A small business can only succeed when its owner has a firm handle on its finances. Failure to appropriately account for income and outgoings can result in poor business decisions being made, being subject to HMRC-applied penalties and even needing to close the business due to it no longer being viable.
The possible outcomes resulting from poor financial management are severe. It is, therefore, essential that small business owners either set themselves up for success by taking on board our top accounting tips or outsource this important function to their local Tewkesbury accountants.
Tip 1 – Separate private and professional funds.
Mistakes can be very costly, so do not be tempted to keep one bank account for both your business and personal funds as this can lead to confusion when filing your Self Assessment tax returns.
Tip 2 – Embrace digital accounting software.
If your business has an annual turnover of less than £85,000, then you are not mandated to use accounting software that is compliant with Making Tax Digital in order to record your business’s financial data. Nevertheless, it can be valuable to do so as the tools simplify accounting and ensure that all income and expenditure are correctly categorised and recorded for future Self Assessments.
Tip 3 – Ensure that you are compliant with tax rules.
There are many tax rules that apply to small businesses (AUTHORITY URL: https://www.gov.uk/browse/business/business-tax) and it is important that you understand which ones apply to you and that you follow them rigorously.Accountants such as https://www.randall-payne.co.uk/services/accountancy/tewkesbury-accountants/ often recommend that small businesses become VAT registered in order to benefit from savings on their annual tax bill..
Tip 4 – File your paperwork sensibly.
Small businesses are legally obliged to maintain their files for a period of at least 6 years, and if care is not applied, this can result in an unmanageable mountain of paperwork. Whether you opt for a filing cabinet with each drawer separated into the monthly accounts for a given year, or an electronic filing system, ensure that you can easily lay your hands on old documents when you need to.