Why you should rescue that receipt from your wallet right now
At least a third of small business expenses are less than £10 - but most small business owners don’t even record them.
Here’s a reminder that the little things can add up to have a big impact on your business. If you’ve ever forgotten to save a receipt or just didn’t get around to recording it, you’re not alone. In a YouGov survey we commissioned at the end of 2012, we discovered that 3 out of 4 small business owners don’t claim all of their expenses, and nearly 20% claim less than half of their expenses, or none at all.
That might seem surprising, but when we investigated the reasons why, the picture became clearer. Out of those small business owners who didn’t claim all of their expenses, more than 40% said they didn’t record some of their expenses because they “didn’t think they were worth claiming” - after all, many expenses are just for the odd few pounds here and there, and business owners cited the administrative hassle as another reason that they didn’t take the time.
However, all of those smaller-value expenses add up, especially for small businesses where every penny counts. To understand how important small expenses were to small businesses, we analysed an anonymous aggregate of 350,000 expenses recorded in 2013 by nearly 5,000 FreeAgent customers. Our results might surprise you: nearly sixty percent of small business expenses were under £20, and a over a third were under £10.
When we averaged expenses by company, we found that 8.5% of a typical company’s total expenses came from items valued under £10. This may not sound like a significant amount, but consider the potential impact to your bottom line if a supplier suddenly raised their prices by 8.5%, or if you managed to cut your costs by 8.5%. This finding is especially important for companies that incur most of their costs as expenses; these businesses could be hugely underestimating their costs, and ultimately, paying tax on a profit that they’re not really making.
As a concrete example, if you’re a sole trader paying the 20% basic rate of income tax, that crumpled receipt for ink cartridges at £20 could be worth a very real £4 in tax that you won’t have to pay. Throwing it away is like throwing pound coins in the bin!
These results serve as a great reminder that the small things can build up to have a big impact on a business’s bottom line. If you’ve got a receipt stuffed in your wallet - or even a whole box of them sitting in a shoebox - check out how FreeAgent can help today.
- Introducing Insights!
- Time for a new tax year! What’s changing for small businesses?
- Return of the hack!
- Get ready for the end of the 2017/18 tax year
- Wave hello to Tide