The only two sure things in life are death and taxes…
Whether you’re a large corporation, small business or self-employed start up, the tax man will come knocking, which is why it’s essential to keep your finances up to date. Without an accountant on hand to help, this can appear a daunting do-it-yourself task, and so we've enlisted the help of tax and financial expert Sonny Benning from Hamilton Reiss, who says, “as a budding entrepreneur record keeping is a crucial priority for a successful business – it’s the glue that keeps your company together.”
Here he shares his top tips for keeping your accounts in order:
Befriend the tax man
Not literally, but keeping HM Revenue and Customs happy (that’s soft talk for ‘asking questions about your business’) is a priority. Your first step is to register yourself at hmrc.gov.uk to avoid any penalties and fines. You’ll find the right forms to download for your new business and obtain a Unique Tax Reference number which will help you or your accountant complete your yearly tax returns.
Itemise, Itemise, Itemise
Keep all your receipts for business outgoings and also income and log them in an Excel spreadsheet. Not doing this could mean missing out on vital money-saving income tax deductions and credits. Also, many accountants will charge extra for basic record keeping you can do yourself. Log receipts numerically and write what type of expense it comes under – i.e. office rent, marketing, business supplies. Do this for each month and file them. This will save heaps of time and avoid last minute scrambling around at tax time.
Set Up A Business Bank Account
Save yourself from sifting through groceries and fashion buys on personal bank statements by opening up a separate business account. By not mixing the two up, you’ll easily stay on track of payments and outgoings. Also it keeps your private life, private as you’re required to hang on to bank statements and financial papers for six years - the typical window during which your tax returns may be audited and checked for any errors.
Get an Accountant
Good professional accountants will offer free advice early on and save you money in the long term. Hiring a professional to do your end of year filing means you don’t have to worry about arbitrary government rules or missing out on tax allowances and can concentrate on doing what you do best: running a successful business.
Simplicity is Key
There’s no need to make record keeping scary – in your first year of trading, all you should be doing is keeping a basic ‘money in’ and ‘money out’ expenses spreadsheet. You don’t need to buy any expensive accounting software.
Set Money Aside for Tax
Set some of your yearly earnings aside for tax (you need to check what tax bracket you're in for the percentage) with a monthly standing order that automatically deducts from your bank account into a separate savings account. Or, put aside a bit of every pay cheque into your savings account. It's a good business habit. Many business bank account providers offer linked instant access savings account for this reason.
Avoid Leaving Things to The Last Minute
Don’t think of your accounts as something you do at the end of the year: stay on top of receipts and invoices on a weekly or monthly cycle. Keeping tabs this way lets you know how and what areas of your business are working and what aren’t. Also, not worrying about the unexpected means you won’t find any surprises or mistakes on your tax bill, so you’ll have plenty of time to iron issues and find extra cash for outstanding tax.
Be organised by creating a diary or email reminder system for tracking invoices and reminding you what monies are outstanding. Don’t be shy – you’ve done the work and should be paid for it.
Picture credit: Getty images