Accurate accounting is essential for any business, and will help to keep your business on track. For small businesses, filing your tax return at the end of the financial year can be a nightmare if you’re not on top of your bookkeeping. Here is an informative guide by the awesome Gina Hitchings on what you need to know about accounting as a startup.
Importance of accuracy
Legally, all businesses need to maintain an accurate financial record and retain them for six years.
Keeping your books up-to-date can also help you make better financial decisions when running your business. Without them, you won’t be able to accurately tell if your business is performing well or not.
Benefits of the books
Accurate and up-to-date bookkeeping can show you where your business is losing idea – helping you see which areas of your business you need to cost cut.
Alternatively, they are useful in telling you how much money you need to stay afloat, or you may use them to see when sales are peaking and even to spot opportunities for your business.
Sage solutions are the most popular accounting software – and a Sage Business Partner will be able to provide your business with the complete solution. This allows your accountants to further develop and bespoke their solutions specifically for you.
The cheapest method is to keep a record on your own computer spreadsheets. This will help you to maintain a simple cashbook – showing money come into and going out of the company.
Keeping your spreadsheets updated regularly will give you an accurate picture of your business’ finances. This will help you spot any potential cashflow issues down the line.
Knowing a few basic skills in Microsoft Excel will get you started. You could ask an accountant for help, or a quick search in Google can help you find a free template. If you’re using an accountant for an end-of-year return, spreadsheets make life easier for them too.
The cashbook is the most vital part for you. It lists the money coming in and going out of your business. On top of that, a purchase ledger shows the sums owed to your business, and a sales ledger details money owed by your business.
If you can keep an accurate record of these, all you need to pay an accountant for is for them to prepare and file your accounts or returns. This will reduce the expenses for your business.
Importance of keeping receipts
Receipts provide evidence of purchases should HMTC make a request, making it important to retain receipts. If all of your purchases are made on a business debit or credit card too, your statements will provide additional proof of purchase.
Accountants are usually mindful of a business’ income, especially with startups. If you’re looking for an accountant to complete and file a tax return, you’ll be looking to pay around £200-300. Expect a slightly higher price if you’re looking for additional advice as well.
Should your startup turn into a large business, turning over more than £50,000 a month for example, you will still only be looking to pay around £100 a month in accountancy costs.
Accountants should be able to justify their fees by saving you a lot of time, hassle and money. While this process is never easy, it helps to keep researching and talk to other startups to find out what they did and how you can make the right choices from the start. Accounting can be simple yet all the way complicated, so take you time, but don’t drag your feet, because it has to be done.