The number of small businesses in the UK is on the rise and it was estimated that by December 2017, it has reached an impressive 5.7 million. Ever since the recession, these numbers have been growing gradually. As more and more people found themselves out of work, it has acted as a major motivating factor to compel them to become self-employed.
Setting up a business is exciting stuff, there’s no doubt about that, but if you want that excitement to be rewarding in the long term, you need to get your basics correct to begin with. The first place of focus when you set up your business should be your financials. If you don’t manage your numbers correctly, you will face a lot of issues in the future. You don’t really need to be a mathematical scientist or genus to handle your small business accounting aspects. All you should have is a basic yet solid understanding of bookkeeping and your business finances. So here’s a small yet detailed guideline from us on how you can get the fundamentals right and give your business the best chance to survive and grow in the UK.
Get Your Small Business Accounting Right from the Go
Rather unfortunately, a lot of small business and new ones at that, fail, not because they are running short of ideas, entrepreneurial grit or creative energy but just because they lack control and insight about their own financials. See, you don’t have to have a mathematical background academically for you to pull this one off. All you need to know is that from day 01 or even before, you should maintain a solid and accurate record of the numbers. If it is a business, register it with HMRC, if it’s a company register with Company House, then open a business bank account and set up a firm financial recording method. This is also a legal requirement.
Your Cash Flow is EVERYTHING
You need to make the revenue to pay off your bills, period. If your business does not pay the bills, you will go bankrupt pretty soon. You can mitigate this risk however, by knowing well who you are extending credit to and also by ensuring that your VAT returns are to date. Stay in control of your business costs. These are valuable points to keep in mind when it comes to small business accounting. Now start managing your cash flow closely and monitor who owes you money and who you need to pay as well. Always keep the cash at hand for what is coming in as well as going out. Only take credit knowing without any doubt that you can, in fact, pay it back when due. Do not spend VAT that belongs rightfully to the government.
Compliance with Legislature
It is natural to take time to understand your compliance responsibilities and to act accordingly as well. When we say compliance with legislature we mean everything to do with payroll, VAT, taxes and any other changes in business legislations like the RTI for example. The deadline for small business to submit their monthly RTI payments to the HMRC is usually in April. You have to make sure that you submit your payroll in real time to them or you would be liable to pay a fine. This is also why small business accounting calls for expertise. The number of changes that the legislations go through in just one year are quite staggering and you will need somebody who can keep track of all this, comply with regulations and categorise the income as the costs to give you insight about where you stand as a business.
What is Standard VAT?
Don’t delay your VAT registration process. If you want to become VAT registered you can choose a scheme regardless of whether your business is below or above the £85,000 limit. VAT is ideally calculated using the date on which the sales invoice was raised and the main benefit of paying VAT is that you can also claim the VAT on any purchases made, irrespective of whether or not your supplier invoices have been paid or are pending. There are also many VAT schemes that you can choose from such as VAT Cash Accounting, Flat Rate Scheme (Invoice and Cash Based) or the aforementioned Standard VAT.
There is no one method to set up an aptly functioning and thriving business, although a lot of it is dependent on how good you can manage your numbers. Especially in the UK all the small business accounting aspects are addressed with a lot of importance as they are what will act as the drivers of your profits. If you feel that you alone do not have the skills and the knowledge to handle this job or that you perhaps lack time for it, hiring somebody with the proficiency is perhaps one of the best investments that you can make for your business.
Did our blog help you understand how small business accounting is done? Leave us a comment and let us know. You can also contact us on [email protected] for courses that can give you a comprehensive knowledge that will help you handle your business accounts well and accurately.