As a small business owner, you must keep on top of your accounting and bookkeeping, to ensure the smooth running of your business and to avoid any financial penalties.
Both bookkeeping and accounting are important for your business and aid in making informed business decisions. While bookkeeping records and reports financial information, accounting is responsible for summarising, interpreting, and analyzing data.
Here are 6 tips to help your small business manage accounting and bookkeeping.
#1 Keep your finances tidy
Keeping your finances tidy and separate from any personal finances from the start can help you in the long run. Not only will it make it easier to understand when making business decisions, but it will also save you a lot of time and hassle when it comes to filing your tax returns.
#2 Create profit and loss (P&L) records
P&L records are a summary of your costs, expenses, and revenues. This statement is required by HMRC and is a great way to see at a glance the financial health of your small business over a certain period, for example, a month, a quarter, or a year. A P&L statement can be created using accounting software or a template on spreadsheets.
#3 Make a note of important deadlines
When managing your own business and playing the role of accountant and bookkeeper, you are fully responsible for submitting your tax returns and paying tax. If these are not completed correctly or on time, your small business may be subject to fines or penalties.
As soon as you register as a small business, you will be provided with the dates of your financial year. Make sure you add this information to your diary so you do not miss the deadline.
#4 Research HMRC rules
One of the most important things when it comes to managing finances is accuracy. Incorrect accounts can have detrimental impacts on a small business. It is crucial when starting that you research how to best manage books and accounts, how to stay compliant, rules for a limited company, introductions to VAT, filing taxes online, what taxes apply to your business, how much tax you need to pay, what kind of tax you need to pay (income tax, National Insurance, VAT, Corporation tax) and when. HMRC has all the information you need to remain compliant and avoid penalties, as well as learning tutorials and workshops.
#5 Budget for tax
As a small business, there are many outgoings you need to consider. One of these must be your taxes. A good rule of thumb is to put away some money to budget for your taxes. This means you are not rushing around at the end of the tax year trying to scrape together the funds.
#6 Keep all your receipts
As a best practice, you should keep all business receipts (or at least a copy of them). This is important if you wish to claim business expenses. Business expenses can be anything from stationery and computer hardware to travel and accommodation.
Getting started with accounting and bookkeeping doesn’t have to be a difficult task if you equip yourself with the information to get started, stay organized and meet deadlines.