Are you a small business? Tips to tackle Accounting side of your business
There are thousands of people involved in different sorts of small businesses with a dream to take their business to the next level. Some are working as sole traders and some have registered limited companies. Some are using eBay or Amazon to start a small business from home and some have managed to secure business premises and provide offline services and products.
It does not matter if you are running a business online or offline, but in all cases, you must keep a track of your finances for end of year accounts and tax returns. Growing piles of receipts and other paperwork on the desk gives most business owners a nightmare to deal with. At the year end, many business owners face a problem to sort out their accounts. Even if they have Accountants, they still struggle to gather required information for them.
Today I am going to give you some tips about how to keep track of your business transactions and avoid a last minute panic.
Are you starting to sell mobile phone cases on eBay with an initial investment of £50 or thinking to work as a cleaner in your local area? No matter how small your business is, you must open a business account and keep your personal transactions entirely separate from your business transactions to avoid time consuming workings and confusions. Always do end of the month bank reconciliations as it will make your life much more easier.
Keeping expense records up to date:
It is very important to keep your records up to date at all times. When I said “at all times” I do mean “at all times”. Never leave any single transaction without recording in your books, even it is for a 50p ball point pen for your work. Most people get frustrated by handling finances, especially huge pile of receipts and could not know a way to sort things out without pain. Now the trick to avoid this is very simple and only takes 10-15 minutes of your busy working day. Before you close down your business for the day, spare 10-15 minutes daily to record all your expenditures on a computer based program. When you do that regularly, you won’t see any piles of receipts wondering around on your desk. It also saves a lot of time to do your month end or year end accounting.
As the technology has taken over today’s world, we spend a lot of money on different things and services for which we don’t receive any paper invoices or bills and we do not pay anything in cash or out of pocket. All these expenses get paid with our money held at bank via an automated system called direct debit or standing order. Expenses like energy bills, business rent and rate, phone bills and other regular contract payment are most paid via paperless billing system. Tricky part for most businesses is that, when they forget to record paperless expenses. To cope with this issue, as advised before, do regular monthly bank reconciliations and record all automated outgoings as your expenses in the books.
Sending our invoices and credit control:
Make sure you get paid by your customers and that is the reason for ensuring your business keeps decent records. Make this your top priority. In most online shopping carts and eBay/Amazon accounts, invoices get self-generated and sent instantly via email. If you are doing your business offline especially that includes providing services, then you must have to make sure that you issue invoices as soon as you have provided the service and record that invoice in your recording register straight away at the time of producing it. If you are using a pre-printed invoice book to give to your customers, then again, spare 10-15 minutes to record all the daily transactions before shutting off your business for the day. Keep an eye on your debtors, in other words customers from whom you have to collect money. Do a weekly analysis that who has paid you and who is late for the payment. Start chasing your payments as soon as the agreed time limit is gone. Remember one thing; if you delay in chasing a payment, you are most likely to be spending a huge amount of time and effort to recover that payment at a later date.
Accounting in the Cloud:
Don’t look at the sky. I am talking about cloud storage technology. Many companies do provide accounting software that store your data in the cloud. It means you can track or submit your expenses on the go from your mobile or tablet. Another benefit of cloud accounting is that, you can store receipts and bills online rather than in shoe boxes and shopping bags. You even don’t need a special accounting program to take advantage of cloud accounting. You can record all your expenditures and incomes in an Excel spreadsheet – just save that Excel file in a cloud storage platform by using free services like Dropbox, Google Drive or One Drive etc. Create one more folder in there and name it as expense receipts. Take photos of any receipts on daily basis and save that receipt image in the expense receipts folder. Once you have done that, you can access that spreadsheet on your mobile, tablet or laptop anywhere you go. With cloud accounting you can even share your records and receipts with your accountant in a few clicks. In this way, your records will be automatically backed up for any unforeseen disaster.
All businesses have deadlines to comply with. Filing Tax returns, paying associated tax bill, submitting accounts to Companies House, Annual Return submission to Companies House, Director’s Self-assessment tax return and if you have employees or yourself a paid director, then RTI payroll returns before making any salary payments. Should you miss any of these deadlines, penalties can build up quickly. In extreme circumstances a company can be struck off. Many people think that they have an accountant so their own responsibility is now ended to take care of these deadlines. That is an absolutely wrong concept. By law you, as a business owner or as a director has a responsibility to meet these deadlines. If you miss the deadline, it won’t be considered as an excuse that it’s your Accountant’s fault. Missing a deadline is always a business owner or director’s fault that are legally responsible for the submission of returns and accounts. Accountants are just your service providers and don’t try to use them as a shield. To avoid missing your deadline, put a reminder in your mobile phone or in Outlook if you use that or even in Google calendar about all important deadlines. As the deadline approaches, you must make sure that the relevant documents are submitted in time before dismissing your reminder. Never see and dismiss a reminder before you have taken action on it, until no action is taken always snooze that reminder.