Things to Consider When Handling Accounts for Small Businesses

There are many things to think about when starting a new business, and the financial considerations can often seem the most daunting. Here are five of the main issues facing new business owners:

1. Which VAT Scheme is Right For Your Business?

Most UK businesses with a turnover exceeding £85,000 will be required to register for VAT, and some businesses may opt to register voluntarily even if their turnover is below this threshold.

The three main types of VAT are Standard VAT, Cash Accounting VAT and Flat Rate VAT.

The Standard VAT scheme is the most common and any business can apply to use this scheme whether they’re above or below the current VAT threshold. Using this scheme businesses will add up the VAT from their sales and deduct the VAT from their qualifying purchases and expenses; paying the difference to HMRC.

Businesses with an annual turnover below the current limit are eligible for the VAT Cash Accounting scheme. The reason this scheme is different to the Standard scheme is that the VAT is not calculated until after the invoice is paid.

The least common VAT scheme is the Flat Rate scheme. It is mainly freelances, sole traders, and small businesses who make occasional low-cost purchases that opt for this scheme. The reason being that no VAT on purchases can be claimed under this scheme, its purpose is to simplify the process of calculating and paying VAT.

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2. Understanding Your Ideal Customers

Many say this should be an essential part to every business. If you think of it this way, without customers, your business wouldn’t have a reason to exist. Therefore, to not make an effort to get to know them and what they need would be a mistake.

It is important to understand which customers provide the best return for you and in what ways you benefit them.

The best way to retrieve this information from an accurate source is by using your accounting data. Ensure that you have made a saved note of the customers details in your system, as this data is highly valuable.

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3. Remaining Organised

A bad habit to avoid is putting off your accounting work. When you have the right tools keeping on top of this is easy to do.

The true key to strongly developing your business is to have up-to-date and accurate accounting information. The easiest way to do this is to keep on top of your invoices and record keeping from the beginning of your business set up, you will save money by doing so.

Not to mention the added bonus of preventing stress from any unexpected tax payments and potential bank charges from late payments.

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4. Have the Correct Accounting Software

Having the correct accounting software is essential when running a small business.

If you want to give access to the software to other people, such as your accountant/book-keeper then the Multi-user Access will be best suited to you. When you own multiple small businesses Multi-Business software prevents you having to pay out extra money to set up different accounts.

If you are a small business owner that desires access to your accounting software remotely, anywhere you wish, then opt for Cloud-Based software. There are lots of these around so it's a good idea to shop around and find the best software for your needs. Most accountancy software now come with mobile apps so that you can use them on the go.

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5. Filing and payment deadlines

Depending on the type of business you are starting there will be numerous returns to file and payments to make. HMRC and other organisations often impose financial penalties for late filing of returns and payment of amounts due, so it's a good idea to sit down and make a note of which returns apply to your business and when they need to be filed and paid by. An accountant can help you with this.

As well as avoiding missed filing deadlines this will help you to budget for the future. Lots of businesses find themselves with cashflow problems because they failed to budget for upcoming payments of tax.