As a business owner, you may feel you’re disappearing in a sea of paperwork. You’re not alone!
In fact, a study of small and medium-size business-owners revealed they spent up to three hours a day completing necessary paperwork. This left them short of time to take care of the important task of promoting and growing their business.
Almost half of respondents said they were working outside normal hours in order to complete everything.
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How important is it to take care of your finances?
Paperwork is unavoidable when it comes to running a business, but having a well-organised system can save you plenty of time and hassle. It’s crucial to take care of your finances because if you don’t, your business could start to struggle if you don’t know your actual income and expenditure.
In terms of getting your financial documents, such as tax returns, to HMRC on time, you will face stiff penalties if you miss deadlines. When you’re required by law to file a return, but miss the deadline, you will receive an automatic £100 fine. It is imposed even if you don’t owe any tax.
If you owe tax, you will also be charged interest on the unpaid tax. If you still don’t file your tax return within three months, HMRC can fine you an additional £10 a day for the next 90 days. This would increase your total penalty to £1,000, which could seriously impact your business, especially in today’s economic climate.
Advantages of having an accountant
Many businesses choose to use the services of an accountant to help manage their finances. Accountants can be invaluable in normal times, so in the current situation, where everyone is suffering the impact of Covid-19, their services can be crucial.
Accountants can help with situations like the pandemic by providing practical tips and advice to their customers. For example, here at DL Accounts, we have been sending out helpful reminders for grant applications and notifying any date changes for finances.
We provide our services for clients who can’t cope with the stress themselves, making sure they have all the information they need at their fingertips and also ensuring the necessary HMRC deadlines are met to avoid hassle and financial penalties.
What documents do businesses need for their accountant?
The importance of understanding the tax system, the cycle of the tax year and what is required from HMRC is of the utmost importance. As a business owner, you must be able to lay your hands on any documents your accountant needs.
UK businesses must keep most of their financial records for at least six years. The majority can be kept in digital format, as HMRC will accept these, so it’s easier to store them on your computer, rather than having filing cabinets full of paper. There are exceptions, such as non-VAT tax documents, as these need to be stored in their original format. This includes paper dividend vouchers if you originally received them in a paper format.
You must also keep copies of all the invoices you have sent to customers, your bank statements, copies of bills or payments that your suppliers have sent to you, receipts showing business expenses paid out of your own pocket and all correspondence and tax-related documents from HMRC.
You should definitely consider digitising your documents, as they would take up a lot of space in paper format. You can store them in a simple filing system, creating a folder for each year and then a series of sub-folders, one for each type of document you need to store. For example, the sub-folders could include invoices, bills, bank statements, expenses receipts and HMRC documents.
Give each invoice a unique reference number to fulfil HMRC requirements – you may wish to add a reference number to each of your other documents too, as it will make it easier to search for a specific item.
Once you have organised your financial paperwork and stored it securely online, dedicate part of your time every week to keeping it up to date, rather than waiting for a monthly or quarterly update. Once you’re properly organised, it will only take a couple of minutes to add a new expense or bill, so you won’t need to worry about an ever-growing pile of paperwork on your desk.
It really is as simple as that to organise your finances, as once you have your documents stored properly, all you need to do is pass them to your accountant, who can do the rest for you.