Self Employed? 5 Ways it Pays to Keep on Top of Your Books

On January 24th 2018, HMRC released figures showing that over a third of self-assessment returns were still outstanding. Although 2018 eventually saw record numbers file on time, more than 30,000 were submitted between 11pm and midnight on the 31st.

Of all the tasks that are needed to keep our businesses running, keeping on top of our Books is perhaps the one that people put off the most.

 It’s no secret that many see accounting as a chore and, given a choice between reconciling a long-neglected pile of expenses and - well - just about anything else, will choose the latter.

“If you want to make an easy job seem mighty hard, just keep putting off doing it” - Olin Miller

Obviously, it’s a legal requirement to maintain accurate accounting records (and to keep them - and associated paperwork - for a minimum of 6 years to be on the safe side).

But, deadlines and legalities apart, there are ways you personally can profit from keeping a tight rein on your business finances.

Whether you’re recently self-employed or you’ve just emerged blinking and scathed from a last minute deadline scrabble, here are 5 ways you can reap real financial benefits from staying on top of your accounts.

1. You’ll make better decisions for your business

Most (if not all) business decisions need you to consider your financial position.

Every area of your business needs to be optimised from time to time - and your finances should lead the way.

From identifying your hero services or products to pinpointing areas which need more of a push; finding areas to streamline costs to knowing who your best customers are - if you don’t know your figures then you’re just feeling around in the dark.

Regular management accounts give you the information you need to make smart decisions to grow your business and maximise profits. Be proactive rather than reactive and you’ll quickly see rewards.

2. You can keep your cashflow flowing

You might know what you’ve got in the bank today, but what about next week? Or next month? Can you quickly deal with disputes, are you proactive with chasing your outstanding customer invoices?

Cashflow issues are often cited as a major problem for small businesses, but one of the main ways you can help yourself is to be aware of exactly who owes you money, and who you owe money to.

Plus, having accurate information to hand makes it much easier to resolve issues with customers and suppliers alike.

If you can see that blip on the horizon coming, then you can plan accordingly. If you know a particular client is a chronic late payer, then you can budget accordingly. If you need to invest in new materials or equipment, you can pick the best time.

You can plan to pay your taxes, watch out for crossing the VAT threshold and work out how much - and how best - to pay yourself a steady and tax-efficient income.

Why not talk to one of our friendly tax experts today, and let them work out the most tax-efficient way for you to take your income?

3. You can ensure you can claim on all your expenses…

If we had a pound for every plastic bag of assorted, unmarked receipts… well, you know the rest.

But a lost receipt means you won’t know your real profit and - worse - means you’ll be charged extra tax.

Just a couple of simple processes could save you or your Accountant hours (and money!) at tax return time.

Electronic copies are all you need these days, and even the least digitally-aware among us can master taking 30 seconds to photograph a receipt and file it somewhere in the cloud.

HMRC have published this list of approved, simple commercial record keeping applications.

If you’re more adept with your bookkeeping, there are lots of excellent, even free, bookkeeping apps and software out there.

If you prefer something easier, we offer simple bookkeeping templates to get you set up and on the right track.

So, no excuses!

4. You’ll avoid incurring penalties and charges…

It can be costly to fall into the late filing hole. Interest and fines add up quickly, and repeated infringements can lead to significant financial penalties, not to mention lots of unnecessary stress and sleepless nights.

Don’t let a small issue get out of control. If you’re late submitting your Tax Return, don’t panic - just deal with it as quickly as you can. If you’re worried about paying your liabilities, don’t be afraid of talking to HMRC.

And if you’re not comfortable dealing with it yourself, take professional advice.

Our friendly, expert tax advisers have helped many people in the same situation, and are well versed in quickly preparing and filing late returns and, in some cases, helping to negotiate payment plans. If you’re worried about your late submission, just give us a call.

5. You can make it easier for you to get a mortgage…

15% of the UK population now work for themselves - that’s 1 in 6 people.

Lenders have finally started to acknowledge and accommodate the vast number of people working on their own terms.

But for the self-employed, there is a common misconception that you’ll be looking at some form of “self-certification” product. The truth is that you’ll be applying for a normal, bog standard mortgage - but you’ll have to work harder than employees to prove your income.

Some lenders are definitely more open than others, so it can be worthwhile enlisting the help of a broker who can suggest who to approach, but there is usually one common caveat - you’ll need accurate and up-to-date accounts and, in many cases, recent Management Accounts.

It is also true that Lenders prefer borrowers to use an accountant to prepare their accounts, as it lends extra credibility to the figures.

If you’re looking to obtain borrowing, or you want advice on any of the issues covered in this piece, our expert team are here to help.

Our friendly tax specialists have more than 20 years’ expertise, during which time they have helped over 10,000 self-employed individuals, private landlords and high net worth individuals across the UK.