Managing your business financials is crucial, no matter whether you’re just starting out or own a big company, but there are many things to take into consideration that can make the process time-consuming – or a hassle.
So, if you’re looking for contractor accountants to do this for you and help you grow your business, you’ve come to the right place. You can check out our top tips designed to streamline your business and maximise your tax-efficiency or get in touch for information on how we can help.
Separate Your Business Finances
One of the first things you should do when setting up a business is to open a dedicated bank account, even if you’re a sole trader and don’t have limited liability. While UK law doesn’t say you need to do this when you’re a sole trader, there are many benefits to separating your accounts, including staying organised.
After all, by having a separate account, you’ll find it easier to stay on top of all expenses, invoices and incomings than if you had your personal and business transactions together in the same account. This will also make your life a thousand times easier when it’s time for your self-assessment tax return.
Of course, if you’re the owner of a limited company, you don’t have a choice. You must have a dedicated bank account for your business, which is also a separate entity from your personal assets – this means you’re not liable for any debt your company incurs.
Organise Your Records
Not only should you keep records of everything (for tax purposes and because business owners should do it for 5 years if you’re a sole trader and 6 years if you’ve set up a limited company), but they should be organised too.
Keeping all your paperwork tidy will save you time – and panic – when you’re filling out your tax returns. It also increases your chances of submitting everything to HMRC correctly.
From 6 April 2023, under the Making Tax Digital (MTD) legislation, self-employed businesses and landlords will need to keep digital records of everything if their income is over £10,000, so start now. We offer 24/7 use of FreeAgent accounting software, an MTD-compliant tool that ensures you stay organised and follow UK law.
Automate What You Can
This is another benefit of using FreeAgent or any other bookkeeping tool. Manually entering data into spreadsheets is not feasible in the long run, even if you don’t have a lot of information to input. This information will grow in complexity and size over time, so you don’t want to end up having to input thousands of entries or wasting time searching for one in particular.
Submitting tax returns is also a lot more difficult this way, and you’re more likely to make mistakes. So, by automating everything you can, including your bookkeeping, you’re saving yourself from costly errors and saving time as well.
Your data is also backed up to the Cloud, so you don’t really loose anything either. Manual spreadsheets, on the other hand, are easy to delete accidentally, which would cause a host of problems to your business.
Remember All Your Deadlines
Tax deadlines tend to stay the same, so you don’t have to worry about memorising a new date every new tax year. Staying on top of all key dates, from your self-assessment tax return to when you need to submit your corporation tax, is easy and will prevent you from paying late fees and penalties.
As your sole trader accountants and limited company accountants, we can help you with this, since we know you already have a lot on your mind. Running a business takes time and effort, so let us focus on your accounts while you take care of everything else.
Monitor Your Accounts Regularly
Even though it can be a hassle, you don’t want to put off looking at your financials and accounts for long. You can catch potential problems before they develop if you monitor them frequently, and can fix issues as soon as they pop up. This can be anything, from overdue invoices to numbers that don’t make sense.
Frequent reviews have another benefit. They can help you be aware of any weak points or strengths in your business and even help you search for new opportunities. You can spot trends and keep track of your revenue on a monthly basis, for example, which means it’s easier to make informed business decisions.
If you can’t see the big picture or there are things in your accounts that aren’t adding up and you don’t understand why, we’re more than happy to help.
Account for Unexpected Expenses
Don’t forget to keep some money aside to spend on unexpected expenses as well. While you should budget for your usual outgoings, there are times when things don’t go according to plan, so it’s important to have that safety net in place.
For instance, if you’re a freelancer who uses a computer that suddenly malfunctions, you need to have the necessary cashflow to repair or replace it without this impacting your business.
Budget for Your Tax Obligations
When you’re a business owner, you have the obligation to submit tax returns, but your tax obligations don’t end here. You must also pay what you owe, and you often have a deadline to do so as well. Ensure that you’re accounting for all tax payment when you’re creating your budget, so that you don’t have to worry about having to come up with extra money.
Have a Payroll System in Place
Employing people in the UK comes with several duties and having a payroll system in place will help you with them. Some of your obligations include paying your employees before or on the right date and complying with HMRC deadlines, which includes staff pensions.
You can also decide whether to do this yourself or outsource it to a specialist. Doing it yourself will save money, but it will take up a lot of your time and add to your admin as a business owner. This admin may not seem like a lot when you first start, but there are so many things to keep track of and to stay on top of, that you may want to consider outsourcing to make your life easier.
Not to mention how a specialist knows everything about payroll and will make sure there are no mistakes or issues. This can give you more peace of mind as well.
Figure Out How Best to Pay Yourself
Should you charge by the hour or the day? Or should you charge a fee per project? This will depend on the type of work you do. If you expect to do a lot of overtime, then you’re losing money if you charge by the day, since you can end up working more than what you’re being paid for. If a specific project doesn’t take very long, then a daily rate may be a good option instead of hourly.
You also want to set the right rates. Don’t just throw a number at your client – make sure that you’re accounting for your living expenses, for the industry rates, for your experience and for the services you provide when working out a figure. The last thing you can to do is undercharge and lose money.
Review your rates regularly to reflect market changes or an increase in your living expenses. Additionally, setting new rates is important as you gain experience or offer new services to customers, as you can start charging more.
Many freelancers and contractors are concerned about raising their rates because they fear it can push clients away; however, you want to work on contracts and gigs that are profitable, so if your expenses grow, changing your pricing is the right business decision. Of course, the majority of your clients will likely be happy to pay more, as they understand that circumstances change.
Hire an Accountant
Our specialist accountants have many years of experience helping freelancers, contractors and locums manage their accounts. We work within many different sectors as well, like IT, property, medicine and engineering, so you can be confident that we understand your industry and its requirements, including laws.
As a client, you’ll have a dedicated accountant on hand to answer all questions you may have (we’ll reply in the same day if you get in touch by 3pm) and we also offer a contractor tax calculator to help you figure out your take-home pay.
We also pride ourselves on being a one-stop-shop for all your self-employment needs. We’ve partnered with professionals who can provide you contractor mortgages, contractor’s insurance and even specialist IR35 advice.
As part of our services, you get assistance with HMRC records checks, preparation and submission of corporation tax returns and of self-assessment returns, standard employment status references, dividend and board minute documentation, a reminder for all important deadlines, preparation of Companies House Confirmation Statements, and so much more.