tax<\/strong><\/p>\n All UK registered limited companies are required to pay 19 percent tax of their profits. However, ensure that you don\u2019t include ring-fenced income in your tax computation. <\/p>\n\n
Preparing and presenting annual accounts<\/h3>\n
Tax computation and payments<\/h3>\n