One of the tasks that business owners outsource most often is finance. Bookkeeping, for small business owners, can be time-consuming, complicated and a long way down the list of important jobs to do. And yet it’s one of the most important roles. Good books mean a better understanding of your business, easier tax filing and more efficient organisation in general.
Keeping the right records
It’s important that you keep control of your business finances, whether you are self-employed or own a limited company or partnership. Organised finances make it easier to fill in your returns and put your business in a stronger position. What’s more, you are required to keep certain records, particularly if you are a limited company and HMRC could ask to see your books at any time.
Our advice for financial record keeping is based on many years’ experience in bookkeeper services:
Start as you mean to go on – the more organised you are from the very start, the easier it is to get into good habits. Trying to sort out a whole load of paper receipts, or reconciling your bank account without any reference is extremely time-consuming and you can’t be sure that you are recording your spending and income accurately.
Think about buying financial software – this doesn’t remove the need for professional bookkeeping, but it will help to make things easier for you and for your bookkeeper. And, with the likelihood of digital tax filing for all businesses under HMRC’s Making Tax Digital initiative, you will be required to keep digital records anyway in the next couple of years, so it’s advisable to get into the habit now.
File your receipts – this is the only way you can prove what you’ve spent on your business. Many expenses are claimable for tax purposes, so find out from your accountant what you can claim for and make sure you have receipts that back up your spending. For bigger businesses, you can also note which client you have incurred the costs for, as this will help with future business planning and understanding your costs and margins. Get into the habit of filing and recording them as you go – once a week for example – so that you don’t have a huge pile to wade through at the end of the tax year.
Keep bank accounts separate – don’t combine your business and personal accounts. It gets messy and it’s difficult for your business bookkeeper to see what expenses are related to your business and what is personal. Instead, set up a separate bank account for your business and, if possible, give your bookkeeper access to it so that they can keep track of your latest transactions and flag up anything that looks out of the ordinary.
Pay attention to VAT – if your business income is over the VAT threshold for any year (this amount is subject to change by HMRC) you will have to register for VAT. This requires you to submit a quarterly VAT return, and you may also be subject to a VAT inspection by HMRC. It is extremely important that your records are well kept and up-to-date. If you think you may have to register for VAT and you’re not sure about managing your day-to-day finances for this, think about outsourcing bookkeeping and accountancy services to help you out.
All expenses count – for the purposes of your business account, all expenses incurred in the running of the business are important. If you have employees, you need to account for their direct and indirect costs. You will also need to consider all business travel expenses, the cost of equipment and stock, and rent, utilities and other running costs. A good bookkeeper will make sure that you know exactly what paperwork, statements or accounts are needed in order to keep accurate and relevant records.
Bookkeeping for small business owners can be extremely straightforward, depending on the type of business you run. You may choose to hire someone to handle your books in-house, or you may follow an increasing number of small businesses who have outsourced bookkeeping to a virtual assistant. The added benefit to using a virtual bookkeeper is that they can work as part of your team providing additional support services at the same time without representing a big cost to the business.
If this is something you think you need help with, or would like to learn more about our virtual business support services feel free to call us on 0800 994 9016 or click here to request a free consultation.