Top 5 Accounting Tips for Tradespeople

Top 5 Accounting Tips for Tradespeople – Learn how to manage your company accounts like a pro.

Cash flow problems are responsible for 90% of all business failures. You need to ensure your company is on the right track by prioritising money management.

How to make your business accounting easy and manageable. These steps will make managing your company’s finances easy and painless.

What is accounting?

It’s basically the recording of financial transactions your business makes with other people and businesses, as well as the tax it will have to pay. It helps you understand your company’s financial situation and how it has changed.

How do you simplify all the math and record transactions?

It is important to get organised right from the beginning. An accountant will spend more time organising paperwork than if you have a pile of receipts and paper scraps in your shoebox. Don’t panic if you feel like this at first. It’s worth organising now to avoid future headaches.

You will be able to keep an eye on your finances throughout the year and avoid any unexpected bills by getting your paperwork in order. No matter what stage of your business account you are at, let’s get this accounting thing under control!

Top 5 Accounting Tips for Tradespeople – How to run your trade business accounts like a Pro!

1. Keep organised and be organised

– Keep track of the beginning

– Register with HMRC

– Even if you are a sole trader, open a bank account for your business.

– Install your financial record-keeping software

– Register with Companies House if your company is a limited one

2. Bookkeeping

To manage small business accounts, you don’t have to be an expert in math. You only need to keep these things in mind:

Cash flow is the king. It’s what makes the difference between being able to manage your money and losing your business. Pay attention to who you owe money (take credit when you can) as well as who owes money to you. Don’t spend VAT that is not yours. Also, ensure your VAT return is current.

Keep track of everything: Invoices, expenses and outgoings. Pay suppliers. Chase money owed. Pay employees. If you don’t organise, this can take a lot of time and become confusing. Although you could hire someone to do it for you, if money is tight we recommend that you avoid the paper and instead go digital. Cloud accounting software makes managing accounts easy!

3. Cloud accounting software

What exactly is it? A variety of companies offer software (generally in mobile format such as an app). Some of the most popular are Sage, Xero, Quickbooks5 or KashFlow. The software allows you to manage your business’ accounts more efficiently, quickly and easily.

It’s easy to use: Instead of scrolling through pages upon pages of reports, users are presented with a dashboard overview of key figures they need to manage their accounts.

You can send invoices online to encourage payment quickly. Your customers can pay within a few clicks after receiving an invoice via payment providers such as WorldPay and Stripe. Great for cash flow! The transaction is automatically pulled into your books, which saves you time.

Credit control functionality: Your invoice details are automatically recorded so you can track expected payments and monitor what is overdue. You can also track late payments through email, allowing customers to pay online’.

You can increase productivity by creating professional-looking invoices and quotes on the move and sending them through the software. This software will help you be more productive and get paid quicker!

You can manage your money anywhere you are: It’s possible. You can do it all if you have a tablet or smartphone. You can quickly create an invoice while you enjoy your morning coffee or chase past due payments on-site.

Automated bookkeeping: Add-Ons for Smart-Scanning automatically pull in your receipts, bills, and expenses directly into your accounts data.

Reports (accounts: You can pull off either a cash report or a profit & loss statement. The numbers you see reflect the current state of the company.

Staying compliant with VAT: You can rest assured that your data is secure as their software uses the same encryption technology as online banking. The data is stored securely in the cloud so you don’t lose receipts. You can also link to HMRC, so you won’t miss any important deadlines like VAT.

Run payroll

Take control of your finances: It’s important to plan and be aware of all the money due so that you don’t get nasty surprises.

You can use one app to manage all your finances.

There is no need to use spreadsheets and no longer send customers unprofessional invoices. You don’t have to dig through boxes of receipts or go through piles of paperwork. Plus, you can easily track your outstanding payments.

It’s an easy decision with prices starting at PS5 per month This allows you to manage your finances while you are at the pub. That’s what I will drink!

4. An annual account for a sole trader

What accounting obligations must a sole trader comply with?

Proper records are essential for managing your business accounts. They also provide an audit trail that can be used to tax your company. Your account records should be kept for five years.

Business Bank Account: Although it’s not required for sole traders, it’s a good idea to have separate accounts for both personal and business transactions. You must maintain clear records of all personal and business transactions if you do not have separate accounts.

Stock: You should conduct a stock-taking exercise at end of each accounting year if you have stock or work in progress.

Employee records: You will need to keep track of all payments made to employees, including wages and expenses.

