Accounting remains an important but often overlooked aspect of running a business, while this discipline goes well beyond filing an accurate tax return every fiscal year.
In fact, efficient bookkeeping can help you create a more cost-effective business operation, particularly in terms of minimizing costs and optimizing profitability over time.
However, you thought so 60% of companies are not satisfied with their current accounting processwhile smaller companies also find financial management particularly challenging.
Keep personal and business accounts separate
If you’re starting out as a small business owner or transitioning from a sole proprietorship to a limited partnership, it’s important that you try to separate your personal and business accounts.
Of course, it is often more convenient to use a single bank account for this everything In and out, while sole traders often use their personal account to take customer payments.
However, this can make effective bookkeeping incredibly challenging, not least because you have to go through a multitude of personal and professional transactions when completing your annual self-assessment and filing your tax returns.
So, segregating your finances definitely represents a more organized and logical approach to managing your business accounts, especially as it helps you save time and focus your efforts on more rewarding and profitable activities.
It can also make it easier to monitor your company’s spending habits in relation to revenue, while identifying potential cost-cutting opportunities and saving money over time.
Use invoice financing as needed
It is often said that cash flow is king in any commercial operation, referring to the total amount of money transferred in and out of a business during a given period of time.
This certainly impacts a company’s long-term success or failure, with approximately 82% of ventures ultimately failing due to poor cash flow management skills or not understanding how this concept impacts a company’s well-being.
Optimizing cash flow is also an important accounting focus, as you can use your receipts and documents to closely track transactions and gauge how well your business is doing in this regard.
In some cases, you may find that your business is struggling to maximize cash flow, often due to late payments or extended invoice terms of 60 or 90 days.
To solve this, consider the benefits of invoice financing or factoring.
With the former, you accept an advance on selected bills while using them as financial proof that you can repay the lender. With factoring you are effectively selling all of your accounts receivable to a third party, although doing so requires you to relinquish control of some of your accounting.
The detailed GRENKE invoice financing guide breaks down this information further, which can help make a more informed decision on how to deal with insufficient or disrupted cash flow.
Regardless, invoice financing and factoring remain highly effective accounting tools, especially for small businesses and startups that must deal with challenging invoice terms.
Create a clean and efficient reporting process
If you want to fully engage with bookkeeping, it is important to keep proper and accurate records over a period of time.
In turn, this means you spend less time searching for specific transactions or records, while allowing you to delegate accounting tasks to key stakeholders within the organization when appropriate.
It is also important to consider the potential impact of future audits. Whether you are subject to an external audit by HMRC or wish to conduct an internal audit of your financial records, you want efficiently produced and accurate review documents that simplify the process as much as possible.
Internal audits can be particularly insightful as they help identify financial irregularities or inconsistencies while driving positive changes to your reporting and accounting processes over time.
Take tax deadlines seriously and put money aside for the payback
While this may sound like an obvious claim, it’s easy to lose sight of tax and self-assessment deadlines and, as a small business owner, become solely concerned with completing and invoicing the work.
However, this is a serious oversight, as failure to file your annual tax return or pay the amount you owe by the respective deadlines could subject your small business to financial penalties and penalties.
Even if you want to propose a payment plan to settle your outstanding tax bill in monthly increments, you must do so before the due date to avoid penalties. You should also be proactive and get in touch with HMRC as soon as possible if you are having difficulties filing or paying your tax return as this will allow you to discuss possible solutions in advance.
Finally, we encourage you to set reminders before important tax filing dates to give yourself time to file your tax return self-assessment and complete the payment as efficiently as possible.
Likewise, it pays to save a set amount of cash each month before you get your tax bill, as it makes the process of paying the bill that much easier and more manageable.
One last note to remember Your annual tax bill contains so-called “payments on account”which are advanced contributions to your next tax notice.
Two payments are due, with the total amount paid being deducted from your tax liability for the following financial year. This is more than manageable and actually beneficial to businesses over time, but it can be challenging (and occasionally surprising) when making your first self-assessment statement.
And Finally… Consider the Benefits of Accounting Software
Finally, consider the obvious benefits of using accounting software in the digital age.
This certainly helps streamline and simplify the account management process while creating an immutable and accessible set of financial records that are ideal from both internal and external audit perspectives.
Even for business owners who may not be particularly tech-savvy, modern accounting software is usually easy to use and capable of creating an instant solution to financial management challenges.
Using accounting software also helps automate parts of the reporting process and create a much more efficient operation, freeing up your time (or that of your payroll team) to focus on more strategic aspects of running the business.
https://techround.co.uk/guides/accounting-tips-for-small-businesses/?utm_source=rss&utm_medium=rss&utm_campaign=accounting-tips-for-small-businesses Accounting tips for small businesses