Whether you’re just in the planning stages or you’ve already cut the ribbon, managing finances for your small business isn’t easy. We get it – the money side of things can be mind-boggling at the best of times. But the legality, viability and growth potential of your business all depend on a sound and strategic approach to your accounts.
So, instead of getting in a twist with all your obligations, we suggest getting the answers to a few essential FAQs – ticking off one key consideration at a time to form a stable foundation for success. Let’s begin…
Tax and compliance
What are my tax obligations?
Understanding which taxes apply to your business (e.g. Income Tax for sole traders, Corporation Tax for limited companies) is crucial. Pay attention to the VAT threshold to see if you need to register, too.
Tax planning and optimisation are key for small business owners to minimise tax liability, AKA how much tax debt you owe to the government. It’s also up to you to keep your finger on the pulse with all tax law updates to ensure you remain compliant and avoid costly penalties.
What expenses can I deduct?
Knowing which business expenses are tax-deductible helps minimise tax liabilities. This depends on the nature of your business and its ongoing requirements. Some common examples include telephone bills, utilities and business insurance.
What financial records should I keep, how should I keep them, and for how long?
Maintaining accurate records is essential for tax compliance and audits. These should include records of all income and expenses, such as invoices, receipts, bank statements, and payroll records, as well as any VAT or PAYE information if applicable.
Cloud accounting software can help you store your records, and it’s recommended that you hold on to them for at least six years from the end of the last financial year they relate to.
Cash flow and financial management
How can I improve my cash flow and forecasting?
Managing cash flow effectively is crucial for business survival and growth. There are data analysis tools and strategies that can help, but for starters, we recommend breaking it down into four stages:
- Decide the period you want to plan for
- List all your income
- List all your outgoings
- Work out your running cash flow
What is the break-even point in a business?
Understanding the break-even point helps you set prices and manage costs in line with your strategic goals. At a top level, you need to determine the point where total revenue equals total costs.
Business structure and legalities
What business structure should I choose?
Choosing the right legal structure for your business is essential because it’ll determine the obligations on both you and your company. The most common options are sole trader, partnership, limited liability partnership (LLP), and limited company.
What are the financial implications of hiring employees?
Look beyond just their salary, considering recruitment costs, payroll taxes, benefits, training, and overhead expenses. To estimate the total cost, a general guideline is to add approximately 75-100% to their salary. Get ahead of common payroll mistakes (and how to avoid them) here.
And finally…
Do I need an accountant?
Whether you’re just setting up or your business is reaching new heights, having an accountant by your side can not only help with number crunching, balancing books, and paying the correct tax – they can guide your business to financial success, pinpointing room for growth and improvement at every stage. Discover more about how an accountant can help you survive and thrive.
Partner with Nabarro Poole
Need a friendly expert to take on the heavy lifting of your accounts and guide your business to success? At Nabarro Poole, we won’t just tick off the basics and simplify the jargon, we’ll work with you as an extension of your team to support your growth.
Contact our team today to see how we can help.
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