When that spark of a business idea first forms in your head, your second thought is not about how best to keep your accounts. It’s the same for most people starting a small business. The enthusiasm and energy that goes with entrepreneurship isn’t necessarily matched with the fastidiousness required for good book keeping.
But keeping your accounts in order not only keeps the tax man from your door, it also provides your business’ vital statistics, letting you know how your business is doing. Recording clear and comprehensive financial accounts is vital to any successful business. Here are a few important points to have in mind when keeping accounts for a small business.
Keep Your Records from Day One
As soon as your business is set up any costs you incur can generally be written off from your tax bill. Most businesses just starting out are going to have a lot of costs and relatively little income. Keeping track of all of these early expenditures means you won’t end up liable for a heavy tax bill that you cannot afford.
Keep any receipts that may be business related and make a note on them what they were for. It is a good idea to scan receipts if you can to have a digital copy alongside the hard copy.
Put a System in Place Early
Having a system of recording your accounts just makes things easier. Tossing all your receipts into a filing cabinet and forgetting about them doesn’t count as a system though. Having a clear, organized system that you understand in place as early as possible puts you in the habit of keeping good records.
Many smaller business and sole traders are put off by the idea of purchasing accounting software. However, cloud accounting software such as Big Red Cloud is ideal for small business and self employed persons just starting out.
Cloud software is typically provided as a service meaning you pay for it on a regular basis but in small affordable amounts. If you choose to hire an accountant look for cloud software that provides them with free access.
Take an Evening Course
It is worth spending a bit of your free time in the evenings to find out about some of the more intricate parts of the tax code. A small amount of time spent doing this could potentially save you a lot of heartache and money down the road.
Arming yourself with knowledge about what you are liable for, what you are expected to do and how to do it will also make you more confident in the running of your business. It can also make the process of filing tax returns a little less daunting.
Budget for Tax
When those first few invoices start to get paid and it finally feels like all that hard work is starting to show a return it can be tempting to splash out on some new office supplies or an espresso maker for the canteen. However, you should be careful to ensure that you have money set aside to pay your tax bill at the end of the year.
Most banks will have a special facility to allow you to automatically set aside a certain amount from your business account each month. This makes is easier to see what you have to work with and won’t leave you unable to cover any liabilities at the end of the year.
Remember to Get Paid
It seems like it should go without saying but in the hectic day to day running of a small business a sent invoice can be quickly forgotten about. Once an invoice has been sent out it is often treated as if paid. Until the money is in your account the invoice is still outstanding.
Having an effective record keeping system in place allows you to keep track of invoices and when they have been paid. Be sure to follow up on unpaid invoices regularly. Cloud accounting software such as Big Red Cloud features invoice tracking that can automatically confirm with your online bank account when an invoice has been paid.