If you’re involved in small business or accounting, there’s no way you’ve been able to avoid the juggernaut that is Making Tax Digital. This is one of the biggest contributors to the massive changes made to the way businesses keep their records. This has changed enormously, even over the past 5 years. Aside from MTD, the current climate of huge technological advances in tax and accounting software have greatly and irrevocably changed the landscape of business accounting.
Yet, while we can bemoan the way in which MTD has forced change on us and pushed us to undergo drastic operational changes, it’s worth keeping in mind that many of these changes were inevitable. MTD merely hastened them.
Technological advancement is rarely less than a benefit to businesses and implementing cloud software can put you in the driving seat, saving you time and ensuring that you have access to the most up-to-date data. Still, in an ever-changing landscape, it helps to understand best practice.
With that in mind, here are some tips we hope you’ll find useful;
Separate business and personal
Make sure you have a separate business bank account which is used only for business transactions. This makes it much easier to track the income and expenditure of your business.
Cash is not king
In accounting terms, it’s honestly better to steer clear of cash. Recording cash transactions in an accounting system can be very time-consuming and increase the propensity for mistakes to be made. Pay for everything on your business account’s debit card and get payments debited directly into your bank account and accounting will be a much simpler process.
Nobody relishes the prospect of maintaining their tax records, but it makes your life so much easier when you keep on top of it. The longer you put it off, the more work you need to do and the further back you need to remember.
A helpful tip is linking Xero directly to your bank account and processing transactions on a daily basis. Download an app like Receipt Bank to photograph and catalogue receipts and invoices as and when you receive them. Receipt Bank will upload it all to Xero automatically to save you the hassle of copying and pasting.
It’s also important not to bury your head in the sand when it comes to how much tax you need to pay. The earlier you find out your tax bill for the year, the longer you have in which to pay it. Income tax, corporation tax, VAT and PAYE all add up.
Keep an eye on cash flow
Your cash flow is a key indicator of your business’ financial health. Without a healthy cash flow, you could find yourself faced with opportunity loss or even struggle to pay vendors and suppliers on time. There is a wealth of accounting software out there which will help you understand your business’ cash flow patterns and spot issues which can create bottlenecking of funds. Speaking of software…
Use apps to make your life easier
There are a plethora of easy to use and affordable apps to make it easier to run your business. Consider using the likes of GoCardless, Stripe and Receipt Bank for managing payments and invoices as well as inventory management apps like Dear Inventory to keep an eye on your stock.
Remember you’re not alone
Even if you’re confident in your own bookkeeping skills, an accountant can help keep everything running smoothly, ensure that you account for all your deductibles and prevent you from overspending on your tax.