Tax advisor’s timely recipe for accounting success
It’s not quite like playing around with pancake mixture, but when you’re in business of your own account there’s still a lot of fun stuff to do, writes Emily Coltman ACA, chief accountant at freelance tax provider Free Agent. There’s the marketing; the networking, the buying – even the eventual flipping of your business should prove to be a sweet experience!
That said in business, as in the kitchen, watching out for the sticky moments along the way will of course be a lot easier if you have a recipe for success. This is true regardless of what you create for your clients.
This year, why not worry less about the vital ingredients? That’s the numbers, the accounting and the tax calculations that you have to do. So starting this Shrove Tuesday, in the same way that an egg is your key ingredient for the perfect pancakes, accounting should be the most important element for the success of your business. At the very least, the following recipe for accounting success will help you to avoid burning your fingers!
Use accounts as the base
Keeping your accounts isn’t just about making sure you’ve got the right information for the taxman, although this is of course important in itself.
Rather, the numbers can also provide vital information to help you run your business. Whether it’s your cash flow, your profits, how much tax you owe, your outstanding bills or your expenses, your accounts are the key to determining how your business is performing - and finding out how to make it work better for you.
Prices in pounds
You might be working on a project that you really enjoy doing, but which doesn’t bring in enough money to cover its costs. So, should you put your prices up - and by how much?
You won’t know unless you’ve recorded all the income for the project and all its associated costs, such as materials, and time that you and your team have spent on the work.
Until you’ve done all of the number crunching, there’s no way of telling what your new pricing should be - or whether you can afford to keep doing the project at the original price and cover the costs from elsewhere in your business.
Equally, you might have customers who are always slow to pay.
As your business grows you won’t be able to remember who has paid you and who hasn’t.
By keeping your records up to date (and by using a simple invoice-issuing system for your customers and to record payments) you can see at a glance who has yet to pay you and how much they owe.
Without enough cash coming in, your business can’t survive for long - so you need to always stay on top of your payments.
Number crunching costs
Trying to remember your business’s costs in your head is something else you’ll very quickly lose track of.
It’s very easy to spend money thinking “oh, that doesn’t cost very much”, but it’s surprising how quickly costs rack up.
How much did attending that networking event cost you – not only in terms of attendance fees, but also travel, parking, and your time?
Did it bring in enough customers to make the cost of attending worthwhile? If not immediately, then might they come in the future?
Don’t try to add up your costs in your head. You will forget some of them and it’s not the best use of your brainpower, which you can spend better on helping your customers and providing a great service or product.
No excess tax
Nobody likes paying tax. However, you can make sure you’re not paying too much tax by keeping your books up to date.
There are often steps you can take to save tax on your business - for example, by buying a piece of equipment at the right time of the year. However, if your books aren’t up to date, you won’t remember to do this and it could cost you in the long run.
Crunching the numbers can help you make sure your business is profitable, viable and will stand the test of time – and can even save you some money, too. There may be aspects of your work that sizzle more, but when it comes to cooking up a business success, there’s no more important ingredient than your accounting.