SMEs are often up against it in terms of finding enough time in the day to service customers, chase new business, handle red tape and sort out finances. Mistakes can be costly, especially when it comes to sorting out payroll and filing taxes. Here are five ways to keep things on track.
1. Don't overload yourself
It can be lonely running an SME or working as a sole trader and the pressure to do everything alone to save money can be huge. Hiring a bookkeeper or accountant can be expensive and out of reach to a small business or sole trader just starting out. But there are all kinds of resources available to help you crunch the numbers. You aren’t alone; go online to read up on the latest ways that technology is helping SMEs look after their books and stay on top of their business expenses. You could also join bookkeeping discussion groups online to see what challenges your peers are facing and how they are tackling them.
Kit yourself out with the most effective tools, including a cash book, ledger and intuitive accounting software. It's also important to be able to work on your finances in the office and on the move. Therefore, an easy and effective way to store and organize receipts and expenses is also crucial. Invest in a receipt storage solution to allow you to scan any receipts you receive then and there, before linking them to your main accounting software for easy analysing, filing and subsequent submitting at a later date.
Most businesses are tech savvy these days, with sophisticated websites, digital marketing strategies and accounting software. By embracing technology, you can take your SME to the next level. Just as you keep an eye on what smart phone or tablet you are using and work out when it is time to upgrade, so too should you be checking for updates to your bookkeeping software, receipt scanning tools and cloud-based storage facilities. In this fast-paced world, up-to-date information is a highly sought-after commodity too, so find time to sign up to webinars, conferences and bookkeeping based events to keep your knowledge fresh.
2. Pay attention to the details
When it comes to your employees and freelancers, ensure that their employment status is correctly classified for tax purposes, e.g. are they fully employed? Self-employed? Always pay on time and keep up with your payroll and associated tax obligations. Put their financial requirements at the very top of your list of bookkeeping priorities – sort out payments and update all bookkeeping records related to PAYE, expenses reimbursement, insurance premiums etc. straight away. Don’t forget to account for any other necessities of the job, such as meeting agreed costs around running their company vehicle or booking travel or accommodation for business trips.
It's also important to schedule monthly checks into your diary to go through your books with a fine-tooth comb. Do this whether you have outsourced your bookkeeping or not. Make sure that you have immediate access to all your financial data whenever you might need it, and that all your records are up to date. This will help you and your bookkeeper enormously when it comes to submitting your tax returns. It also gives you the perfect chance to stay on top of your invoicing and maintain an efficient administrative function. Forgetting or mislaying a client’s invoice is counterproductive to your primary business aim of making money, while delaying payment of your suppliers’ invoices could mess with their cash flow and make you look disorganized or dishonest.
3. Mistakes matter
Correct errors as you come across them, which will be sooner rather than later if you follow the previous tip about regular checking. Errors left unchanged can cause more serious problems down the line. Cut down on the possibility of mislaying money by paying any cash-based earnings into your bank straight away and entering it into your accounting system. The same goes for your receipts. Work out a digital storage system for these that works for you and your business. It's also important to update your main bookkeeping records regularly so that you aren’t reliant on bits of paper that can get ripped up or go astray.
4. Stay on top of deadlines
Stay on top of your tax obligations, as failing to adhere to them can be extremely serious. Know your deadline dates for filing your tax returns and engage an accountant to help with this if you feel anxious about sorting it out alone. Open a separate savings account and transfer the money you will need to pay in tax into it regularly – perhaps after each client payment. This will make the inevitable tax payment far less painful when the time comes to stump up the cash.
Use your bookkeeping resources to plan ahead financially. Good systems can tell you where your best-selling product lines are, for example, or where you are spending more money than you are making. Use this data to inform future plans and stay open to change and moving in different directions. Keep an eye on the bookkeeping media to learn about developments in accounting software and to find out about new bookkeeping trends that could help you save or make more money.
5. Regularly update your knowledge
Many businesses trade both in their own country and internationally. This can lead to mistakes in the associated bookkeeping functions if those involved fail to grasp the implications of casting their commercial net wider. Many countries have complicated tax arrangements around exports and imports, as well as demanding laws around trade and tariffs that can have a large effect on a small business. It is well worth taking time out early on in the international trading process to not only understand the rules around the trading itself, but also what you need to do for your bookkeeping records and submissions.
Again, keeping invoices, delivery paperwork, customs documents and receipts is a vital part of the process. Similarly, it's also important to research the best bookkeeping training, hardware, software and apps. Go on a bookkeeping course to fill any knowledge gaps. Take time out to look into the whole tax assessment process and learn the official jargon to help you understand the process. The more you learn, the less intimidating it will seem and you will build up your own skills and confidence. If you really cannot get your head around the subject, there is no shame in outsourcing your accounting work. The support of a competent, confident bookkeeper can be worth its weight in gold for a thriving SME.
About the Author
Hasan Ekici is a content strategist for Receipt Bank. Receipt Bank is a platform used to manage the receipts, invoices, and other documents that businesses depend on to keep accurate, useful financial records