Spring Clean your Business
May
09
Emily Coltman, Chief Accountant at online accounting system providers FreeAgent (www.freeagentcentral.com), suggests steps to take today to clear the cobwebs from your business finances.
6th April has come and gone which can only mean one thing. Spring has sprung and we’re into a new tax year. So here are five ways to spring clean your business’s finances and set yourself up ready to tackle the new tax year.
1) Finish your accounts and firm up your future plans
If you prepare your business’s accounts to 31st March or 5th April each year, try and get them done earlier rather than later.
That will not only give you valuable insight into whether your business has been successful, but will also enable you to start planning from firm foundations.
Planning is in itself a very important exercise.
Will your business bring in enough cash to rent a new office? Hire more staff?
What if you decided to start selling a new product line? What costs would that involve? For example, if you are an upholsterer and you decide to branch out into making wedding dresses, how would you market your new product?
If you have your most recent accounts, that’ll help you start planning ahead, because you’ll have a much clearer idea of what your business’s existing costs and commitments are, and be able to look forward from there.
2) Get off on the right foot
The new tax year is a good time to take stock, reflect and make some promises to yourself.
Ask yourself what you can do to make things run more smoothly.
Contrary to popular belief it is possible to reduce the hassle many associate with managing their finances. If you find your accounts build up to an annual nightmare, why not consider some of the tools out there that can help put you more in control all year long? Online accounting systems such as FreeAgent, for example, can really help to ease the burden, leaving you to focus your energies on your customers.
Or ask yourself if you have any “toxic” customers? Surely every customer is a good customer?
Not at all!
A toxic customer might be:
- A customer who expects you to drop everything the minute they e-mail and answer them, even if you’ve told them you’re on holiday, or engaged elsewhere.
- A customer who always pays you very late.
- A customer who’s rude and unpleasant to you and your staff.
I could go on. You know who your toxic customers are. Australian dentist and business adviser Paddi Lund says that bad customers drive away good customers, because you’ll be so cross and miserable after dealing with a bad customer that you’ll provide poor-quality service to the good customer who calls you next – and potentially lose that good customer, and the money they pay you.
So it might be worth your while just reflecting on whether all of your customers are helping you build and sustain your business.
Don’t risk losing your good customers. Lose your bad ones instead!
3) Get a Business Debit Card, and take steps to tame your expenses
One issue that often causes problems for businesses is trying to keep costs that you’ve paid for personally, separate from those that you paid for from your business bank account.
How often have you gone into a shop to buy something for your business and found it was just much easier to pay with your personal credit card than remember to bring in your business cheque book?
Apply to your bank for a business debit card and you’ll find your finances get much easier to manage, because you’ll be able to pay your business costs directly from your business bank account.
Also consider using iphone or smartphone apps that help you automatically keep track of receipts. There are several which FreeAgent integrates with, which mean all you need to do is to take a picture of a receipt on your phone, and you’ll see the costs associated with it appear automatically in your FreeAgent accounts. This helps you keep control of all of those bits of paper you have to carry round, and makes sure you claim and pass on all your relevant expenses to your clients.
4) Collect your tax paperwork together now!
Firstly, start collecting material for your tax return for the year ended 5th April 2011 (2010/11 in tax year shorthand). It’s not too soon!
If you left preparing your tax return until January this year, don’t do that again!
Remember what a mad scramble it was to prepare your tax return at the last minute – running round collecting pieces of paper, registering online with HM Revenue, hurriedly putting together your accounts…
If you start now, you’ll be able to save yourself that for 2010/11.
Your tax return contains information about all your income for the tax year, and you’ll very soon receive paperwork such as certificates of interest from your bank, showing you how much interest you’ve earned on your bank account(s), before and after tax.
Make a file to keep that paperwork all together for 2010/11, and as information arrives, add it to the file straight away. This means that nothing will get lost in the maelstrom of paperwork.
If you’re an employee (including of your own limited company), your employer must give you a form P60 showing your earnings for 2010/11 by 19th May 2011. Keep that in your tax file.
You may also receive a form P11D from your employer by early July, showing any non-cash benefits you had as part of your job. That goes in your tax file too.
Collect all your tax return paperwork together now to save yourself having to do that in a panic in January.
And if 2010/11 is the first year you’ll have to file a tax return, register with HM Revenue to file it online.
This not only gives you an extra 3 months to file your tax return (because if the return is done on paper it must be in by the end of October), but HM Revenue’s online software will calculate your tax for you.
5) File your payroll forms by 19th of May
If you employ people (and, if your business is a limited company, that includes yourself), your payroll forms for the tax year ended 5th April 2011 must be with HM Revenue by 19th May.
HM Revenue don’t give you very long to do these, as they can’t be done before the end of the tax year!
And the deadline is less than a month away, so if you’re not yet registered to file these online, do that now!
Year-end payroll forms include a P14 for each employee, showing how much that person has received in salary from your business in the tax year, and how much tax and National Insurance has been deducted from their wages.
You also need to file a summary of your payroll for the tax year, on form P35.
If you use commercial payroll software it will usually generate these forms for you, and can nearly always be configured to file them online with HM Revenue for you, too.
A business owner’s work is never done but there are many ways in which it can be made easier and you can avoid creating extra work and stress for yourself!
Emily Coltman is Chief Accountant at FreeAgent, which provides an online accounting system specifically designed to meet the needs of freelancers and small businesses.
FreeAgent is giving away two months free trial of its service to help you to kick start the new tax year. To benefit from FreeAgent’s promotion enter the special code “SPRING” when signing up for a free trial on the site. The offer is valid until 31 May 2011.
Photo credit: bies
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