Are you just starting out in business? If you’re new to freelancing or contracting, it’s important to be aware that you must keep track of your records, from transactions to receipts. Paying attention to your accounting from the get-go will help you to be organised from day one.
And, if you’re organised, you’ll be able to better spot business opportunities, boost efficiency, keep on top of expenses, and so much more.
If you’re looking for contractor accountants that can help you achieve all this, Gorilla Accounting is here for you – additionally, our accounting software will easily let you manage your finances and accounts at any time and from any device, freeing up time you can use to grow your business.
Why is Accounting so Important?
No matter the type of business you’ve started, you’re looking to make profit and keep costs low. In order to do this and to run a business successfully, you have to consider the numbers.
Accounting will help you to see your return on investment, to make informed business decisions, to check whether your business is in the red or performing as expected, whether you can make certain purchases or if you have to cut some expenses out, and so much more.
In fact, you need accounting to keep track of your debts, transactions and expenses, and need it to communicate with entities like banks, partners and investors as well. Accounting is also used to analyse a business’ strengths and weaknesses, including those of your competitors.
Why You Should Stay Clear of Excel
Many start-up owners believe that, just because their business is still small, they can simply use a tool like Excel to manage their finances. However, while this is perfectly fine with your personal expenses and budget, the same can’t be said of your business’.
Firstly, there is too much to keep track of, especially manually, so you may find yourself wasting too much time inputting information by hand. What’s more, Excel is not a bookkeeping tool, so it lacks functions necessary to modern accounting, like allowing you to keep and organise receipts.
Setting up a good spreadsheet is also time-consuming, since it requires a lot of attention to detail and planning. If you want to track expenses and invoices, it’s important to get it right, but you may still have to keep updating and changing the file on an ongoing basis as things change in your business.
If you don’t create a good spreadsheet, it’s likely you’ll be confused by all the information you inserted, which can cause you problems when it comes time to deal with HMRC.
In addition, it’s also very easy to make mistakes in Excel, which you may not even realise at the time. Famously, an error in JP Morgan’s Excel spreadsheet led to a loss of £5 billion back in 2012 – the file was used to model risk but contained a mistake that went unnoticed until too late.
Of course, due to their nature, it’s also impossible to have an audit trail in Excel, as the programme is so easy to alter, even by mistake. An accidental extra zero will make all the difference. Excel doesn’t integrate with other applications either.
How Long Should You Keep Records for?
You’re legally obligated to keep records of your business for a long time as well, which is worth remembering. Having an online tool where everything is organised will make your life so much easier.
Generally speaking, if you own a limited company, you need to keep records for 6 years and, if you don’t, you risk a hefty fine. You may be charged up to £3,000 if you don’t have the documentation or if you have incorrect or inadequate records.
When it comes to tax returns, however, you need to keep records of them for, at least, 22 months after the end of the tax year the return is for, but only if you sent the paperwork on time. If you missed the deadline, you have to keep records of the returns for, at least, 15 months.
If you’re a sole trader or in an unincorporated partnership, you have to keep records for up to 5 years, which includes sales documents, expenses, income, money withdrawn from the business, and more. As a limited company owner, you have more paperwork to keep, such as liabilities and shareholder transactions.
So, ensuring you have the right paperwork – and that your files are always correct – is important to avoid a penalty from HMRC.
Having documents all in one place through your online accounting tool will help you to easily keep records for as long as you want. And, if everything is organised and safely kept in your accounting tool, you also have peace of mind and don’t have to waste time worrying about it needlessly.
It’s important to note that, due to Making Tax Digital, all businesses with a taxable turnover above the VAT threshold, which is currently £85,000, has to use MTD-compliant software to keep records and submit returns (including VAT, as well as income and corporation tax).
You can read more about this legislation on our Making Tax Digital: What is It and What Do You Need to Know? article.
Why You Need Accounting Software as a Start-Up
Whether you’re a sole trader or own a limited company, you lead a busy life, especially when you’re just starting in business and trying to figure everything out. Because you have limited time, you don’t want to spend hours dealing with numbers and paperwork manually. It will take a lot of effort too, which is better spent in other areas of the business or even as quality time with your loved ones.
Accounting software is constantly being updated with the latest features, which ends up saving you a lot of time, be it with repeating invoices or third-party app integration.
With software like this, you can manage your finances on the go as well, which can suit a wide range of businesses – if you’re a freelancer, for example, you may want to work from home, from the park, from the coffee shop or from the library, and you can access your financial details no matter where you are.
Your accounting software will also show you the big picture. Being aware of your financials is important to make informed business decisions, so you can use the date you find in the tool to see how your business is performing and how you can take it from there.
Getting paid on time is a major worry of the self-employed, but it can be made less stressful if you have an automated system in place that chases invoices for you. This will improve your chances of receiving payment on time.
Your accounts will also update automatically, mainly because accounting software tends to allow for third-party syncs, so you won’t have to update anything by hand.
You can have all your paperwork in one place too, as mentioned, so you don’t have to hunt for a specific receipt or invoice, especially if you don’t remember where you put them. This means you’re unlikely to forget anything and can be confident that the information you send to HMRC is correct.
Your accounting software will also help you to submit your files on time. Missing deadlines can be costly, as HMRC can charge you fees and penalties for late submissions, and so can submitting incorrect documents. With an online tool, you can prevent mistakes and ensure that the government receives the right information and returns at all times.
This peace of mind is priceless, and it’s something you’ll wish you’d had from the beginning if you opt out of an online accounting tool as a start-up.
FreeAgent Accounting Software
At Gorilla Accounting, our tool of choice is FreeAgent accounting software. This software can do so much for freelancers and contractors, and you’ll find it plays an irreplaceable role in your start-up business.
You can access it from anywhere and from any device, which includes your mobile, tablet and laptop. FreeAgent also automatically creates real-time business accounts from your documents (bank statements, invoices, etc.), so you’ll always have an up-to-date picture of the status of your business.
You can upload receipts and manage expenses easily, categorise your bank transactions and create and send personalised invoices. The tool also generates reports that help you to dig in deeper into your business accounts. You can generate reports on profile and loss, balance sheets, dividends, and so much more. You can just set the tasks to automate and leave it all out of your mind, confident that your data is all there.
In addition to all of this, FreeAgent allows you to view and print dividend vouchers for your company and you can benefit from custom reports as well. Plus, you can view all of your transactions in a comprehensive way, which makes bookkeeping so much easier.
One of the best things about FreeAgent is that it works for many different businesses and trades. Whether you’re a project manager, work in retail, work in construction or are a freelancer writer, you will find this tool not just useful but absolutely invaluable.
Your information is safely stored in the cloud and FreeAgent uses cutting-edge encryption software to make sure that no one accesses your details.
Cybersecurity has never been more important, and you should choose a software that you can trust with your details, especially as everything is now done online. FreeAgent is proactive in its approach, as it’s continuously looking for and removing security risks. All of their data centres, which are located in the UK, are also ISO 27001-certified, manned 24/7/365 and have HD CCTV on the premises.
If you become a Gorilla Accounting client, you have 24/7 access to our FreeAgent accounting software.
At Gorilla Accounting, we’re proud to offer FreeAgent as part of our services, so why not give it a try to see for yourself how it works – and how useful it will be for your business?
As limited company accountants and sole trader accountants, we have many years of experience helping self-employed individuals with their business finances, so call us on 0330 024 0406 to get your accounts sorted. You can also send us an enquiry if you have any questions about FreeAgent and how it can help your start-up business.