Why Getting Bookkeeping right in important
When running a business one way to get the one potential problem off your shoulders in getting into the routine of keeping good records from the start. This will help you have complete visibility of your income, expenses, monitor payments from clients and suppliers or service providers. Failure to do this can cause your business cash flow problems, a result of having little control on your cash movement.
Ensure that your transactional paperwork are saved in a secure location that is easily traceable. Use virtual technology that is backed up to save paper documents in a way that can easily be searched or traced when needed. Use cloud software that allows you to easily access your documents from anywhere.
Split the Bank Account
We advise all our clients to have at least one business bank account. Keep your personal finances separate from the business. As a director of the business you are not allowed to spend the company money on your personal purchases. If you want to take money out of the business for your personal spending, the best way to do that is to pay yourself a salary or dividend if the company is profitable and pay the necessary tax on it. If you are self employed, it is still advisable to have a separate bank account for your business. Having a separate bank account solely for the business draws a line between your business and personal finances and its definitely a good practice, which will come handy and save you out of trouble in case there is ever an investigation on your business accounts. We make recommendations and help our clients apply for bank accounts if they do not already have one. Multiple bank accounts are ideal. We connect your bank statement with cloud accounting software to enable your bank transactions feed into an accounting system, a process known as bank feed. This helps keep good records and gives you the ability to trace all income and expenses without losing control of movement in cash within the business.
Be Prepared for the Tax Man
Good record keeping fits in well with the new system of reporting VAT, “Making Tax Digital”. VAT returns are easily traceable and in a situation where there is a follow up question from HMRC returns can be traced to bills, invoices and bank transactions showing as proof to satisfy any queries raised.
Budgeting your business transactions for the year, will help you make plans to put money aside to pay for your taxes. By having multiple bank accounts you can dedicate one bank account purposely for putting money away to pay for taxes. This is quite important for businesses that pay VAT each quarter. Because the money is paid in arrears they tend to struggle when the due date comes. The same is true for self employed. Unlike Pay as you earn which is deducted at source, for the self employed the tax that was meant to be deducted in the month of April if they were employed by a company is not due till 22 months time. No wonder many people forget they owe any money.