Top Tips from a Bookkeeper

Tuesday, February 5th, 2019

Clare Mannall, Director of CEM Bookkeeping & Consultancy Ltd recent gave a talk at our  ‘Wych Networking’ event; aimed at freelancers, homeworkers and start-ups.  Here are her ‘Top 10 Tips to Being Financially Efficient’ for small businesses.

 

  1. SET UP A SEPARATE BANK ACCOUNT to put all your business transactions through.
    1. This can just be a 2nd current account. It doesn’t need to be in your business name until you are a Limited company
    2. It’s an easy way to manage your cash flow
    3. You can see your profitability fairly instantly
    4. It’s more professional

 

  1. Reconcile your bank statement monthly and make sure you have all the receipts & invoices to go with the transactions.

 

  1. SOFTWARE – ‘if you’re repeating something manually, find an app for it’.
    1. don’t be shy to use some software, there are some great packages out there
    2. 1-Tap (part of Receipt Bank), or Wave, Quickbooks, Xero
    3. MileIQ for tracking your mileage – 20% off if you use this code CMAN965A
    4. Do your research first though.
    5. Don’t just plummet for the cheapest

 

  1. Consider INTEGRATING PAYMENT OPTIONS for your invoices.
    1. In this day and age there is no reason why you should have bad debts
    2. Any business can go bust if they don’t manage their cash flow; but equally a business making a loss who manages their cash flow can still stay afloat
    3. Options to consider: Stripe & Paypal – expensive but credit card based. Direct Debit options include GoCardless, variable depending on the size of the transaction – either 1% of the invoice total or a maximum of £2.

 

  1. Don’t sell yourself short – consider your PRICING, and make sure it includes your costs, including:
    1. Memberships, travel, printing, phone, IT Software, being able to replace your laptop, insurance, etc.

 

  1. SET YOURSELF TARGETS and go for the long term approach.
    1. It can take 4-5 years to really establish yourself and you won’t realise that till you look back

 

  1. Making Tax Digital
    1. VAT goes digital from the 1st April
    2. But rest assured HMRC will introduce Self Assessment and Corporation Tax in the next 2-3 years
    3. Get some software that is MTD compliant
  2. If you find yourself distracted from your business because you are managing your finances or chasing your debts…
    1. GET A BOOKKEEPER
    2. What takes you several hours to psych yourself up for, then do, worry about getting wrong, worry about HMRC, etc.. will take a bookkeeper a fraction of the time
    3. Be prepared to pay a fair price though. A well trained, qualified bookkeeper, with all their appropriate registrations will charge you upwards of £20 per hour.
    4. And they will ask you for some ID and information about yourself and your HMRC details – this is really normal and is for the purpose of ensuring Anti Money Laundering

 

  1. Some other USEFUL FACTS
    1. VAT Registration is £85,000 upwards
    2. Personal Tax Allowance goes up to £12,500 from April
    3. Higher rate of Personal Tax is £50,000
    4. Tax free threshold on Dividends is JUST £2,000 – you must be a limited company in order to take dividends
    5. Gradually, Directors will start taking a salary instead of dividends – the tax benefits are minimal these days

 

  1. PAY INTO A PENSION straightaway – don’t get used to the money – there are also tax perks if you are hitting the 40% tax threshold, as pension contributions come out before tax.

 

  1. SAVE, for a rainy day – have a contingency plan

 

  1. SET UP A DIRECT DEBIT TO HMRC to budget for your Personal Tax
    1. And remember it is nearer 30% – 20% PAYE Tax + 9% National Insurance contributions
    2. When you do your first Self Assessment Tax return, you will have to pay tax for the year and then pay ‘up front’ for the following year.
    3. HMRC estimate your tax based on the tax you paid the previous year, and you pay in 2 installments
      1. One by January 31st of that tax year – so you will have just paid your first installment for the tax year 2018-19
      2. The 2nd by 31st July – 2nd installment for the tax year 2018-19
  • Any remainder due or refund, will be dealt with on completion of your self assessment tax return.

 

  1. Finally, YOU GET WHAT YOU GIVE
    1. Don’t just take from others and clients, as you build your business,
    2. Consider what you can give back to those businesses, or how you can use your expertise to support local charities and business networks.

 

Written by chamber member Clare Mannall, Director of CEM

Email: [email protected]

CEM Bookkeeping & Consultancy Ltd

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