Shorter days, Halloween decorations on sale, pumpkin spice infiltrating high street coffee shops - there’s no doubt that autumn is upon us.
As momentum ramps up again after the slower summer period, the autumn months are the ideal time to take a good look at your business and start preparing it for seeing out 2017 in great shape. Emily Coltman FCA, FreeAgent’s chief accountant, gives her top tips for getting your books in order and making life easier in the chilly months ahead.
Check your cash
Do you know exactly how much your business has earned or how much cash it has on hand? If your business’s cash flow is poor then you could be heading for tricky times this winter, so it’s important to make sure that you know how much cash your business has in its bank account.
If you’re not already doing so, check whether you can set up an automatic feed in FreeAgent to pull this data from your bank straight into your accounting software in order to minimise data entry errors. Then make sure you check at least weekly, if not daily, to make sure that your bank balance is correct in your accounts and that all your transactions have been recorded.
Remember if your bank balance in your accounts doesn’t match what’s in your bank, you’ll have to look back and find the difference - it won’t go away!
Send out your invoices
If your business issues invoices to customers, take advantage of any downtime you have to check through your records and make sure you’ve sent invoices for all the work you have done to date. Your customers can’t pay you if you don’t invoice them!
You should also check your list of open invoices - because sometimes there might be some invoices that haven’t been paid because the customer’s just forgotten about them and you haven’t followed them up. There may also be old invoices in your accounts that haven’t been paid and won’t be, perhaps because your customer’s gone out of business.
Take some time now to write off any invoices that you’re sure will never be paid, and to chase up those customers who haven’t paid yet.
Round up your out-of-pocket expenses…
Out-of-pocket expenses are business costs that you paid for personally, for example if you went to the post office and bought a book of stamps to send business letters, but paid with your own cash. As long as these are bona fide business costs, you can put these into your business accounts too, and they reduce the amount of profit you pay tax on, so it’s worthwhile keeping track of all of them!
Go through your wallet and look for stray receipts and make sure that you’ve included any of them which are business costs in your accounts. If you use FreeAgent then snap them using your smartphone and they’ll be uploaded to your accounts immediately - then you can throw the paper receipts away!
…and review how your costs are categorised
When you’re putting your business costs into your accounts - whether they were paid for from your business bank account or whether you paid for them personally - make sure that the costs are in the right categories. For example, a pack of envelopes would be best categorised as ‘Stationery’, while a bill from your office landlord would be ‘Rent’. This helps you make sure that you’re claiming the right amount of tax relief on your costs, and means you can track where you’re spending money in your business.
Be aware of the categories that contain potential tax pitfalls (for example, sundries, subscriptions and lease payments) and make sure that any costs you put in these categories are correct. If you have any doubts, consult an accountant who should be able to advise you.
Keep an eye on when your tax is due
If your business is a limited company, it will be due to pay corporation tax nine months and one day after its year end. If you’re a sole trader, you can expect to be paying income tax and NI at the end of January. And whatever your business type, if it’s registered for VAT, then there will often be a VAT bill to pay every three months.
Make sure you know how much tax you’re due to pay soon, and have money put aside to pay for it. It’s also a good idea to set up a system where you keep a running total of all the tax you owe and align this with your calendar so you know exactly when you have to pay it (or use FreeAgent’s Tax Timeline feature, which gives you live updates of your tax position and deadlines).
Look to the future
Take some time during the early autumn months to consider how your business will deal with the rest of the year. Christmas, in particular, can be a potential bonanza for many businesses, so what will it do for yours?
Will you offer special products, services or discounts at Christmas? If so, could you pair up with another local business who serves the same customers as you do, to offer a joint Christmas package? For example, if you are a children’s party planner, could you find a local caterer, entertainer (magician, balloon modeller, clown) to team up with for special Christmas events? If so, this could provide a welcome boost to both of your businesses.