9 Tips to make accounting for small businesses easier

Accounting for small businesses is something that those new to the world of entrepreneurship often struggle with. However, proper accounting is literally the basis of a functioning business. 

Without it, your business is more or less guaranteed to fall apart. And it’s a sad fact that this is the story of many enthusiastic people trying to live their small business dream. Over 80% of small businesses fail due to bad financial management!

So whether you're a sole trader or run a limited company, staying on top of your finances is a task you need to have under control from the get go.

The good news is that even with limited accounting knowledge, our 9 practical tips and strategies covered in this article will streamline the process and minimise stress. 

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Simplify accounting for small businesses with these tips:

1. Record your expenses (it's not optional!)

This might seem obvious, but diligently tracking every penny spent on your business is the foundation of good accounting practices. Every receipt, invoice, and bank statement becomes a vital piece of data.  

If you want to claim the extra revenue you're entitled to via tax rebates, simplify your tax filing and have a clear overall picture of your finances then meticulous record-keeping of expenses is an absolute must-do task.

As well as a physical folder for paper documents and/or a spreadsheet, use a dedicated accounting app (Use this one for free! From Play Store or App Store.) with a receipt scanning tool which lets you easily record expenses with your phone. The key is to record the expense amount, date, and a brief description of what it was for.

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2. Open a dedicated business bank account (separate your money!)

Keeping your personal and business finances separate is essential for both accounting clarity and tax purposes. Opening a dedicated business bank account allows you to more easily track income and expenses. As well as adding a layer of privacy between your personal data and your business.

It also simplifies tax filing by providing a clear record of all business-related transactions. Additionally, using a business credit card for purchases offers benefits like earning rewards points and building a separate credit history for your business.

Check out Crunch’s packages which offer discounts for business banking from our partners Metro Bank and Barkley’s.

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3. Learn how to practise proper bookkeeping and manage business finances (knowledge is power)

Understanding basic bookkeeping principles will empower you to effectively manage your business finances. While you don't necessarily need a degree in accounting, familiarising yourself with terms like income statements, balance sheets, and cash flow statements is highly beneficial. Numerous free online resources and tutorials can provide a solid foundation. 

There are also affordable bookkeeping courses designed specifically for small businesses. Investing some time to learn the basics will not only save you money in the long run but also give you greater control over your business's financial health.

If this kind of number crunching just sounds too much for you, you could consider using an expert bookkeeping service to do it for you.

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4. Get your self assessment sorted (don't panic, it's manageable)

For sole traders in the UK, filing a Self Assessment tax return is an annual requirement.  This is where recording your expenses and practising accurate, organised financial admin really pays dividends.

Remember to register, submit and pay in time. As filing deadlines are strict and missing them can result in severe penalties. Make sure you mark the due date in your calendar well in advance.

By using a professional Self Assessment service you can have your entire tax-return prepared and filed for you by expert accountants. It’s an affordable solution that’s worth its weight in gold for the hours of time and stress it will save you. 

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5. Set up payroll (if you have employees)

If you employ staff, setting up a payroll system is necessary for ensuring timely and accurate employee payments, as well as calculating and remitting deductions like National Insurance and tax. There are several payroll software options available for small businesses, many of which offer automated features that save time and minimise errors. 

Alternatively, you can outsource payroll to a reputable accounting firm. Regardless of the chosen method, ensure you understand your legal obligations as an employer, including minimum wage requirements and employee benefits.

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6. Decide how to pay yourself (reward your efforts!)

As a small business owner, you have the flexibility to choose how you want to pay yourself.  Sole traders typically withdraw profits directly from their business accounts. However, for Ltd companies, there are different options, such as taking a salary or paying dividends. 

Make sure you understand the tax implications of each method. Consulting with an accountant can help you determine the most tax-efficient way to pay yourself and ensure you comply with relevant regulations. 

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7. Learn tax dates and rules (stay informed, avoid penalties)

Ignorance is definitely not bliss when it comes to taxes. Keeping yourself updated on relevant tax deadlines and regulations is super important for avoiding penalties and interest charges. HMRC offers a wealth of information on its website, including tax calculators and guides specifically aimed at small businesses.

Setting reminders for important tax deadlines, such as VAT (Value Added Tax) payments and corporation tax (for Ltd companies), will help you stay on top of your tax obligations. Additionally, consider subscribing to newsletters from reputable accounting firms or business organisations to stay informed about any changes in tax regulations.

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8. Set budgets (plan for success)

Creating a budget is a powerful tool for any small business. It allows you to forecast income and expenses, identify areas for cost-saving, and track your financial progress towards your goals.  

Developing a realistic budget requires considering your projected sales, fixed costs like rent and utilities, and variable costs like marketing and supplies. Regularly monitoring your budget against actual income and expenses will highlight any variances and allow you to make adjustments as needed. 

Remember, a budget is not a static document; it should be reviewed and updated periodically to reflect changes in your business operations.

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9. Use an online accountant (get expert help when you need it)

While the tips above can make small business accounting much easier, there’ll likely be times when you need professional guidance. Online accounting services offer a convenient and cost-effective way to access expert help.

These services typically provide features like:

• Cloud-based accounting software - Online platforms allow you to securely upload receipts, manage invoices, and access financial reports and powerful insights remotely.

• Bookkeeping assistance - Many online accounting services offer bookkeeping packages where qualified professionals handle tasks like data entry, reconciliation, and payroll processing.

• Tax filing and advice - Online accountants can provide assistance with tax preparation and filing, ensuring you maximise deductions and minimise your tax liability.

• On-demand consultations - Most online accounting services offer flexible consultation options, allowing you to connect with an accountant for specific questions or complex financial matters.

Using an online accountant can free up your valuable time to focus on core business activities, and provide the peace-of-mind of knowing your finances are in good hands.

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9 steps to small business accounting success!

By implementing these 9 practical tips, you can significantly simplify accounting for your small business, regardless of whether you're a sole trader or run an Ltd company.

Remember, consistent record-keeping, a basic understanding of accounting principles, and access to expert help when needed are key ingredients for financial success. 

With a little planning and organisation, you can ensure your business thrives without getting bogged down by the complications and potential pitfalls of accounting.

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