Business tips: keeping up with the books
Maybe you’ve secured the initial investment you need to get your venture off the ground and are busy planning how to make it a success. If you’re a young entrepreneur, maybe you’ve applied for one of the Government’s new Start-Up loans. Or perhaps you’ve already forged a relationship with a future supplier, produced your first batch of goods or started your initial marketing strategy.
It’s tempting for many new business owners to concentrate on the more exciting parts of running their company during these early days, but you also need to ensure you don’t put the less interesting bits - such as your accounts and record keeping - at the bottom of your to-do list.
Emily Coltman ACA, Chief Accountant to FreeAgent, gives her top tips on how to ensure your new business gets off to a flying start.
So draw up a simple financial forecast for your new business and be conservative with your estimates. There’s no point in forecasting a huge wave of profit in your first six months of trading unless you know you’re actually going to achieve it. Also, work out some simple ratios such as your break even point - which is the point at which your costs and your revenue are equal - in order to help you make decisions about where your business needs to go next.
Look online for a forecasting tool that can help you with this initial planning for your business. It may be easier than trying to do it from scratch yourself.
Keep on top of your finances from day 1 - or earlier
Recording your income and running costs can be tedious but the longer you leave it the harder it gets. I recommend starting the moment you spend any money on your business, rather than waiting for your first sale. If you don’t do this, you could lose receipts for costs, forget about that cost and pay too much tax!
Use a good record-keeping tool
The good news is that you don’t have to do it this way. If you’re using an online accounting system, you’ll be able to automate your bank data directly into your accounts - or use an app that allows you to scan your receipts straight into them.
And even if you’re on a shoestring during the early days of your business, there are a number of free mobile phone apps which allow you to input your data and have an at-a-glance overview of how your business is performing and how much tax you owe.
It’s a lot easier than wrestling with a spreadsheet!
Update your books regularly
How often you’ll need to update your books depends on how many transactions your business has. It might be once a week, or once a month, but you should make sure you do it regularly.
However, if you find that you really don’t have time to keep your books, don’t leave them undone – hire a bookkeeper to do it all for you.
Stay on top of your tax
Ensure you keep the correct information that you need for your tax commitments and make sure you know all of the relevant dates for submitting your tax or VAT returns. And make sure to check HMRC website for any additional information you may need about your tax responsibilities.
Keep an eye on your invoices
You should also consider implementing a system that sends out automatic invoice reminders if you don’t feel you have the time to do this yourself.
Starting a business can be a daunting prospect, but it’s important to not be overawed by your accounts.
Remember that staying on top of your figures, keeping good records and being organised when it comes to paying your taxes could be the difference between your business being successful or not.
*Emily Coltman ACA is Chief Accountant to FreeAgent, who provide an award-winning online accounting system designed to meet the needs of small businesses and freelancers. Try it for free at www.freeagent.com which has information on apps and accounting support.