Keeping your books can seem a daunting task.
However it is an essential part of running your business. Not only will you have problems later if you ignore your accounts, you’ll be unable to track the progress of your business and put aside money ready for your tax bill at the end of the year.
With this in mind here are my top five tips on doing your own books.
Start from Day One
As soon as you set up your business start recording your costs that you incur and any sales that you make.
In fact, you may incur costs pre-start up. These can still be deducted from your profits which will reduce the amount of tax you have to pay.
Start recording everything from day one, keep up to date and make sure that you know the dates your accounts, tax, VAT, PAYE etc are due.
Late payments or tax returns incur heavy fines and penalties; keeping on top of things avoids these.
Get a system
Set up an accounting system as soon as possible. This does not have to be a sophisticated software package. You could start with a manual system but it might be better to use at least a spreadsheet, an easy Cloud accounting system or a Challenger Bank Accounting App.
If you intend to use an accountant, agree the system with them in advance. You will be surprised how much this can save on fees if you use one they are familiar with or recommend. You may even find that some of them offer a free system.
Watch a FREE HMRC Webinar
HMRC do have several free webinars aimed at those starting out in business. A list of those applicable to the self employed business owner can be found on the HMRC website.
Budget for Tax
Although you may have made a profit (income less costs) not all this money is yours – you will have to pay some to the tax man. Make sure you budget for this as you go so that you do not have any great shocks at the end of the year.
Open a deposit or business savings account and put money aside for your tax. You might not earn much in the way of interest but this way you will get into the habit of not spending it!
Make Sure You Claim for Everything
The general rule is that you can claim for anything which is wholly and exclusively for business.
Remember to keep all the receipts for your business purchases e.g. stamps, stationery, travel, hosting, advertising etc.
Record all your business trips and claim for these e.g. a trip to the post office to send a business letter or parcel.
In fact you can claim for the business trip if you cycled to the post office! The allowed rate for cycling is 20p / mile – so get on your bike instead of getting in the car.
If you use your home as an office you can claim for this.
Whilst there is no exhaustive list available of what you can claim, common sense should prevail in applying the wholly and exclusively rule to your outlays or check the details with your accountant if in doubt.