Do accounting and tax filing send shivers down your spine? It doesn’t need to be that way if you follow a few do’s and don’ts to help make life a little easier for your growing business
If you are a start-up business owner, chances are you have enough on your plate before attempting to navigate the choppy waters of accounting and tax filing. Bookkeeping might seem an intricate process, but the following do’s and don’ts guide can help make life a little easier for your growing business.
Do: Use the technology available to you wisely
Finance tools like Xero and Receipt Bank are designed specifically with small businesses in mind, and together they can be a powerful combination.
These tools are user-friendly, help reduce the paperwork, and will automate your processes where they can. Technology, when used correctly, will save you time, and give you an up to date view of your numbers wherever you are.
Cloud-based accounting technology has come a long way over the last few years, so make sure your business is taking full advantage of this progress, and you pair the right systems together. It’s definitely worth getting some advice here.
Don’t: Have a bookkeeper on your payroll
Your business is in its early stages, and hopefully, it’s growing. Your accounting needs are going to change along with that journey, perhaps faster than you know it.
Having your own bookkeeper may seem like a safe option, but how well will they be able to adapt as you grow?
If you find a good third-party provider you will buy yourself more flexibility, and they should be able to grow with you. Why have a single bookkeeper when you could have a whole finance team!
Do: Create a business plan, upload it into your software and track it monthly
You may feel like you’re struggling to see two weeks ahead, let alone a year. However distant it feels, if you want to maximise your chances of getting somewhere map it out beforehand.
Creating a 12-month business plan focuses on the mind, and forces you to consider your revenue streams, customers, and cost base.
Make time to review your actual performance against your plan and learn from this. This approach will get you into good habits for when you grow, and you’ll need to think like this if you ever need to raise capital for any investment.
Don’t: Register for VAT too early if direct-to-consumer is a major part of your strategy
You don’t need to register for VAT until your VAT taxable turnover goes over £85,000. If you are trying to build a direct-to-consumer (D2C) customer base, and you register earlier than you need to, you are just increasing the cost of your product by 20%.
You need to weigh this decision with your cost profile but think twice about increasing your product cost for your customer before you have to.
Do: Think about your finance processes
The finance processes in your business, however simple or complex, will naturally overlap with your operations.
By spending some time thinking about these processes, and working out how to best streamline, you will usually find you can make improvements to your day to day operations.
These improvements could require deciding to use a new inventory management software system, changing how you invoice your clients or simply changing how you run your monthly payroll.
If such processes work well, you will free up valuable time. Moreover, you will be able to scale your business more easily. If your processes are not working well now you will have a serious headache when you are five times the size.
Don’t: Always think you can be paying less tax
Yes, there are some simple things that every business should consider when it comes to tax.
Get some advice and think about how these apply to your business, make the changes you need to and then crack on with winning new customers or clients and growing your business.
Tax is often more black and white than you think. In the UK, the HMRC has been in the game for a while and the house usually wins. If you’re spending hours and hours trying to find the next big tax saving loophole, you’re probably ultimately wasting your time.
Do: Find an accounting partner who speaks your language and understands your needs
Wouldn’t you prefer a partner over a service provider? You want to work with a firm who is prepared to understand your business and help you run it better. You need to be able to develop a good relationship with your accountant, and you need to be able to trust the work is done professionally.
It helps if your accountant has experience in your industry sector, and it focuses on similar sized businesses to you. Your accountant is a great source of advice if you find the right one, but it will be a nightmare if you don’t.
Don’t: Bury your head in the sand and hope things will be fine
It most likely won’t! HMRC knows where you live, and they will find you. Knowledge is power, and it’s definitely better to know where you stand; you will sleep more easily for starters.
Date published: 23 June 2020