Accounting Tips for Small Business Owners in the UK

If you’re not an accountant yourself, then the accounting aspect of your business probably isn’t the most exciting. However, it is an aspect which all small business owners need to tackle.

Here are some handy accounting tips for small business owners. You can implement into your routine to stay on top of your business finances.

Meeting Deadlines

Deadlines

If you are running your business as a Limited Company, deadlines and staying on top of them is essential. It’s important to make sure you’re submitting your annual accounts, tax returns and Companies House documentation accurately and on time. This will make sure you avoid any potential penalties.

Sole Traders & Partners

Sole traders & Partners require self-assessment completion, which is due by the 31st of January each year alongside any tax liabilities. If you are a director with any untaxed income, you will also need to complete a personal tax return.

Responsibility

Ultimately, it is the business owner’s duty to be responsible for the timeliness and accuracy of their accounts and records. A good accountant will provide you with insight and reminders along with their accounting services. However, there’s only so much they can help with.

Accurate Claims for Allowances

It is important to understand what allowances you and your business are entitled to claim for. It is best to discuss your potential allowances with a qualified accountant. Mistakes and negligence can sometimes lead to penalties.

Record Keeping

Maintaining good record keeping habits are a great help for keeping deadlines. If you have an accountant, they’d also really appreciate it as it makes their accounting work easier. All records, invoices and receipts should be kept neatly and ordered in a safe place. According to HMRC, all business records should be kept for six years. Utilising a Cloud Accounting software can improve your record keeping, as long as you keep on top of it all.

Working from Home Costs

£6/week or £26/monthly without having to submit any receipts or additional paperwork. However, there’s also a more complex method involving a proportion of your home-related costs. This process can become complicated, so it’s best to leave that to the professional responsible for accounting in your business..

This applies especially during the pandemic as many people choose to work from home rather than at an office. If you are running a business from home, there are certain claims you can make.

Cloud Accounting

Accounting Software

There are many options out there when it comes to Cloud Accounting software. If utilised correctly, it can be a game changer and save hours of your precious time. In addition to saving your time, it will also make your accountant’s job significantly easier when year-end rolls around.

Accounting Cloud Platforms

These accounting software platforms allow you to link your bank account. All of your transactions will seamlessly roll through to the platform to be categorised. There are also often attached tools which will make year-end reporting significantly easier. These platforms are often great investments for you and your team.

Understanding VAT

Are you a VAT registered business? Or should you be? It is best to have a conversation with your accounting in order to determine what is best for your business. You may be in a situation where switching to a Flat Rate VAT Scheme would be best. It could provide tax benefits for your business and is significantly simpler for accounting. Understanding what VAT is best for your business is something your accountant would discuss with you.

Business Related Expenses

Keeping Track

Many people do not keep a good track of their expenses. This sometimes means that some costs which have been incurred as a part of the business aren’t claimed for. This is often the case around the early months of a business, where there are many start-up costs associated with a business.

Business Purchases

It is important to make sure that any expenses that you claim for are incurred solely for business reasons, and that there is no dual purpose for that purchase. For example, if a purchase has been made, but you will also use that item for personal use, then it is best to discuss the best course of action with your accountant. This could be purchases such as computers for the home office, or a new car for work.

Separate Bank Accounts

Recommended Setup

You may be reading this and thinking this is obvious advice, or you may be the opposite. There are many people out there, primarily sole traders, who are sharing their business and personal expenses within the same bank account. It is always recommended to set up a separate deposit bank account in order to keep things segregated. Trust us, you do not want to sit there at year end trying to decipher whether something is a business expense or a personal expense, it will take you a LONG time!

Good Accounting

Accounting Advice

A good accountant is worth their weight in gold, and can become your most trustworthy and valuable advisor. An accountant can advise on a wide variety of matters, from tax implications, to business structures, and even some mild financial recommendations for the business based on your cash flows.

It’s all relative

One aspect that accounting services can really help with which small business owners may not appreciate is the most tax efficient way for you to draw down money from your business. Many people believe that simply paying themselves a wage is the best approach. However, this may not be the case in your specific scenario, and there are various approaches you could take.

Good accounting services

How do you find a good accountant though? Often the best approach is word of mouth. Ask other business owners that you trust whether they have any recommendations. This is also often the best approach to find out which accountants you should avoid.