This blog post was first published on 7 March 2017 and was last updated on 5 March 2018.
Dusters at the ready! It’s National Spring Cleaning Week, aiming to inspire and educate the UK to spring clean not just their homes, but their lives as well. Here’s some simple ways to give your small business a refresh.
1. Tidy your bookkeeping routine
It might not be that exciting but regular bookkeeping is an essential part of running a small business. By always knowing how much you’re spending, how much tax you owe (and when) and which clients haven’t paid you, you’ll be able to make informed decisions about how to run your business.
Spring Cleaning Week is the perfect time to tidy up your routine. To make sure you stick to a regular plan, start by picking an hour a week that you can dedicate to your bookkeeping routine. Make that time an appointment like any other in your diary, so that you’re not tempted to put other meetings there. You can then use this ringfenced time to keep up to date with your invoices, reconcile your bank transactions, chase up invoices and log expenses - saving you a lot of hassle in the long run.
For more tips on how to use the ‘hour a week’ system, take a look at this handy checklist.
2. Brush up your contract
It’s essential that you agree a written contract with each client before you begin work, otherwise it’s all too easy for a client for delay and dispute payment. Take some time this week to check that your contract template covers you for all potential disputes.
Here’s some things to consider when you’re reviewing your current contract:
- How quickly do you want to be paid? If you usually give clients 30 days to pay, consider changing your terms to zero days for a much better chance of being paid within a week.
- Your contract should make it clear that the client is paying for your work whether they use it or not (for example, in case they say ‘we decided to do the work in-house’ once you’ve completed the job).
- Consider including a clause that states that the client doesn’t own, and may not use, the work you produce until you’ve been paid in full. Make sure it’s very clear in your contract who owns the rights to your work, and when.
These sample contract agreements from Elance will also help you check your contract template is watertight.
3. Collect old debts
Now is a great time to go back through your list of invoices that you haven’t been paid for yet. Accountants call this your “aged debtors report” and it is part of the standard set of accounting reports that an accountant or accounting software would prepare for you.
Use this aged debtors report to check who should have paid you, then proactively contact those customers by phone or by email and make sure that payment is on its way. If you are VAT registered, don’t forget that the aged debtors report will show the amount of money owed including VAT, which you’ll need to pass on to HMRC, so remember you don’t get to keep all that money owed!
In FreeAgent you can set up automatic email reminders for invoices, so going forward your invoices will chase payment themselves - easy!
4. Give your business plan a polish
The new business year begins in April so now is a good time to review the business plan you hopefully made when your business began (if you don’t have a plan, here’s some useful information from Freelance UK on creating one).
Your business plan should have covered details about who your customers would be and how the business operations would work, as well as how much you expected to sell, and how much profit you estimated you’d make.
Take the time to think about how you would like to develop your business in the next year. Are you planning to take your business into a new market, for example by selling offline as well as online, selling to overseas customers, or bringing out a new product or service? Will there be changes to your operations, such as moving from working at home to an office or other workspace? Are you still buying from the same suppliers? All of these factors could affect what you need to include in your updated business plan so that it’s as helpful for you as possible.
Disclaimer: The content included in this blog post is based on our understanding of tax law at the time of publication. It may be subject to change and may not be applicable to your circumstances, so should not be relied upon. You are responsible for complying with tax law and should seek independent advice if you require further information about the content included in this blog post. If you don't have an accountant, take a look at our directory to find a FreeAgent Practice Partner based in your local area.