Small businesses are on the rise. At the end of 2017, there were 5.7 million Small Medium Enterprises (SME’s) equating to over 99% of all UK business. If we break this down further, in 2016 96% (5.4 million) of these SME’s were micro-businesses (0-9 employees).
There are a lot of small business owners out there but do they know the essential accounting needed to establish a successful company.
Here are some accounting tips for small businesses:
Be organised with bookkeeping
Bookkeeping involves the organisation and processing of your business records. It encompasses payments, invoices, cash flow, profit and loss, balance sheets, forecasts, and future projections. These records form the backbone of a business, so keeping them up to date and accurate is essential to keep your business afloat. Additionally, business owners are required to keep these records, which have the potential to be audited, for a minimum of 6 years.
Be aware of and meet government deadlines for taxes and accounts
Looming tax and account deadlines can be stressful for business owners. Research these dates at the beginning of the year and put them on your calendar. To stay on top of these deadlines, you should be proactive and complete the paperwork in advance. By being organised, you can reduce stress and the risk of running into unexpected fees and fines.
Have a contingency plan and cash reserve
Most businesses will be able to recall slow periods in their business cycles. The economy is unpredictable, and you usually don’t need to feel disheartened by these slow periods. However, it is essential to plan for them. Most financial analysis recommend having a cash reserve to cover at least three months of necessary operating costs, however, the more you can afford to put to one side the better.
Hire an account specialist
As a business owner, you may find you do not have the time or energy to research and complete all the procedures involved. Professional tax and accounting services are a gamechanger when it comes to running a small business. While many business owners can be reluctant to spend money on a small business accountant, it can be an investment which saves many businesses money in the long run. Accountants have the expertise to organise your accounts accurately and efficiently. This helps reduce the chance of incurring fees or fines for incorrect information. Experts can also use their knowledge to structure your business to help mitigate tax liability. When a professional takes care of your business formalities, you will also find you have more time to spend on income generating business tasks.
An accountant will be able to:
Ensure your business is legally compliant
Inform you of tax changes and mitigate your tax liability
Prepare and submit annual statements
Maintain business records
Set up and handle your payroll
Assist with finance applications
Advise you on business plans and future forecasts
Educate you on some of these processes
If you decide not to hire an accountant, download some good accounting software
In this new digital age, you can download software to help you organise your accounts. Software should make the task of accounting more straightforward but could be more difficult for those who are not familiar with technology. Having digital accounts is more convenient for storing, organising and accessing files (it is also better for the environment as it saves paper). The software can be expensive, so it might be worth weighing up the benefits of this versus an accountant before proceeding.
If you own a small business, you probably find your business formalities are a nuisance. Accountants can help you with many financial and compliance administrative business procedures. They are trained to make your life easier by helping you to build and maintain a robust business structure.
Working with an accountant is not the big deal some people make it out to be. You do not have to commit to hiring an accountant full time; you can try hiring one for a set period to assess whether their services will be beneficial to your business. Accountants are also great advisors to help you learn about the procedures you need to undertake as a business owner.
Note: The information should not be construed as legal or other advice as it designed as an information source only © More Group 2018. All rights reserved.