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Taking everything into account

Let’s face it, 2021 has been hard. I think most of us started the year full of hope, pleased to leave 2020 behind, and feeling positive about what was ahead… and then we hit the third national lockdown.

It’s been tough on everyone, and speaking from the perspective of working parents, this past year has been one heck of a juggle – I think the 2020-21 tax year will go down in history as one of the hardest years of my life, running my own rapidly expanding business, and raising my daughters through the labour-intensive pre-school years!

If, like me, you run your own small business, getting your accounts ready this year has probably been at best, right at the bottom of your to-do list, and at worst, something that has sent you into a blind panic, because you just don’t have the time to do the usual January round up.

Unfortunately, there’s nothing I can do about Covid-19 or the resulting time pressures that come from emergency home-schooling or juggling toddler tantrums and Zoom calls (believe me – I’ve tried!) – but I can give you some top tips to stay on top of your accounting going forward, making year end a breeze, whatever life throws your way…

1) Invest in an accounting software…

If you have the funds and are willing to make the financial investment, I recommend setting yourself up with an accounting software. There are so many variations out there at the moment – I work regularly with Xero and Quickbooks and generally they work well for my clients. If you can integrate your business bank account, this takes away so much of the manual document inputting that most sole traders find themselves doing at the end of the tax year – what’s not to love about that?! Depending on the software you choose, you might also benefit from being able to drill down into your business and track your profit by product, your best times of the year for sales etc. – so many opportunities to better understand your business.

2) Have a system that works for you…

If you haven’t got the funds to invest in a software solution, or would simply prefer to do things manually, don’t worry, a little organisation can help you to build a system that keeps you organised in real time. Try setting yourself up a spreadsheet (ideally at the beginning of each tax year) with three main tabs, income, expenditure and travel, and set aside one hour a week in your diary to keep this up to date. Working in real time is so much easier than trying to recall the past events of an entire year, or hunt down receipts to support your business expenditure, on the 31 January deadline – and you’ll have the added bonus of being able to track your profits as the year progresses.

3) Budget, budget, budget (and don’t forget payments on account)…

If you run your own businesses, it’s likely that you’ll be self-assessing your tax bill at the end of the year – top tip, put a percentage of your income into a savings account at the point in time that you receive it. You’ll always have the cash available to pay your taxes, even if you don’t have the time to calculate your final liability until just before the filing deadline. It’s also worth noting that, if your income tax liability is over £1,000, you’ll generally be required to make payments on account before your tax return is due to be filed – most newcomers to Self Assessment don’t realise this, and therefore don’t budget for it. Using the method outlined above, you’ll always have cash set aside to cover your tax bill, at any given point during the tax year.

4) Outsource…

If you can, outsource your tax returns to an accountant. They know how to keep you compliant, they know how to make sure that your tax return includes everything it needs to, and they often know a few tips and tricks to ensure that you don’t pay more tax than you need to. Not only that, they’ll help you to understand your profitability, which is obviously key for every business, and they often take away the stress of communicating with HMRC when there are issues to be rectified – all while leaving you with more time to focus on growing your business, rather than administrating it.

5) Communicate…

If you do use a bookkeeper or an accountant, it’s so important to communicate regularly with them (as with anyone who you might outsource areas of your business to). Set regular catch-ups, have a timeline, and hold them to account! Make sure you understand everything you’re being told about deadlines, payments, payments on account etc. Your accountant should add value to your business and clarity to the process of filing your accounts – they should not leave you feeling stressed, pushed for time, or bamboozled with endless jargon.

Claire runs Clear Accounting and is based in Lichfield Staffordshire you can find out more on Instagram , Facebook You can find out more about how Claire founded Clear Accounting by signing up to my newsletter where an interview with Claire will be featured on Friday 26th February.

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