Numbers aren’t everyone's bag, and that's fine! There are ways and means to accommodate your accounts, even for the most numerically challenged of entrepreneurs.
Start at the beginning
As it’s a very good place to start. In fact, it’s an integral place to start! Keep records of everything from day one. Accurate accounts of revenue, costs, VAT, PAYE etc serves as evidence for auditors. It also means you can deduct costs from your overall profits, including those which you may have incurred during the startup period. This means your tax liability is reduced, which is always a good thing!
Ignorance is not an excuse
The principle of law that exists as proof HMRC will not be sympathetic if you get it wrong. All will not be forgotten should you stray outside the law, even without malicious intent. Protect yourself. Do your research. Ensure you have a good understanding of the rules and regulations which your business must operate in.
HMRC offers a free online guide, with lots of information for business owners. Swot up on the basics when you start your business to ensure you’re not caught out later on. Take a look at their online guide here.
Another thing HMRC will not tolerate is tardiness! Non-compliance is big no no and firms who don’t adhere to these strict deadlines are slapped with unforgiving penalties and fines, which in severe cases can mean the end of the implicated company altogether. Setting up direct debits from business accounts safeguards against the risk of making late payments.
It’s also important to keep abreast of any changes. The HMRC have recently unveiled plans to digitalise all tax returns and triple fines given to small business owners for late payments. This has been met with criticism but that doesn’t mean it won’t go ahead. You can read more about their plans here.
Unless you’re a slippery global corporation with more loopholes than a fishing net or...dead, you will be paying it! Any profits you make are taxable, so putting some money aside throughout the year ensures you’re not in for a nasty shock when the tax year ends. A good rule of thumb is to set aside 25% of your income which will ensure you can comfortably pay your tax bill with some room to spare.
Get what you’re owed
If you’re paying tax you’re damn sure you should be claiming it back when you can! Any cost incurred ‘wholly and exclusively for the business’ can be claimed back. And this counts for any cost, even if it’s a stamp. Even if it’s driving to the post office to get the stamp. Even if it’s sitting in your home office using the electricity and heating, applying the stamp to the envelope for which you can also claim back. Small businesses are missing out £238 million of expenses a year, according to smallbussiness.co.uk, with many business owners feeling it isn’t worth claiming for expense amounts of less than £10. Don’t be careless about what you choose to expense as the little things add up to a lot!
Whereas accounting is the high-level overview of your business, bookkeeping is the day-to-day process of recording transactions, categorising them and reconciling bank statements. It’s important to develop a system early on to avoid confusion. Whether you opt to use a dedicated software programme, outsource the task or simply use an Excel spreadsheet, find a solution that adequately fits your business needs.
If you're lucky enough to have some employees, they’re more than likely going to want to be paid! Payroll can be done in house or you can outsource if you're not confident in processing it yourself. Payroll software can simplify matters greatly as it automatically generates payslips complete with NI and tax calculations.
Hiring an accountant is undoubtedly a costly expense, but the return on investment could heavily outweigh the initial outlay. Hiring an accountant reduces the pressure on you and lets you focus on doing what you do best, running your business! As an accountant it’s their job to be well versed in financial laws and regulations, so they will be able to advise you on key deadlines and ensure you're claiming all the allowances you're entitled to.
Looking for the right accountant can be like looking for the right partner, and as uncomfortable as the first date can be it’s important to only proceed with the relationship if you trust them. Take a look at these 15 questions to ask prospective accountants to ensure you find a professional who's the right fit for your business. Even if you're not ready for a long-term commitment you can hire an accountant if and when you need one on an ad-hoc basis.
It isn’t personal
It’s business! Running a limited company means the money you make doesn’t belong to you, it belongs to your business. This means no spending money on purchases for yourself, unless it’s a legitimate business purchase. Keeping your accounts ‘clean’ by ensuring business and personal finances remain separate is imperative, even when taking drawings from the company.
Never be satisfied
As your business grows your needs will change. Review your methods and look for key ways to optimise your practices, it will save you time and money in the long run. An excel spreadsheet may have been suitable when you first started out but realistically it won’t provide the visibility required to make fully informed business decisions. Remain pragmatic and review all your options before making a change.