Efficient bookkeeping is key to running a successful business. This is especially the case for start-ups or smaller companies who need to manage their time and money resourcefully. Even minor miscalculations can cause trouble further down the line, notably in relation to complex tax returns.
To assist with the process, we’ve put together four simple tips to help you manage your books.
Meticulous records must be kept of all business dealings, no matter how immaterial they may seem at the time. You can either maintain data manually or via accountancy software but either way, you must stay on top of all income and expenditure. Designate some time, be it weekly or every fortnight, to go over the accounts in isolation from usual business activity.
Remember that costs incurred pre-trading should be included in your calculations, helping reduce your profit margin for tax purposes. As you move forward, retaining every receipt is highly advised, both with cash transactions and online payments – a good tip here is to create a new inbox folder where you can redirect all email receipts.
As mentioned, using accounting software is an efficient way to maintain your books digitally. Although some basic data entry is still required, complex calculations are completed and updated automatically – easing the burden on your shoulders. These programmes can also tie in with the recent ‘Making Tax Digital’ changes brought in by the government.
However, not all accountancy software is necessarily suitable to your business model and can complicate things further. Implementing the system and training staff how to use it can create further headache, not to mention the added cost of constant upgrades. An accountant can help with the transition however.
Many businesses fail simply because they overspend and can’t balance the books. It may seem like an easy trap to avoid yet it still occurs on a regular basis. Address all expenditure and tighten up excess spending where possible. Even if times are good, don’t be tempted to purchase unnecessary goods or service that won’t actually enhance your company.
Budgeting for tax is an area commonly overlooked. The HMRC will demand a chunk of any profit so bear this in mind when finalising your accounts. Again, it’s recommended you seek professional advice to become tax efficient and not suffer any great shocks come the end of the financial year.
Hire an Accountant
With around 5.7 million SME business owners in the UK, it’s a fair bet that a large proportion won’t be comfortable dealing with long-winded financial data. Likewise, many will simply want to get on with growing the company rather than being tied down with monotonous spreadsheet tasks.
If this applies to you, there’s no shame at all in passing the buck onto a specialised accountancy practice. Despite the initial outlay, their long-term value is priceless. Not only will they manage your books effectively, but they’ll also address excessive spending, reveal tax-saving tips and keep you on the right side of the HMRC. If you think you would benefit from some professional accounting advice, feel free to get in touch with the friendly team here at Neil Smith Accountancy.
If you’re not yet decided about engaging an accountant, check out this post listing some great sources of business advice; or find out more about the right time to hire an accountant for your business.