Choosing the right VAT scheme is an important step for small business owners and can have a considerable...
If you run a small business, it's essential to stay on top of your accounting. Without a proper system, you won't know if you are making any money. You could even get in trouble with HMRC.
Far too many small business owners neglect their accounting. It's very easy to focus on the day to day work of sales and customer service. But the end of the tax year can creep up on you.
Before you know it, it's time for your filing and tax returns and you've got a mountain to climb. In this article, we'll run through the basics. For more detail on any topic, check out our article archive.
Bookkeeping is like mowing the lawn. If you do it frequently, it's no trouble at all. However, if you let it build up, it becomes a nightmare to fix.
The first step is to choose some good accounting software. If your business is really small, you can probably get away with using a spreadsheet. However, as soon as possible, get yourself some dedicated accounting software.
We recommend Xero to our clients. It is very powerful, but also very easy to use. If you'd like some help getting set up on the platform, please get in touch and we can arrange some training sessions.
Good bookkeeping is largely a matter of creating a good routine. You can do the jobs as and when they come up. For example, as soon as you receive an invoice or payment, log it on the system. Or you can "batch" jobs. Maybe take half an hour at the end of each day to update your books.
Payroll is one of those jobs that is more complicated than it looks! If you have some payroll experience and it's just you running the business, or maybe one or two other staff, you can probably take it on yourself. Just make sure you keep good records and always send the details to HMRC every month.
If you do not have payroll experience or as soon as you start building a team, we would recommend getting some professional help. Even if you keep doing the bookkeeping and tax returns yourself, get some help with payroll. The annual cost is not a lot and it costs as much to rectify any mistakes so it is better to leave to the experts.
Payroll requires you to understand pensions, PAYE, National Insurance, bonuses and expenses. And you can't afford to make a mistake. Not only will your staff be unhappy if you get a payment wrong. You can get in trouble with HMRC if there are any inconsistencies.
How you manage tax as a small business depends to some extent on how you are set up. There will be different tax rules and schedules depending on if you are a:
- Sole trader
- Incorporated company
There are two key aspects of the tax system to remember as a business owner:
- Make sure you are fully compliant, keep proper records, file and pay tax on time
- Take advantage of all the generous tax schemes and breaks available to small businesses
Even if you don't want to bring on a full time accountant, you may find it helpful to arrange a couple of consulting sessions. Most good accountants will pay for themselves many times over by making sure your affairs are organised in the most tax efficient way.
If you'd like to discuss how we work with small business owners, please don't hesitate to get in touch with us.