A question for you…how do you approach your paperwork?
I have a question for you.
When you think about all the paperwork involved in running your business, what are your thoughts?
A) I have it all under control and I make sure it’s all completed in an accurate and timely manner. I have studied the HMRC website in infinite detail and I am now a tax expert.
B) I avoid it all costs. I raise an invoice if I have to and I chuck my receipts in a shoe box. Tax? I’ll get an accountant for all that when my returns are due.
C) I add everything to a spreadsheet and put my receipts in date order but I have no real clue how to work out my tax from it. It’s 20%, isn’t it?
None of the above answers are the wrong way to do things as such. It’s more about being honest about your capabilities to ensure you are reaching two very important goals at the end of each tax or financial year (often two separate things for a limited company):
Goal 1: Your business is making money rather than losing it.
Goal 2: You’re paying the right amount of tax, and accounting for it as you go along, rather than getting a big shock at year end.
Obviously, there will be people out there who are doing something completely different, or who fit somewhere in between the above situations. Whether or not you do fit into one of the above categories, here are a few things you should consider:
1) No matter how much you read the HMRC website, it isn’t always clear what you need to include for each book-keeping and accounting process, particularly for some who is new to it. It’s always worth checking in with a professional, even if it’s just to make sure your understanding is correct and you are on the right track.
2) Scenario two is one I come across quite a lot and it’s understandable too. These people want to do the job that they specialise in. They don’t want to waste their time attempting to be an accountant, and rightly so. My only advice would be to get a book-keeper or accountant onboard as soon as possible.
Of course, whatever state your accounts are in, an accountant will sort them out, but leaving it until you have a tax deadline to meet doesn’t do you or your accountant any favours, as you may get a short notice, shockingly high tax bill and your accountant will have a very short timeframe to go through a mountain of paperwork (which oftentimes, will lead to a higher fee if it is given to them at that short notice, when you consider they have to fit a years worth of work in a few days).
By appointing a book-keeper/accountant early on and providing them with the necessary paperwork on a regular basis, they can keep you notified of your tax liabilities on an ongoing basis, so you have enough put aside for the bill when it comes. Besides, how gutted would you be if you found out that after a year of working hard, you hadn’t actually made a penny?! Regular monitoring allows you to make changes where necessary if your profit margins are lower than they could be.
3) Keeping a log of everything is a great start and you are a book-keeper/accountant’s dream client if you are at least keeping everything orderly, even if you don’t know what to do with it. As above, engage with a book-keeper/accountant early on. Any firm worth their salt will negotiate a price with you based on what you can and can’t do yourself. Think about where you don’t have the knowledge or confidence to complete yourself, and speak to a firm who will help you to bridge the gap.
Lots of firms (including AVA Solutions) have fixed rate, all-inclusive packages. However, if you wanted to do elements yourself, providing it didn’t get to your year end and they all had to be redone by us to correct them, we would absolutely negotiate a fee to accommodate that.
Ultimately, everyone has their own approach to paperwork but it is potentially reckless and cost-incurring not to obtain the services of an expert for at least some aspects, and ideally, to do this early after you commence trading. Perhaps think of it as a form of insurance. You may not like having to pay for it but you like the peace of mind it gives you.
These are AVA Solutions packages. Contact us today to get your peace of mind.