Accountant Emily Coltman from FreeAgent gives some advice on how to improve your accounting.
The daylight hours are getting longer which means that now is the time to start thinking about how you can do some much-needed business Spring cleaning.
But instead of just papering over the cracks or carrying out some minor cosmetic touch-ups, could this be the year that your Spring clean helps revolutionise the way that you work and add real value to your business?
Emily Coltman FCA, Chief Accountant to FreeAgent explains how overhauling the way you manage your business finances could dramatically improve your performance in the year ahead.
Change your infrastructure
If you’re starting out running a business, using a spreadsheet can be a cheap way of keeping your figures together. But once a business is established, it may not be the best idea to cling onto spreadsheets.
That’s because with a spreadsheet, it’s you (the small business owner) who is doing all the work when it comes to accounting tasks such as inputting data, creating and sending invoices, managing expenses, calculating your cashflow, forecasting how much tax you owe and manually extracting the information you need to fill out and file your tax returns.
On the other extreme, some small businesses end up using complicated desktop accounting software to manage their finances. But these packages are often overly complex for the needs of a typical small business and can be bloated and difficult to navigate, which means you’re likely to spend more time wrestling with your data and you may end up making unnecessary mistakes.
So instead of struggling with something that isn’t the right fit, why not look for a tool that’s more suitable for a business like yours? Perhaps you’d benefit from switching to a system designed specifically for small businesses and freelancers, which doesn’t have all those complicated extra features that you don’t understand, or even need.
Some systems enable you to set up an automated feed of your bank transactions that go directly into your accounts – or provide the ability to easily upload your bank statements – which means you can explain all of your business bills, expenses and payments and use that information to automatically forecast how much tax you owe. You can also raise invoices and chase payment from your clients; and even complete and file your tax returns.
With a bit of research you should be able to find an intuitive system that makes accounting easier than ever and saves you valuable time – which you can then use to focus on the stuff you really like doing in your business.
Change your weekly habits
A big reason why many small business owners find managing their finances such a hassle is because they don’t have a good routine in place to break down the admin and make the process easy.
So instead of facing a mountain of accounting work at the end of each quarter – or whenever you have a tax return due – try putting aside an hour every week, throughout the whole year, that you can dedicate to keeping on top of some important bookkeeping tasks.
Use your hour to stay on top of your invoices and chase up those clients who haven’t paid you. Manage your bills and reconcile all the unclassified bank transactions in your accounts. See which projects are earning you money, look at your up-to-date profit & loss account and learn some key insights about your business. And don’t forget to record all your expenses as you go, so you won’t have a stack of receipts to scan and log every week.
Taking a small amount of time each week to dedicate to your bookkeeping can save you a great deal of time – and stress – further down the line. And in addition to that peace of mind, you’ll also be able to make more informed decisions about your business as you’ll have an up-to-date view of your performance.
Review your accountant
If you use the services of a professional accountant, it’s a good idea to regularly review the relationship you have with them – to ensure you’re getting the best possible service.
For example, do you tend to only get help once a year when your tax return is due? That’s fine if you just want an annual double-check of your figures to make sure they’re correct, but you may be able to get even more value out of your accountant than just basic number crunching. Could they, for example, offer you useful financial advice about your cash flow, the structure of your business accounting set-up, and make suggestions for how to improve your profitability?
And is your accountant flexible to the way you want to work with them? Online accounting systems have made it easier and quicker than ever to collaborate, so if you’re still mailing bulky files, or physically taking boxes of receipts to your accountant for them to sort through, it may be time to look for someone who is more tech savvy.
Many forward-thinking accountants now offer a wider, more flexible service than just basic number crunching. So if you want a trusted advisor able to give detailed insights about your business finances rather than just a standard accountant, it pays to search a little deeper.
Review your banking
If you still have the same bank account as you did when you first set up your business, it might be a good idea to look into other options to see if there’s a better package that you’re missing out on. Many businesses sit tight with their accounts – usually because they don’t want to face the hassle of changing bank – but there could be big benefits in store if you switch.
For example, your current bank may have put their fees up because you’ve been with them for a certain amount of time – but opening a new account elsewhere could give you a lower, introductory rate. And you may also receive a higher level of support or additional perks as a thank-you for opening an account with a new bank.
But if you’re not keen on changing banks, could you be doing more with your current set-up? Could you schedule a meeting with your current bank to discuss your options and check if they can upgrade your account? Or perhaps you could set up a separate savings account so that you have a place to put aside money for taxes?
Don’t just sit back and accept the status quo when it comes to managing your business finances. Look at all of the alternative options and you may be surprised at not just how much time and stress you could save yourself, but how you can also add real value to your business in the year ahead.
*Emily Coltman FCA is Chief Accountant to FreeAgent, which provides an award-winning online accounting system for small businesses and freelancers. Try it for free at www.freeagent.com