Top Tips for Tackling your own Finances
When you first set up and learn how to run your own business from a day-to-day running point of view, you'll definitely have areas where you're stronger than others. For me, I was very organised so I found out what I needed to do completed these things in a logical systematic order.
From filing my business with companies house, the next logical step was to set up a bank account.
After this, I was good to go...except for one small detail: how was I going to do my accounts? Keeping track of your expenses, receipts, incoming money and outgoing money is one of the most important parts about running a business.
It's also one of the most mind-boggling if you're not the best person with numbers. I love watching the money coming in, but after that it's all a totally different language.
After 2 years of book keeping, I like to think I've learnt a lot. So here are my top tips for tackling your own finances.
Step 1: Get yourself a book keeper
When you begin your business, you're not just a managing director. You step into the shoes of a marketing director, a logistics director, a financial director, as well as being a decision maker, a writer, a customer services advisor and whatever else it is that you do. Getting someone to help you alleviate some of the stresses of running a business is going to be a big help. Get a book keeper to keep your books in order. Not only is it imperative for forecasting, it's also a legal requirement - and incase the tax man decides to pay you a visit you'll want to have everything looking ship shape.
No one likes doing their books, except for book keepers and accountants. You might try to do it yourself to begin with, but soon you'll realise the harsh reality of how stressful it is.
Step 2: Look for an accountant to file your yearly accounts, run your payroll and help with financial advice
Getting an accountant is another one of the things you'll want to do. You can get your accountant to keep your books for you as well, but some people find it better to separate them out as freelance book-keepers tend to be more cost effective than accountants.
You'll want an accountant to do your yearly return for you, again this is one of the most important things to get right so trusting someone who is a professional to do it means you can spend more time doing what you're good at.
An accountant can run your payroll for you, and mainly help you out with financial advice so that you know you're doing running your business in the most tax efficient way.
Step 3: Get accounting software - it's going to be your best friend
After a year of doing my accounts on an excel spreadsheet, I decided it was time to 'millenial-ise' them. I signed up for Quickbooks - a piece of software that tracks your income and outgoings, you can invoice through it and it then tells you how much you're owed.
It's a simple way of keeping track of your money, making sure you're invoicing and getting the money you're owed.
You can easily categorise your income and outgoings so that when you get to the end of the year everything is ready to hand over to your accountant.
Step 4: Save your tax money in a separate account
Make sure you know how much money you need to give to the tax man. For most people this is 20% of your earnings. From the start of every year, I'll put away 20% of everything I earn, before expenses. This way, you can pay yourself a dividend and from your profit (after you've put away 20%) and know that at the end of the year you've got your back covered. The 20% you put away won't include your expenses so you'll probably find that come the end of the year, you'll have a nice dividend to pay yourself.
Accounts can be really stressful, and if you've done them before you'll know that it takes a lot of time, and often there can be tears! However, these three things will make your life so much easier when it comes to getting everything done properly.