The short answer is ‘no’. You can be self-employed and operate as a sole trader, or even run a small limited company without any legal obligation to hire an accountant, let alone a bookkeeper. However, unless you are a bookkeeper or accountant, you must ask the question ‘is doing your own accounts, self-assessment tax return, VAT return etc., a productive use of your time?’
For many sole traders and small business owners there are probably 101 other things that you could be doing instead; things that you’re good at, things that make money, things that will grow your business.
Doing Your Own Accounts
Even so, you may decide that you would prefer to do your own accounts – at least until you can comfortably afford to get someone else to. Managing the day-to-day finances is a skill business owners need anyway, so doing your own books in the early days of your business is a way to learn these skills ‘on the job’. However, you’ll want to get it right – after all we’re dealing with the financial health of your business – so always take advice if you’re in doubt!
These tips will get you off on the right foot:
- Keep records of all financial transactions
You’ll need to know all your costs and sales to complete tax returns and pay any tax, NI contributions or VAT, so record keeping is essential. Clear records will also make it easier for a bookkeeper or accountant to take over if you need support later on.
- Get a system
You don’t have to have accounting software, a spreadsheet or even an old fashioned ledger will do. However for a small outlay you can make your life much easier with cloud accounting systems such as Zero or Freeagent.
- Get advice and skills
If you are going to do your own accounts it makes sense to learn how to do it properly! There’s plenty of advice online, evening courses you could attend, and HMRC also have a number of webinars, videos and e-learning guides covering the basics.
- Budget for tax
Sounds straightforward but many people don’t. Save 25-30% of all your income so you don’t have any unpleasant surprises when HMRC ask for tax.
- Claim business expenses!
The most effective way to reduce your tax bill is to make sure you claim for all expenses that are ‘wholly and exclusively for business’. That trip to the Farnham Hub is tax deductible, so is the coffee, the car parking fee and your mileage! Even if you come on your bike you can claim 20p per mile. If Jeremy Hunt can claim 27p for his half-mile trip to the Hub, so can you!
Getting Bookkeeping And Accountancy Support
Perhaps you’ve got to the stage where you need support, or maybe you know that this job is one you need to outsource from the offset, what services do you require? It can be helpful to understand the differences between bookkeepers and accountants so you can decide whom you need at this stage of your business journey:
Bookkeepers: Essentially the bookkeeping function is the recording of daily financial transactions. Since most commonly used accounting software also has the ability to generate reports, bookkeepers may also classify and summarise financial reports too. Bookkeepers can also prepare your VAT return, and work with your accountant providing them with the information they require to prepare year end reports and tax returns.
Accountants: The main difference between a bookkeeper and an accountant is that accountants are responsible for classifying, interpreting, analysing, reporting and summarising financial information. While there are obvious crossovers between the two roles, an accountant will be able to use this information to advise businesses on tax planning, dividends and more strategic financial planning.
We have accountants and bookkeepers in the Hub who will be happy to talk to you about your needs, have a look on our VIP page for their contact details.
Outsourcing Helps You Make More Money And Grow!
I know that making the decision to hire someone else to do a job you’re able to do can be a big step. We tend to focus on the money being spent rather than the benefit it brings. In the case of accountancy and bookkeeping, as with many of business activities, it really can save you time and money – and your accountant should be able to demonstrate this. Not convinced? Here are 5 reasons that may make you reconsider:
- Cost savings: Your accountant can help you manage your money and tax much more effectively, often reducing your tax liability because they have expertise and knowledge that you probably don’t.
- Saves time: Without proper expertise accountancy activities are always going to take you longer to do than someone who does it day-in-day-out.
- Helps grow your business: Accounting professionals have a wealth of experience and insight that can help you grow your business. They’ve seen other businesses succeed, and fail, and therefore can be a trusted advisor. It’s in their interests too that your business does well.
- Allows you to focus on what you do best: Your time is valuable, there are plenty of activities that you should be doing that will increase revenues, profitability and help you meet your targets. If you can do this, those bookkeeping and accountancy fees won’t seem so onerous after all!
- Helps you sleep at night: Business owners have enough to worry about without adding ‘did I file my tax return correctly?’ to the list. Delegate some responsibilities like this to other people, so you don’t have to worry about them.
If you have any accounting or bookkeeping questions that you would like answered, you can leave them here or in our Facebook group. Support and collaboration is a key aspect of the Hub ethos and so our expert members will be happy to help if they can.
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