Starting a business is so easy – you have a solution to a problem, a service to fit a need, a product to make things easier.
You get your first clients and it seems like it is all plain sailing.
But then you hear about HMRC. You need a bank account. You think about an ‘invoice’. How did you decide on the price of your time and effort?
Alongside the importance of a well-rounded website, having your finances in order through good bookkeeping is vital to not just to know where you are on a day to day basis, but for business success.
Bookkeeping and Your Business
Having a firm understanding of your business financials isn’t a nice to have, it is a must have.
A bookkeeper brings together information to give you this financial overview;
- Purchase Receipts
- Bank account information
This information then gives you an accurate Profit and Loss, and a report called a Trial Balance. The Trial Balance is an overview of all incoming and outgoing finances against all the various ‘categories’ of purchase or sale.
Then, when it comes to HMRC. Are you;
- Registered as Self Employed, with a Unique Taxpayer Reference (UTR)?
- Registered for Pay as You Earn (PAYE) – if you have staff?
- Up to date with your tax returns?
You could also voluntarily register for VAT if you turnover below the threshold, but the pro’s and con’s need to be weighed up before taking this step. A bookkeeper or accountant can discuss this with you.
Claiming Tax Relief as a Self-Employed person
There are certain things that you can claim for, as part of running your own business. A simple example of this, is your business mobile phone contract.
There are, however, also some pitfalls here – for example paying for fuel. The rules on what you can and cannot claim are different between a sole trader, and a limited company director. You need to get clear advice about this from a bookkeeper or accountant before deciding which route to take, as there are clear pro’s and con’s of limited and sole tradership.
Why keep track of finances?
Other than knowing exactly what the financial status of your business is, having an excellent bookkeeper dramatically increases your chances of survival. Seven out of ten new firms survive at least two years, half at least five years, a third at least ten years and a quarter stay in business 15 years or more. (source: – 15 Small Business Success Rate Statistics and Survival Tips – BrandonGaille.com).