For new business owners, dealing with the financial side of things can be the biggest challenge, way ahead of managing staffing issues or handling tricky customers, because if you get the numbers wrong your business could be in trouble.
Many new business owners simply can’t afford to pay for professional accounting services from day one however, and will have no choice other than to do the best they can themselves.
DIY accounting can be successful if done properly and there are a few key elements which need to be taken into consideration:
#1. How to educate yourself
If you are going to become a DIY accountant then it’s just like learning any other skill, you need the knowledge before you set out on the journey, so do some research, buy some business finance books and give yourself a basic understanding of business finance before you start.
You need to know all the jargon and what it means so you can talk about cash flow or profit and loss, and you need to be able to work out your business numbers effectively. If you don’t know how much money is coming in or out, how can you run the business?
#2. How to choose an accounting system
For our friends at Crunch, it is important that you set up a way to track all of the money coming into and going out of your business, including receipts for purchases, invoices to be paid, purchase orders, invoices owed to you and wages costs.
This can become complicated if you are trying to do it manually on a spreadsheet or in books so you need to have a good accounting system which can work for you. Fortunately there are now online accounting systems designed for the DIY accountant.
You should have a look into these to find the one which works best for you and your business.
#3. How to keep track of income and outgoings
Once you have decided on your system you need to have numbers to put into it so it’s important that you get used to keeping track of every incoming and outgoing pound related to your company.
You need to keep copies of all receipts, bills and other financial paperwork and many of the online accounting systems allow you to scan documents and store them within the system for easy record keeping.
Set aside regular time each week to update your records, otherwise it can be very easy to get into a big mess if you leave it too late.
#4. Understand the taxes you need to pay
Another aspect of accounts which you won’t have had to face until now is taking responsibility for paying taxes owed by your company, so make sure you use all of the HMRC resources to help you understand what you need to pay, the deadlines for completing tax returns, and what kind of expenses you can claim.
#5. How to hire a book keeper
It may be that you are too busy to keep on top of all the receipts but still want to do your own tax returns, so why not consider hiring a book keeper to keep all your monthly accounting records for you, and then they are all ready to submit at the end of the tax year.
#6. How to hire an accountant
Ultimately, no matter how good you are at DIY accounting, there will come a time in your business when you just won’t have the capacity to spend your precious time on spreadsheets and accounting.
As the business starts to grow you will need to consider taking on a professional accountant but the good thing is, they can help support your business in a number of ways. They should have the knowledge to advise you on taxes, trends and business growth.
They will be able to see patterns emerging from your business finances which could help you to resolve a potential crisis before it hits. And they can keep you up to date with changes in the law or the tax requirements.
As a new business owner it can be fairly straight forward to do your own accounting at the very beginning, as long as you educate yourself about business finance and understand what you are doing.
However, as your business starts to grow and you get less time you might want to look at taking on a book keeper to make sure your business finances are always up-to-date and in line with any requirements.
Once your business starts to grow, employing an accountant to take over the finances makes sense as it frees you up to focus on running and expanding the company and also provides you with a great support who can help advise you on the best ways to grow the business while cutting costs.