Here, Emily Coltman, Business Advice expert and chief accountant to cloud accounting provider FreeAgent, gives readers her top tips for getting your business books in order by the end of the summer and making life easier in the months ahead.
The end of summer is not far off, which means you may be thinking of having a last-minute holiday or finishing a long overdue DIY project before the days get much shorter.
But, the holidays could also be the ideal time to take a look at your business books, and start preparing your company for autumn and the busy Christmas period.
Check your cash
Do you know exactly how much has your business earned or how much cash it has on hand? If your business? cash harvest is poor, then it may starve, so it’s important to make sure that you know how much cash your business has in its bank account.
If you’re not already doing so, check whether you can set up an automatic feed to pull this data from your bank straight into your accounting software in order to minimise data entry errors.
Then make sure you check at least weekly, if not daily, to make sure that your bank balance is correct in your accounts and that all your transactions have been recorded.
And remember, if your bank balance in your accounts doesnt match what’s in your bank, youll have to look back and find the difference it won’t go away.
Send out your invoices
If your business issues invoices to customers, take advantage of any summer downtime to check through your records and make sure you’ve sent invoices for all the work you have done to date. Your customers cannot pay you if you don’t invoice them.
You should also check your list of open invoices because sometimes there might be some invoices that havent been paid because the customer’s just forgotten about them and you havent followed them up.
There may also be old invoices in your accounts that havent been paid and won’t be, perhaps because your customer’s gone out of business. Take some time now to write off any invoices that you’re sure will never be paid, and to chase up those customers who havent paid yet.
Check your out-of-pocket expenses…
Out-of-pocket expenses are business costs that you paid for personally, for example if you went to the post office and bought a book of stamps to send business letters, but paid with your own cash.
As long as these are bona fide business costs, you can put these into your business accounts too, and they reduce the amount of profit you pay tax on, so it’s worthwhile keeping track of all of them.
Go through your wallet and look for stray receipts and make sure that you’ve included any of them which are business costs in your accounts.
And, if you keep a big box of receipts that you usually only look at when your tax return is due, use this time to go through these and record all of them in your accounts. It will save you a lot of time and hassle in the long run.
…and review how your costs are categorised
When you’re putting your business costs into your accounts – whether they were paid for from your business bank account or whether you paid for them personally – make sure that the costs are in the right categories.
For example, a pack of envelopes would be best categorised as “stationery”, while a bill from your office landlord would be “rent”. This helps you make sure that you’re claiming the right amount of tax relief on your costs, and means you can track where you’re spending money in your business.
Be aware of the categories that contain potential tax pitfalls (for example, sundries, subscriptions and lease payments) and make sure that any costs you put in these categories are correct. If you have any doubts, consult your accountant who should be able to advise you.
Check when your tax is due
If your business is a limited company, it will be due to pay corporation tax ninemonths and one day after its year end. If you’re a sole trader, you can expect to be paying income tax and NI at the end of January.
And whatever your business type, if it’s registered for VAT, then there will often be a VAT bill to pay every threemonths.
Make sure you know how much tax you’re due to pay soon, and have money put aside to pay for it. it’s also a good idea to set up a system where you keep a running total of all the tax you owe and align this with your calendar so you know exactly when you have to pay it.
Look to the months ahead
Take some time during the quiet summer months to consider how your business will deal with the rest of the year. Christmas, in particular, can be a potential bonanza for many businesses, so what will it do for yours?
Will you offer special products, services or discounts at Christmas? If so, could you pair up with another local business who serves the same customers as you do, to offer a joint Christmas package?
For example, if you are a children’s party planner, could you find a local caterer, entertainer (magician, balloon modeller, clown) to team up with for special Christmas events? If so, this could provide a welcome boost to both of your businesses.
Emily Coltman FCA is chief accountant at FreeAgent, award-winning cloud accounting providerfor micro business owners, freelancers and their accountants