Running your own business is challenging enough without having to worry about the finances. Every business, whether fledging or multi-national, needs to adopt effective accounting and bookkeeping habits to keep records accurate and complete, and to stay abreast of cash flow, profitability and growth. Declan McCusker from Perrys Chartered Accountants in London offers his top five practices to ensure your business stays healthy.
- Keep good records: Get into the habit of keeping track of all expenses, bills and invoices to ensure that you get paid on time and avoid unnecessary hassle further down the line. Make sure invoices are clear and make a note to follow up with clients. These measures will prove useful if your company is audited. HMRC found that of the more than 2,000 UK businesses it checked in one year, 39% had issues with their record keeping. Failure to keep adequate information can lead to inspections by HMRC, costing your business time and money.
- Hire a good accountant and bookkeeper: Small businesses might be tempted to think they don’t need an accountant, and that all they do is fill in forms for the taxman. But accountants can boost a company’s profitability, advising on schemes and benefits businesses might be missing out on, and offering advice on the best way to overcome financial difficulties. Finding an accountant you can trust will help ease the burden of understanding complex regulations, as well as helping to identify financial problems that may arise.
- Invest in software: For small start-up businesses, simple Excel spreadsheets are easy to negotiate and will help you keep tabs on your accounts in the early days. But the latest technology is revolutionising the way businesses manage their accounts. Cloud-based software – where accounts are accessed via the internet – is part of the new-wave of technology, enabling staff with login details to access information from anywhere in the world. Available for a monthly subscription, cloud-based accounting is perfect for businesses operating in today’s inter-connected world. If you’re a technophobe, your accountancy firm may be able to offer training in using the software.
- Understand expenses: If you don’t keep a close eye on your expenses, they could eat up your profits. There are two main types of business expense: overhead business expenses, which refer to passive costs such as insurance, rent, utilities, accounting and loan repayments; and cost of sales expenses – expenses a business needs to pay out in order to sell its wares, such as a construction company buying machinery. To ensure you keep control of expenses it is good practise to set budgets and communicate these to your team. Record details of the two types of expenses separately to ensure better financial health for your business.
- Stay on the right side of the taxman: When it comes to financial responsibilities, your tax duties really do come first. If you miss the deadline for filing your tax or VAT return, or fail to make payments on time, you may find yourself liable to unwelcome penalties, interest and surcharges. Neglecting tax deadlines means you could be charged even more if you’re late again in the future and means you’re more likely to be selected for a dreaded inspection by the HMRC. Make sure you’re fully aware of deadlines, file your tax and VAT returns on time, and if you can’t pay, contact HMRC before the deadline. You may be given more time to pay or be permitted to pay in instalments.