5 ways to spring clean your business books in the new tax year
Chief FreeAgent accountant Emily Coltman offers her top tips to help you spring clean your business books and get your company set for fresh new growth in the months ahead.
With the new tax year now under way, it’s a great time to think about making some changes to keep your business running as efficiently as possible in the year ahead.
One of the most important pieces of spring cleaning you can perform is giving your business books a proper sort-out, so that your financial information is as up-to-date and accurate as possible. But how do you go about doing this?
Review your customer list
Look at who you sell to and how quickly each customer pays you. Then think about whether any of them regularly question your price, or expect you to deliver more services for no additional fee.
If so, you may want to consider whether those customers could actually be harming your business. it’s sometimes hard to turn customers away, particularly as a small business in the early stages of its life, but you may end up being glad of it in the long run and your bill for headache pills will be much smaller. Remember: you don’t have to work with anyone you don’t want to.
Look at your cash flow
Take a look at your business bank account and see how much you had in the bank at the end of each month and whether there are any noticeable times when you were really short of cash. Then consider what you could do next year to stop that happening again for example, opening your business to new markets, putting your prices up, or borrowing extra money.
If you do not keep track of your cash, you could find yourself unable to pay bills on time, which will damage your relationships with your suppliers and make them not want to go the extra mile for you next time you need something delivered urgently. Remember, the better your relationships with your suppliers, the more you can do for your customers.
In the very worst case scenario your business could even not survive if it runs out of cash completely.
Be consistent in your categorisation
When you’re deciding which category to put your costs into, such as stationery or postage, you may well find that some of your business’s costs could easily go into more than one category. For example, a monthly subscription to a software provider could be “computer software” or “subscriptions”.
While there may not be clear-cut guidance from HMRC about which category to choose in these situations, make sure you allocate these costs consistently as they recur. That way, if your accountant needs to move the cost to a different category for tax reporting, itll be quicker for them to do that. Also, it’s much easier for you to track how much you’re spending in each category if you always put the same costs in the same places.
Go back over your historic transactions and make sure that you’ve categorised your costs consistently.
Emily Coltman is chief accountant to FreeAgent, provider of cloud accounting software for freelancers, micro businesses and accountants. She is passionate about helping the owners of small and growing businesses to escape their ?fear of the numbers? and she translates small business finance and tax into practical common sense speak.
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