Many small businesses have difficulties in managing their books. It is usually a fact that can be linked to their particular background formation, having difficulties to do bookkeeping, being too busy in the trade answering to the clients’ requests, etc. The reality is that keeping track of both income and expenses is the core to a successful business.
To make extra effort to keep the books in order and track income and expenses will reduce accountancy fees. An easy way to do so is the use of cashless transactions. Bank account service is the easiest way to manage both income (payments from clients) and expenses. Accountants will usually request a bank statement in an excel format which can be downloaded easily as long as one has an online banking. The statement can be downloaded for the whole year and this can help to sort out the company Year End Accounts.
In the case of those accepting cash payments they have another way to go about it – Carry Bag System. This means, many will be placing receipts and invoices in a carry bag as they go. When the time come to do their accounts they hand it over to the accountant. The accountant will need to spend possibly hours to not only sort out and put in order those receipts but also to make sense of notes and content of receipts. What is the solution to this? Simple, every day, every week, every month to put together all those receipts and invoices and make a written excel spreadsheet of expenses related to the business, how much and totals. The same applies to invoices paid by customers. This will not only help a business to keep track of income and expenses from the business but also have everything in order and reduce the accountancy fee.
There are some common mistakes made by people in the trade field and therefore, missing on their tax returns when they do not take notes of the following:
1. The absence of a list of fixed assets and therefore, it is impossible to identify depreciation which is accounted as an expense to the business. For example a machine which may have cost to the business £500 and is used constantly by the business suffers depreciation. A company car is another one where it is not recorded as fixed asset because the business has not got such list of fixed assets.
2. Losing receipts.
3. Mixing in the shopping list between personal items and business items. Sometimes receipts of this kind are passed to the accountant and it can lead to confusions when calculating how much the expense to the business was. This is also time consuming as an accountant will not always have time to check the content of every item recorded in the receipt.
4. Receipts kept badly will lose its ink and eventually the record will either disappear or be difficult to identify.
5. Not recording business expenses like petrol or diesel (it is common nowadays to fill up your tank and pay on the spot with a debit or credit card and the machine has no paper to produce a receipt), other travel expenses, having a coffee or lunch when working.
6. Disregarding the use of your home as office where you work too. The tax man provides a platform where there are allowable expenses which can be claimed and reduce your tax bill.
Therefore, it is important to make records of transactions and keep them safe. These records will provide a good picture of how your business is doing, provide information on what other things you will need to do (reduce expenditure, increase investment in advertising, etc), and reduce your tax bill as well as your accountancy fee. Therefore, having a business bank account is essential.