Starting Up In Business But Have A Fear Of Finance? (Part 2)
Guest article by Debbie Miodonski
In the first part of this in-depth article, we looked at the costs associated with starting up and which were essential items so that it doesn’t have to cost a fortune.
The Scary Bit
This is the accounting and record keeping side of the business and it’s easier than you might think!
Registering As Self Employed
It’s important to let HMRC know that you’re self-employed as soon as possible, even if you already fill in a tax return each year. If you don’t tell them as soon as you begin self-employment you may also incur penalties.
You can let HMRC know about your new self-employment by registering online for business taxes. You’ll be asked for information about yourself and your business. HMRC will set up tax records for you using the information you provide, for example:
- Self Assessment
- National Insurance
- PAYE if you have people working for you
A Self Assessment Online account will be set up for you automatically at the same time (taken from HMRC web-site www.hmrc.gov.uk/working/intro/selfemployed.htm)
You can register online, and it only has to be done the once.
It may seem daunting, but really, it isn’t. You just need to put some time aside and do it. It may feel out of your comfort zone, but that’s allowed!
Once you’re registered with HMRC, you’ll receive a Self Assessment tax return to complete each year so that you can provide details of your earnings and any other income you get during the tax year (6 April to 5 April).
This information is used to work out how much Income Tax you have to pay (taken from HMRC website).
Self-assessment tax returns are completed annually and they can be completed online.
You can opt out of paying Class 2 National Insurance contributions if your earnings are under £5,885. However, this can affect certain state benefits e.g. maternity pay, so, check this out before making a decision.
Do Not Worry About Vat
You only need to register for VAT if your turnover exceeds £79,000 (current figure), so don’t worry about VAT from the offset. If you make that in your first year, then WOW!
This is another area which fills most people with dread, and again, it doesn’t have to!
You need to keep track of your expenses and income.
In simple terms: income minus expenses equals profit
If this figure is a negative, you have made a loss.
Keep a record of all money you receive and spend which is related to your business. It doesn’t need to be complicated, in fact, the simpler the better. You do not need fancy software, or even a computer. A pen and notepad is sufficient.
You will probably do this without being prompted!
We all love to know how much money we have taken. Make sure you keep track of your debtors (people who owe you money).
When you spend money, keep the receipts. Write a note what you have spent the money on, if it is not obvious from the receipt.
At the beginning of the year, label up 12 new envelopes, one for each month. Put receipts in an envelope for the relevant month.
If you only do one thing – do this! It will make a massive difference!
Business mileage is tax allowable, so keep records of all business related journeys.
Put Aside Some Time Weekly
Try to put a bit of time aside each week to do your accounts. It may not be your idea of fun, but it’s manageable in small doses.
Little and often is far better than stressing and struggling the week before the self-assessment deadline.
Do Not Rely On Memory
You may think you will remember every financial transaction, but you won’t! And why give yourself the stress of trying to remember everything when it takes minutes, literally, to log expenses as you go along.
Keep life simple and easy for yourself and keep a log of ALL transactions.
If you don’t, you may forget expenses which could reduce your tax bill, so it’s in your own interest to do this!
Finance is not the big gremlin people make it out to be and it is not that big a deal. It may be tricky at first, and it will mean putting some time and effort into it.
However, if you keep things simple, methodical and easy – you will be fine. There is plenty of help available on the internet.
You never know, you may end up loving finance – just like me!
Your action plan
Is there anything on this list that you haven’t done yet? If not, get on with it!
I’d love to hear how you’re getting on with setting up your business, post in the comments below.
About Debbie Miodonski
I love all things finance and numbers fascinate me! I am the founder of www.SmallBusinessMoneyMastery.com (check out my Facebook Page) and Mums Business Basics. I am a Money Coach for Mumpreneurs. I help other Business Mums to understand their number’s, overcome their fear of finances and grow their business.
Recently, I have set up Mums Business Basics, which compliments Small Business Money Mastery. It has a new FB page and a thriving online community, in the FB group “Mums Business Basics”. Its aim is to help Mums with great new business ideas understand the basics of running a business and to achieve a guilt-free work / life balance.
Sign up to get instant access to Debbie’s FREE webinar “How to get customers to pay on time” and also receive her newsletter packed with useful goodies. http://mad.ly/signups/98284/join