When you are new to self-employment, you have a million and one things to do and normally bookkeeping isn't at the top of the list.
Most new business owners are spending hours and hours of their time growing their new start-up and have little time to spare to keep up to date with all of the receipts and invoices.
There are lots of good reasons why you should make sure that bookkeeping is a priority and I am going to explain why it could save you money and how it can be a painless process.
Reduce your tax bill
Lots of new start-ups have what is called pre-trading expenditure, which are expenses that you incur before you start selling your product/service. Recording these expenses will save you tax as they are tax deductible, lots of businesses lose out on these expenses because they aren't recorded at the time and are forgotten at year end.
Examples of pre-trading expenditure include; Stock, rent for business premises, insurance, professional fees, stationery, equipment, advertising.
If you record your expenses on accounting software from the start of your business, you can make sure that you don't miss out. If you chose an accounting software that has an option to add on apps, such as an expenses app, it is easier than it has ever been. You can take a photo of the receipt on your phone as and when you make a business purchase, the app reads the receipt and records it automatically into your accounting software.
Improve your cash flow
At the start, it may seem like too much effort to buy into an accountancy package just to help with your invoicing and you may think it is easier to create your invoices in Microsoft Word/Excel, or even from a paper invoice book. However, there are many benefits to recording your sales on accountancy software, such as the following:
It is easier than you think, most accounting software has an invoice template and you can add your logo, business details and bank account information once. For every invoice, you just enter the customer and invoice amount and hey presto - there is your invoice!
Using software reduces the risk of errors as it will automatically calculate the total and tax, if applicable.
You can send invoices from the software straight to your customer with ease.
You can easily see which clients invoices are outstanding so you can chase accordingly. Some accountancy packages even have automatic reminders for overdue invoices. They are created from the accounting software, without you even needing to press a button.
Monitor profitability
If you record your business income and expenses in an accounting software you can easily see how the business is performing by running reports. You have made the massive leap to self-employment so you need to make sure it is profitable. This means that there is no need to guess how your business is doing and there are no scary surprises at the year-end.
Save on accountancy fees
If you do not keep on top of your receipts and invoices and pass it over to your accountant to deal with at the year-end, it will save you time but it will also cost you money, as accountants charge by the minute. Costs can even go up in the busy tax return season due staff availability and charge out rates. By keeping on top of your bookkeeping you could save yourself an expensive bill from your accountant.
To sum up… Sum up… get it?
There are many good reasons why you should keep your bookkeeping up to date. I do understand that when you are running your own business you may not have enough time to keep on top of it, nor do you want to pay for your accountant to do it.
If you choose an accountancy software to use from the start of your business you may find the whole process a lot easier than you were expecting. There is a lot of choice in cloud-based accounting software and there are many tools and add-ons that you can use that make bookkeeping easier than it has ever been before. These include automatic reminders for invoices, expenses apps and bank feeds.
Kirsty Piercy
Kirsty Piercy Virtual Assistant
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