If you are running a small business the language of business can feel complicated and confusing, especially when it involves finances. All businesses of all sizes have accounting obligations, but do they fully understand them?
Business finance provider Liberis surveyed 200 small business owners to find out what their big financial goals are. They found 49 per cent are most focused on longevity and making sure their business is still thriving in 10 years’ time. Becoming a “big player” in their industry is less of a priority - they’re more interested in standing the test of time and maintaining financial stability.
If you’re in the same boat, you’re probably looking for ways to make your accounting and bookkeeping as reliable and straightforward as possible. The key to making smart financial decisions in business is having the knowledge and insight to back them up. Bookkeeping and accounting is an essential part of running your business, but do you know the difference and when to start looking for expert help?
What is bookkeeping? Keeping track and making records
It sounds very paper-based, but bookkeeping has evolved just like many other business processes. Bookkeeping means keeping accurate records of all the money coming into your business and leaving it. That includes payroll, receipts, invoices, transactions, and more. If it’s processed through or by your business, it should go in your records.
What is accounting? Understanding and decision-making
While bookkeeping involves doing the maths, accounting involves applying the maths. Accounting is more analytical and complicated - interpreting the figures, understanding them, and using them to make business decisions.
Business owners need to be able to understand their financial health, or they’ll find it tricky to make investment and purchasing decisions. When your figures are in order and you know what they mean, you’re fully prepared to start making those big decisions.
Hire help or go solo?
When you’re first starting out, making do on your own is usually a no-brainer. You’re on a budget, after all! A top accountant probably isn’t the first thing on your list of priorities.
There’s a lot of helpful information out there, particularly from HMRC, so you can learn the process as you go. If you’ve reached a point where you think you might need to invest in some personalised expert advice, then maybe the timing is right. If you’re unsure, here are some signs you might be better off consulting with an expert...
Six signs you need help with bookkeeping
- It takes you away from your main priorities.
- You want mathematical peace of mind.
- You find it difficult to keep the books updated regularly.
- You’re not 100 per cent sure what information you need to record.
- You’re new to business and bookkeeping.
- Payments are regularly made or collected late.
Six signs you need help with accounting
- You don’t have the knowledge to access tax breaks and benefits you’re entitled to.
- Tax season makes you feel stressed.
- Preparing for tax season is taking you away from your main responsibilities.
- Your business is getting bigger and your needs are changing each year.
- You to be sure you are ready for an audit.
- You think you could be saving more cash.
Accountants are trained professional, so they’re the best people to deal with your business finances. If you’re choosing an accountant to work with, the biggest priority is trust and confidence. They should be responsive, reliable, and able to give you relevant advice at the right moments.
Your accountant should also have one eye on the future, and let you know how financial decisions will affect you down the line. Ideally, they’ll grow with you and adapt their approach as your needs change.
How to choose an accountant you trust
Shopping around for the first time, or making a switch? Here’s how to make the smartest decision when choosing an accountant.
Got friends in business? Ask them who they use and what they think of them.
Read independent reviews
Anyone can put anything they want on their website. Prioritise independent sites over self-published testimonials.
Focus on their specialisms
Some accountants are great with the simple stuff, and others will have more specific skills. Look for the knowledge your business will benefit from most.
Go digital to save time and cash!
Whether you’ve been in business for 6 months or 10 years, you can still keep track of your accounts without spending very much at all.
Cloud accounting software and other digital tools are designed to be affordable, easy to use, and adaptable to your business as it changes. They usually carry a fairly low monthly fee and have loads of helpful features, including payroll, tax calculations, easy expense tracking, and more.
If they don’t have a specific feature already installed, you can usually upgrade to another package as your business grows or add plugins to your existing service. It’s super flexible and easy to manage, no matter how small and simple, or big and complex, your business is.
The big benefits of cloud accounting:
- All in the cloud, so you can access it anywhere.
- Your data is automatically encrypted.
- Templates and forms are all pre-coded so inputting data is fast and easy.
- Pick and choose the features your business needs.
- See all the important top-level facts and figures on your dashboard.
- Automatically record expenses.
- Choose a plan that suits your business’ size, so you don’t pay for things you don’t need.
How will making tax digital change things?
The way you do your business and personal tax return is going to change by 2020. In an effort to make the process easier, the government is making it possible to submit your figures straight from your accounting software. That means fewer forms and a much simpler self-assessment.
If you’re not already using a cloud accounting tool, it’s important to start getting to grips with one now. Not only will it make tax calculations easier at the end of the year, you’ll be able to submit your accounts with a few clicks.
Access as many tools as possible
Whatever kind of business you run, there are loads of financial resources out there to use and learn from. The more you have access to, the better. Finding the right software and professional help can make you a whizz at invoicing, inputting data, tax calculations, and running your business successfully.
Inna Kaushan, CEO and founder, Solna
Image Credit: GaudiLab / Shutterstock