Self-Assessment Tax Return: The tax years run from 6 April to 5 Apr. Relevant accounts must be completed by 31 January. To support your return, you will need an Annual Balance Sheet and Profit & Loss Account each year.

There is no need to file accounts with the public body (such as Companies House for limited-company companies).

5. An annual account for a limited company

What accounting obligations must a Limited Company fulfil?

Your private limited company should prepare for the next financial year.

Companies House & HMRC to fill out full (or statutory) annual accounts

HMRC will need to fill out a Company Tax Return

Any Corporation Tax you pay (calculate it using these two formulae)

Statutory accounts must include:

A ‘balance sheet’ is a list of all the assets and liabilities of the company. It shows how much each item was worth on the last day.

A ‘profit & loss account’ is a financial statement that shows sales, running expenses, and profit or loss for the year.

Notes on the accounts

A director’s report, unless you are a micro-entity.

Depending on your company’s size, you might need to include an audit report. The balance sheet must include the name of a director and must be signed by the director.

As part of your Company tax return, you must send copies to all shareholders; Companies House and HM Revenue and Customs.

You might be able to send shorter accounts to small companies, micro-entities, or those that are dormant.

Deadline for Action

Companies House will open your first account 21 months after you register with Companies House

Companies House will allow you to file annual accounts 9 months after the end of your financial year.

Tell HMRC or pay Corporation Tax that your limited company owes no Corporation Tax 9 months and 1 day after your ‘accounting time’ for Corporation Tax expires

Twelve months after the end of your accounting period for Corporation Tax, file a Company Tax Return

You may be able to send your accounts to Companies House and HMRC at the same time, even though you have different deadlines.

Your Company Tax Return covers the accounting period for Corporation Tax.

What should your end-of-year reports include for your company?

HMRC

Company Tax Return The Company Tax Return (CT600), contains information about your company’s income and any tax allowances or expenses.

The remainder, or your profit, will be used to calculate the Corporation Tax that your company must pay.

Annual Accounts

These are the components of your Annual Accounts that you must submit to HMRC:

Income Statement (Profit- and Loss statement), which summarizes your company’s financial transactions for a given period. It begins with your income and then subtracts expenses incurred while operating the business. The bottom line of your income statement indicates how much profit or loss the company has made in the accounting period.

Statement of Financial Situation/Balance Sheet: This report shows a company’s assets and liabilities at a particular time. This provides an overview of your company’s financial position as of a specific date. It should show your assets and liabilities as well as your equity. The formula is Assets = Liabilities + equity.

Footnotes: Information regarding transactions between your company (such as loans advances and guarantees) and its directors

Confirmation Statement

You are legally required to confirm the information of your limited company with Companies House at least once per year. This is usually one year after incorporation, or the date that you last submitted a Confirmation statement.

Top Tip:

Make sure you have all your expenses in order. Every pound claimed as a business expense is taken from your company profits. Less profit equals less Corporation Tax! Are you unsure if something is eligible for reimbursement?

HMRC rules state that expenses must be used exclusively for business purposes. If you purchased something for your business, you may be able to claim it as an expense. If you’re unsure about what you can or cannot claim, your accountant can help.

Rectify any outstanding invoices. Your company year-end must be accurate. Contact the debt collector several weeks in advance to collect any unpaid invoices. Once your company has the money, you can reconcile all your accounts using your accounting software to make sure they are 100% accurate.

Top 5 Accounting Tips for Tradespeople – Summary

Cloud accounting makes bookkeeping easy and flexible. We highly recommend it to help you stay organised. If you have a small company, you may need to hire someone to assist you with your end-of-year accounts.

A tax-saving expert can also help you. In the run-up to your year-end, it is a good time to start thinking about financial and tax planning. This can reduce your tax bill both in the short-term and long-term. You have the option of paying money into ISAs or bringing your spouse/partner into your business and putting some of your income towards a pension.

For a FREE Research and Development tax credits review for your business, call Quest Chartered Management accountants Birmingham at 0121 235 0315. We can help you reduce your tax bill and grow your business.

If you like this post: Top 5 Accounting Tips for Tradespeople, then make sure to check out more like this on our Blog: How To Protect Your Business From Cyber Attacks, What Can You Claim R and D Tax Credits For?, 10 Top Accounting Tips For Startups, Pros and Cons of Paying Your Tax Early, 7 Bookkeeping Mistakes To Avoid.