Why reviewing your business expenses could help maximise company growth
Nick Biggam, commercial manager at Advanced Payment Solutions (APS), shares his six essential tips for managing your small business expenses
Once your start-up is off the ground, getting your expenses in order is a key step in maximising your business growth and keeping cashflow in check. Make your life simpler by creating a good recording strategy from the outset.
Whether you plan on doing the paperwork yourself, or hiring an accountant to manage finances for you, this should make completing a tax return simpler and help you pinpoint opportunities to save money along the way. And remember, while recording and reconciling may seem like a tedious process, keeping accurate sales and expense records is a business requirement.
Follow our six steps to create a plan tailored to your business.
1. Get a handle on tax and national insurance
Your business expenses will make up the bulk of your annual tax return. Make sure your business is on the correct tax code and avoid missing a deadline by familiarising yourself with the taxes and other contributions you need to pay, and what you can claim back.
2. Find out what records you’re required to keep
This will vary, depending on the size and structure of your business, the taxes you pay and whether you’re VAT registered. Knowing what information you may need to provide (this could include sales receipts, invoices, bank statements or accounting records) at the end of the financial year, will help you when it comes to deciding how to record and manage your expenses.
For a detailed list, HMRC provide a useful resource here.
3. Identify and categorise your expenses
It’s important to record and declare everything that could be considered a tax deductible business expense – accurate record keeping could reduce the amount you pay in tax and save your business money. Attributing your main expenses to departmental or other categories, such as office supplies or wages, will help you keep a close eye on spending in comparison to budgets.
4. Regularly record, reconcile and review
Keeping full and accurate records is essential to ensure you’re paying the correct amount of tax. And, if your records aren’t satisfactory you may pay a penalty to HMRC.
Reviewing your expense records regularly will better enable you to cut down on areas where you’re overspending.
5. Use technology
Digital solutions for record keeping, receipt storing and expense tracking are easily found online and could simplify and streamline your expense management processes. With solutions for real time reporting and tax calculations, you could save time on manual recording and save money on hiring accountants.
6. Separate business and personal transactions
When you’re starting up, using your personal account for business expenses can seem quicker and easier than opening a business bank account – especially if having to pass a credit check is a daunting thought.
However by mixing personal and business transactions from the beginning, you could be in store for a complicated tax return later on, and if you’re operating a limited company, having a business account is a legal requirement. So if you do think you’ll struggle to open a business bank account, you could look at some of the options available on the high street, like prepaid corporate expense cards or business current accounts.
By managing expenses this way you’re able to monitor and track spending online and ensure transactions are automatically recorded for simpler reconciliation. These accounts are often low cost to operate and the approval process is fairly simple.
One of the UK’s leading providers, Advanced Payment Solutions (APS), provides an award winning prepaid business account, offering complete banking solutions to UK businesses with no credit checks to open an account and a simple online application.
Nick Biggam is commercial director at www.apsgroup.com. APS is a leading payment solutions company and the provider of the award winning Cashplus Business Account.