Accounting and Small Businesses

Rules relating to taxes vary from business to business. There are various dates during the year when taxes fall due for payment, and it is wise to keep records of these to prevent any nasty surprises. The owners of a small business that is not a limited company are deemed to be self-employed, and they will need to fill in self-assessment tax forms. Make sure that you declare your business-related taxes on time, as penalties are issued for late declarations, which could increase your business tax bill.

When running a small business, there are many accounting issues to take into consideration. Fortunately, while the list may seem overwhelming at first, it's not unmanageable. Here, we help you navigate your accounting responsibilities when running a small business.

Small businesses need to pay attention to all relevant taxes and any changes that occur. Although paying an accountant may seem like an expense that a new small business can do without, in reality, doing so may help your business keep your tax bill low and pay for itself in the long run.

Whatever the trade, the ability to accurately track financial transactions is vital for all businesses, both large and small. Losing control of a business' finances, accounting procedures and liability for taxes is likely to lead to serious (possibly fatal) consequences for the business. Owners of small businesses need to decide how to handle accounting for everything associated with sales, purchases and taxes.

Small businesses need to work out whether they have the resources to do their own bookkeeping, handle credit control issues, and cope with laws and regulations relating to taxes.

If you are a small business owner, you almost certainly have a computer at your disposal, but do you know whether you have the appropriate accounting software to deal with your small business' accounting requirements?

Finally, you need to decide whether to employ an accountant (either full-time or part-time) or whether you can deal with accounting matters and queries relating to your small business' taxes using your existing resources.

The single most important accounting function for your business is bookkeeping. All types of paperwork (invoices, receipts, statements, etc.) should be retained and monitored frequently. Statements should be checked regularly and any problems sorted out promptly. This information will also be required for calculating how much is owed in income taxes.

Keeping close tabs on your small business' bank statements also helps to ensure that a healthy cash flow is maintained.

A range of accounting software is available from various suppliers with different accounting features and price levels.

Software packages range from basic bookkeeping packages that simply record sales and purchase transactions to accounting packages that can produce a full set of accounts, payroll data, taxes and even deal with online e-commerce transactions.

However, many small businesses require nothing more elaborate than a few spreadsheets to handle their accounting requirements. As most business computers have some sort of spreadsheet program installed (e.g. Microsoft Excel), this is often the most cost effective accounting software option for small businesses.

Although accountants are not cheap to employ, many small businesses are able to save money by employing an accountant, even on a part-time or short-term contract basis.

The area of regulations governing taxes provides the greatest potential for cost-effective accounting for small businesses. A competent accountant should be able to advise you on a number of topics including income taxes, expenses and the most effective use of allowances.

Accounting experts are also in a good position to give advice about different types of accounting software as well as more general accounting information, such as avoidance of taxes and the benefits that might be gained by the formation of a limited company.