Understanding your financial position is vitally important in giving your business the best possible chance of success. If you don’t have an accountant then its even more important that you are on top of your numbers. This week I’m therefore going to give you some top tips for DIY accounts.
Please note that although most of the tips will apply whether you are operating as a sole trader or as a limited company, I would always advise limited companies to get an accountant involved due to the more complicated statutory requirements.
1. Understand it
If you don’t have a good understanding of what you need to do, and what you can claim as business expenses, then you won’t do a good job of it yourself. Read books, blogs, do online training, ask other people for advice, but make sure you know what to do, how to do it, and when to do it by.
This is something you should do whether or not you have an accountant. Making sure your accounts and tax affairs are up to date is your responsibility, and nobody will be in a better position to understand your business than you.
2. Stay on top of it
There is nothing worse than trying to work back through old receipts and calendars to try to figure out what you should have claimed months after the fact. Try to get into a habit of updating your booksat least once a month - ideally once a week. It won’t take nearly as long or be anywhere near as difficult.
3. Be organised
A lot of the day to day bookkeeping simply needs you to be organised:
- As soon as you make a sale, file the invoice
- As soon as you buy something, file the receipt and make a note on it how you paid
- Make sure you regularly review your sales invoices to make sure that your customers have paid – and chase them if they haven’t
- Do the same with your purchases invoices, and make sure you pay then by the due date
- Every time you do some business mileage, write it down
4. Think about your available cash
A simple cashflow forecast looks at how much money you have now, adds on what you will get from your sales, and takes off how much you expect to spend. Look at this for the next few months ahead to make sure that you are going to have enough available cash. Try to do this once a month.
If you are going to run out of cash, then delay unnecessary expenditure, redouble your efforts to get your customers to pay, and make an appointment with your bank manager. The bank is more likely to be sympathetic if you talk to them before you go over your overdraft limit.
5. Get some accounting software
Good accounting software will make it easier for you to manage your finances. It can save you time and effort. Some software can even link to your business bank account, and most can produce your invoices for you.
Do I need an accountant?
If you’re getting behind, or you’re not sure what you are doing, then get some professional help - remember accountants are not just there to do tax returns after the end of the tax year. If you get an accountant involved at the right time then they can help you to plan the best way to minimise your tax. If you want a free, no-obligation chat then contact me.