Running your own small business can be liberating: setting your own timetable, business values and culture, goals and objectives. However, there are many pitfalls that lie in wait, not least of which is accountancy! Start-up business owners often want to crack on with generating business, following up on leads, engaging with consumers, designing business websites and driving a social media presence. Bookkeeping is very often a turn-off for small business owners and you will very often hear “I didn’t know that I was supposed to do that” or “Why didn’t anyone tell me I had to keep those records?” when small business owners are faced with fines or fees for late submission of accounts and tax assessments.
Good accountancy – from bookkeeping to hiring a small business accountant - is key to successful business. There are 5 key tips to help prevent your small business from falling victim to financial errors.
1. Separate your personal and business finances – you will normally hold your income and other funds in a personal account but becoming a business owner brings your business-based finances into the equation. Opening a new bank account for your business transactions is essential for organisation and preventing undue stress and worry when tax deadlines come around. Common consensus is that the financial aspects of running a small business will be more difficult if you fail to separate your accounts. Managing invoices, completing tax returns and bookkeeping will all become a bit of a nightmare if you have to search through hundreds of personal transactions to find a particular piece of business.
2. Maintain neat and accurate accounts - everybody is different as some prefer everything around them to be neat and tidy, where others are comfortable with organised chaos. A little bit of clutter may be ok in your personal life but untidiness in business accounts can have serious consequences. Sound bookkeeping makes day-to-day tasks more fluent and easier to handle and larger financial tasks less stressful to organise. If you’re a one-man operation or smaller business, self-managing your finances can save you a small amount of money, but if organisation isn’t your strength, then problems may well arise.
3. Recruit a tax accountant for small business – because many small business owners work to tighter budgets and look to avoid paying out for additional services, they are often reluctant to seek accounting tips, guidance and expertise from a small business accountant. But, in reality, the assistance of a tax accountant for small business can save you money in the long run, as these accountants have the skills and know-how to organise your accounts efficiently and familiarity with small companies and all of the financial issues that can occur. In addition, while your tax accountant is busy organising your finances, you have more time to spend on establishing and growing your business.
4. Be aware of tax deadlines and stick to them - looming tax deadlines can be quite stressful, particularly for small business owners and the economic variables that they have to deal with. Tax forms that have been filled out incorrectly or missed the deadline will result in late fees and fines, neither of which are good news for a small business with a tight budget. Also, the longer it takes you to send your tax return (after deadline), the more it costs, because of daily fees. Small business tax accountants won’t miss these deadlines and you can be reassured that your tax return will be submitted to HMRC as a well-organised and accurate depiction of the accounts of your business.
5. Embrace accounting software – we are in the digital age so technology forms an integral part in the business world. Accounting software provides an efficient tool to keep your incomings, outgoings and taxes organised. The software is sophisticated but is appropriately programmed so that it is user-friendly, even for those less tech-savvy business owners. If you have a small business accountant, using accounting software in tandem is a great way to save them the job of tidying up your books. They will then have more time to address other financial aspects that could potentially reduce your costs and increase your profits!