Do you know how financially fit your business is? Many people don’t visit a GP unless they’re feeling ill, not even for a routine check-up. There are, of course, plenty...
Your accountant needs your help. No, this isn’t the wrong way around. As a business accounting service, we’re here to help and support your business, but to do this effectively, means you must have your finances in some sort of order.
This isn’t just for our sake, by the way. Managing various key aspects of your business finances will make your life that much easier, helping to keep your business on track.
Letting things like paperwork and records spiral out of control will only bring a sense of chaos to your business, and be a distraction from your core activity.
If you keep good accounts, it should mean doing it little but often, rather than leaving it to pile up then struggling to find the time to manage it. That’s a sure path towards a stressful existence. And no one wants that!
Here are our top tips for staying on top of your business finances, and it means that when you do need our services, we’ll be able to get a clear picture of where your business is up to.
Keep Good Records
The devil is in the detail, as they say. Not only is keeping accurate records a legal requirement but sound record-keeping is the cornerstone of a healthy approach to business finances. Not only that, but it reduces the stress on you.
Let’s focus on the essentials. You must keep records of all your business transactions, most importantly:
- Invoices – include information about the type of work you billed for, when you finished it and what you were paid for it. Include any other reference details such as company names and registration numbers.
- Receipts – keep a complete record of your expenses, including any receipts relating to your work, such as travel, rented space and office supplies. We can advise you on what expenses you can claim.
You must also keep records of bank statements, receipt books and wage books, where applicable. The type of business you run will determine the documentation you’ll need. Your accountant will be the best person to advise you and we’d be happy to have a chat with you.
Remember, you’ll need to keep records for a minimum of six years, because HMRC could decide to audit you for any time within this period.
Good record-keeping requires a proper system. HMRC likes invoices to have a unique reference number, so it makes sense to devise, and stick to, a system for this.
It might be a case of sequencing your documents according to the project you’re working on, or the client you’re working for. Or you might want to just simply number your invoices chronologically. Just do it however is easiest for you.
The important thing is to keep your system logical and stick to it once you’ve started it.
If you’ve not done so already, go digital. Storing your accounting records online is far more straightforward and efficient than having mountains of physical paperwork in filing cabinets. Paperless business are the future, after all.
There are plenty of apps on the market, including some free ones, which will help enormously in keeping on top of your invoices and recording your expenses. Many have built-in reminders-always handy when you’re trying to run your business.
Don’t worry about keeping hard copies of your digital documentation, but do ensure that you have everything online backed up, in the event of any technical hitches requiring disaster recovery measures.
Also, make sure you remember to keep in line with the Data Protection Act if you are storing customer information. You don’t want to lose any sensitive data!
Separate Your Accounts
You may work from home, and even if your business has grown, you might have started out as a sole trader. However, it’s vital that you keep your personal and business finances separate.
Have a separate business account to ensure there’s no confusion between the money you spend on your business and what you do financially in your personal life.
This will help us with your accounts, and it will help ensure that HMRC has complete clarity about your tax affairs.
Put Aside Money for Tax
Talking of tax, you should ensure that you’re keeping enough money aside for when you have to pay your tax bill. The type of business you have, and what you earn, will determine the type and amount of tax you pay.
Avoid late payment to HMRC. They’re on the ball when it comes to chasing overdue tax, and you could end up facing penalties, or even a winding up order if things get really serious.
Manage Your Cash Flow
Having a cash flow plan from day one can be critical decision for SMEs. It’s vital to set cash flow targets, which means preparing and maintaining a cash flow forecast.
Look ahead to the next six months or year, and update your forecast on a regular basis, even weekly.
The big danger to cash flow is late payment, so ensure you communicate clear payment terms to your clients or customers before taking on any work. If you have clear payment terms, you know when you’re due to get paid and, if payment is late, you can act on it.
Try to keep the payment process as smooth as possible. Invoice quickly for your work, because the longer you leave it then obviously the longer it can take to be paid. Make it easy for people to pay you by opting for online payments. Avoid payment by cheque wherever possible as this slows things up, and can give late-paying customers more excuses.
When it comes to credit control, be clear about your procedures and diligent in issuing reminders and statements when they’re due. Consider an automated option to stay on top of late payments.
As part keeping your finances in order you should also try to keep within your credit limits. If you regularly get close to your credit limit it’s a sign that you’ve got cash flow difficulties. It might not be easy, but if you can, have a cash reserve in place for emergencies.
Loading up on your business credit card, or using a bank overdraft as a buffer, may be convenient, but they’re costly in the long-run, and may make getting other kinds of funding, such as growth loans, more difficult.
Get In Touch
For business accounting services in Burnley, Lancashire or anywhere else across the North West, please get in touch. We’re very approachable and we can offer you lots of business support. Give us a call on 01282 902456, email email@example.com or visit the contact page on our website and fill in the contact form – we’ll reply as soon as we can.