I live near a couple of accountants and every year during the last two weeks of March there’s a flurry of men and women walking with purpose, with carrier bags full of receipts, towards the accountants’ offices. It’s like watching stressed parents hand over their demanding toddlers to the grandparents to sort them out.
I do smile to myself, smug I guess that I’ve organised my accounts with military precision throughout the year, but then I enjoy doing it.
And, I want a holiday home one day so short of doing a tour similar to Peter Kay’s ‘Mum wants a bungalow’, watching every penny is the only way I’ll achieve it, so the hard work has to be put in.
Anyway, I know and appreciate we all enjoy different things, so understand you may be one of those who detests paperwork, loathes bookkeeping or just can’t be bothered. However, if you’ve promised yourself 18/19 will be different and you’re going to keep on top of things, then these six easy steps may just save you some time.
Ready? … Here goes:
1. Get everything online
Everything! Your bank transactions, invoicing, reconciliation (where you match a transaction with a receipt or invoice), refunds, credit notes even your tax savings account.
After my first year in business, I moved my accounts online from Excel, Word and PDF. It was my first ‘big’ business expense, and like I say I am a penny watcher, so it was hard, but it remains one of the best investments I’ve ever made. It saves me around 4-6 hours a month, which equates to £120-£180, and helps me keep track of everything owed, how long things are overdue and calculates my tax bill for me.
I use and recommend FreeAgent for my bookkeeping clients. I’ve even got a 10% off code, which I’ll pop at the bottom of this blog.
2. Photograph receipts
How much do you think you’ve lost in expenses over the years because those damn receipts disappeared, only to reappear during the next financial year, or have faded on the car dashboard? It’s highly likely you’ve got a camera on your smartphone, so photograph them. Do it even before you’ve left the shop or the post office, while on the train or delegate the job to your children – and call it ‘family time’.
3. Always pay by card
Even car parking when you can! That way you won’t miss out on any expense claims as they’ll all go through your bank account. You just need to find the receipts to match them up, but if you’ve done number 2 above, you’ll be fine!
4. Split transactions
I buy my copier paper from a shop that sells household things I usually need to stock up on and as you know when you have a receipt full of stuff you can’t claim for it’s easy to just leave it, but don’t! These little expenses soon add up throughout the year. To avoid dismissing any expenses split your transactions, i.e. pay for the items you can claim for in one transaction and the other stuff in another. It takes no longer to get through checkout and saves you money in the long run.
5. Put tax money away every month
I put 30% of my profit away every month, it leaves no nasty surprises for me at year end or the embarrassment of getting caught rifling down the back of coffee shop settees for money. There’s a handy calculator on the UK government website which will help you calculate exactly how much you need to put away for your self-assessment tax bill here.
I know, HMRC actually provide something to ‘help’.
6. Change your payment terms
When I did my bookkeeping course it was suggested that payment terms for small businesses should ideally be 7 days, to enable us to manage our income better. For example, if our payment terms were 30 days, it’s a whole month before you can start chasing someone for payment. If it’s 7 days, you can start chasing on day 8 and get your money much quicker. I’ve written more about it here, but have a look at your current payment terms. I can’t think of many reasons why they can’t be 7 days – it’s your business after all!
If you choose to outsource your bookkeeping make sure your bookkeeper is registered with HMRC for Anti-money Laundering, it’s a legal requirement!