Don't let your books get caught in a Groundhog Day spiral
Today is February 2nd but that probably has little significance to most people in the UK - aside from a chance to relax after the stress of filing your self assessment tax return to HMRC by the January 31st deadline.
But across the Atlantic, today’s date represents a long-standing, annual tradition that supposedly predicts when the year’s Springtime weather will arrive: the Groundhog Day holiday.
The legend goes like this: if the skies are cloudy on February 2nd then a groundhog will leave its burrow and herald the start of the Springtime. But if the sun is shining, the creature will see its shadow and retreat back to its burrow, signalling six more weeks of winter.
Of course, many people will also associate the Groundhog Day holiday with the famous Bill Murray film about a man stuck in a time loop, where he has to live the same day - and make the same mistakes - over and over again.
For small businesses and freelancers, staying on top of their accounts can represent a similar scenario. It’s sometimes unclear how long the bad weather will last before things start to get easier - and you’re scared of making the same mistakes over and over again.
So here are a few tips to help make your accounting a little easier over the next year, and ensure you avoid a Groundhog Day scenario for your business.
Keep your books in good order
It’s easy for small business owners to quickly fall behind on their accounts. They have a hundred other things to consider in order to keep their business moving forward, and often these take priority over what appears to be the boring task of bookkeeping.
But you shouldn’t just wait until you have a tax or VAT return due before considering how much money you owe. Some forward thinking at the start of the year will help you stay on top of your finances, ensure you know how much your business is making, and may even make your bookkeeping a manageable - if not enjoyable - experience.
Make sure you’re keeping proper records and know exactly what you can claim in expenses. Have a robust, simple system like FreeAgent in place, so you can easily manage all of your payments and keep on top of your earnings, invoicing and tax throughout the year.
Remember by keeping your books accurate and up to date, you’re not just keeping the tax man and your accountant happy - you’re ensuring that you always know how your business is performing. You’ll have a constant overview of your cash flow, profitability, expenses and tax, so that you’re in full control of your business every step of the way.
Be prepared for your taxes (and avoid penalties)
You may have heard of HMRC’s “Time to Pay” scheme, which can give you more time to pay your tax - but anecdotal evidence suggests that this isn’t always very helpful.
Instead, try to put money aside each month to pay your taxes on time. You can even use a different bank account to keep this money safe if that would help you remember not to spend it.
If you file your returns and pay your taxes on time, this will not only avoid interest and penalties from HM RC, but will improve your relationship with them. It’s always best to work with HMRC rather than against them when you can.
And it’s better to prepare for your tax return rather than running around frantically at the last minute trying to complete it before the deadline.
Get an expert opinion
It’s easy to think you can do everything yourself, but there could well be times when you’re tearing your hair out trying to stay on top of your company finances. Whether it’s calculating your VAT, claiming the right expenses, preparing your tax return or simply maintaining your records, you may find you need some guidance from an expert, rather than trying to muddle through on your own
Don’t be afraid to call in the help of an accountant to advise you about your bookkeeping and make sure you’re on the right track. Getting help at an early stage could help you avoid making the same mistakes time and time again.
Happy Groundhog Day!
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- Get ready for the end of the 2017/18 tax year
- Wave hello to Tide