Keeping the Books

Swindon

According to a recent survey, keeping accounts and company books is a constant headache for many of the UK’s small businesses, with an amazing 17% still relying on pen and paper. If you’re a small business owner, you may often find it a struggle just to keep on top with everyday accounting, yet at the same time you should also be looking ahead. It’s important to be aware of how alterations to the financial system could impact on you.

For instance, in April 2016 there was a change to the way in which tax is paid on dividends, which will mean many SME owners could face higher taxes.
Under the changes, every individual can receive up to £5,000 of dividends tax-free over a tax year, but any amount over this sum will be charged at higher effective rates than in the past. SME owners may need to get advice over the implications of this as well as preparing for the automatic pensions enrolment.
 
Struggling to Keep the Books
All small companies have a responsibility to keep proper financial records, while limited companies and limited liability partnerships have to file accounts with Companies House each year. There are also various other types of records that have to be kept, as well as the requirement for business owners and directors to fill in self-assessment tax returns.
It can be difficult keeping track of all this, yet, as well as those UK SMEs who still do their accounts on paper, the survey by Worldpay found that another 75% only use basic home software. As a result, around 40% don’t have access to up-to-date figures for how their business is performing in terms of profit and loss. Also, more than 70% don’t have a 3-year financial projection, even though this is an important way of looking at how business is doing and planning for the future.
If you miscalculate tax, your business could easily lose out financially as a result, and failing to send out invoices promptly will inevitably have impact on cash flow.

What’s the Answer?
So what is the answer? One possibility is to invest in some courses to improve your staff’s financial expertise. Another is to invest in specialist accounting software which will make it easier to keep accurate records and make projections.
However, many small businesses find that it is a better option to outsource accounting, payroll and tax affairs to an expert in this area.

Other changes to tax and employment law are also likely to cause extra demands for company financial record-keeping in the future. All the more reason for SMEs to get to grips with their finances now, and ditch the pen and paper method for good.