16 May 2016 15:00
How to make your financial year-end go smoothly
Running a small business can be stressful. Business owners often have to do everything, from sweeping the floors to cashing the cheques. But one aspect of business that most small owners dread is the end of year tax reports.
To help small firms everywhere, we've asked 11 SMEs what advice they would give to other firms when preparing for the end of the tax year. Here's what they said:
"Consistent work throughout the year prevents major tax season disasters; the more work you can put in throughout the year, the better off you’ll be. Taxes are about monotonous legwork. Even if it’s fifteen or twenty minutes a week, the fact that you are carefully sorting out your papers or highlighting specific expenses that will require attention will be of benefit."
2. Andrew Halliday, Coreter SEO services
"When I first registered with my accountant, they spent a day training me on Sage so that I didn’t make any mistakes inputting receipts or preparing invoicing. Then prior to sending off my VAT return each quarter they do a quick analysis to make sure everything is correct.
"I have also set up an email address called invoices@…. And every invoice and receipt I get, I automatically forward to this address. I then log in on a Sunday evening and spend an hour inputting all this information; It means I don’t get distracted during the normal working day and input something incorrectly or forget to add it. My accounts are up-to-date and there's less work for the accountant and a lower bill at the end of each year."
3. Stephen Nightingale, Nightingale online jewellers
"We use Xero for most of our transactional needs, including VAT returns. I have to say we’re very impressed – it really is a one-stop-shop. Whether you’re an app user or not, the key to ensuring a slick tax return submission is consistently ensuring your books are up-to-date and getting everything handed into your accountant in plenty of time."
4. Dawn James, CPA
"First off, you need to plan for year-end. You need to review your profit (or loss) for the year to date and then you need to estimate income and expenses for the remainder of the year. Once you have this information, you need to see where you can be 'tax wise' and consider what you can do to reduce your tax liability. I would review all purchases over £500 so you can determine whether they are an expense or need to be capitalised."
5. Paul Haydock, DueCourse cash flow technology
"Be proactive and your year-end will be a breeze. The first thing to do is to ensure that you are using the latest cloud accounting technology (such as Xero, Sage One or Quickbooks) to keep your books up-to-date. Next, contact your accountant well in advance and ask him or her to dive into your accounts to check everything is OK and ready for the end of the year."
6. Bryan Clayton, GreenPal digital lawn care
"Greenpal is best described as Uber for lawn care. My previous company was a landscaping firm that grew to 150 employees over 15 years. But over the course of that journey I made a critical mistake - I was cheap with my tax advice and the selection of accountancy firm I worked with.
After I sold the company to a national organisation they pointed out years of mistakes that my novice accountant was making because my company simply outgrew him. My advice to fellow business owners and entrepreneurs is not to be cheap with selecting an accountant to work with.
Rushing at the last minute to get all of your tax preparations in order is like cramming for an exam the night before; sound tax preparation happens all year long."
7. Jessie Seaman, Tax Defense Network
"Hire a professional to prepare your tax returns for the first year or two, or until you are comfortable preparing them on your own. This is the number one mistake that gets businesses in trouble; by the time they find out a problem exists, it is too late.
"Invest in professional tax software such as Quickbooks. These programs make it easy to keep records and allow you to see your income patterns, fluctuation of expenses and cash flow. If you cannot see the big picture of your business activity then it is impossible to cut costs, identify 'untapped markets' or improve your business plan."
8. Emma Loughlin, E Business Works PR and communication
"I was never any good at keeping on top of business finances – which usually involved all receipts and invoices being thrown into a folder and then trying to add all of this into a spreadsheet once or twice a year in a mega rush. Now I use Xero, a cloud book-keeping and accounts management system; it has simplified my business financial records and has made life much easier.
"Xero allows us to have constant access to real-time results and it links to my business accounts so that transactions are automatically pulled through and matched. Paper records are a thing of the past – I take photos of receipts and link them to the transaction and I can instantly forget about them.
"Xero gives my accountants instant access to everything they need and ensures a smooth end of tax year when they come to complete my year-end accounts, self-assessment tax return and all company returns."
8. Louie Balasny, Botkeeper customised bookkeeping software
"The preparation for year-end taxes should be on-going. Typically, companies wait to do everything just before deadline because they’re preoccupied in running their businesses. This creates more work for the accountant. Only having up to date information once a year is not the proper way to be running a company and it can be incredibly risky."
9. Stephen Frost, Surging Life, health and wellbeing coach
"I used to leave everything to the last minute and endure late nights but now I prepare well in advance. As I move through the business year I keep track of receipts - stapling them to a piece of A4 and writing an explanation alongside is helpful. And with tools such as Excel and OpenOffice the whole job has become even easier. As well as paper copies, I have everything entered electronically too. This gives me a really good idea of the headline figures in advance so I can ensure everything is ready in terms of funds.
"Taking a few minutes out every hour or so to clear the mind in meditation is highly beneficial and helps to minimise the risk of making errors. I am careful about what I eat and drink anyway but at tax time I stay well away from sugar to help me to stay focused. Now as well as doing my taxes much faster I also do them more calmly."
10. Zondra Wilson, Blu Skin Care
"We prepare for the tax year by using Quickbooks. It allows my accountant to log sales, returns and itemised deductions into one simple place. It places all of this information into the schedules so at the end of the year, all I have to do is pull up the schedule information, fill in the information on my tax form and it’s done."
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