Over the Christmas and New Year break we all have time to take a breather and think about our lives and our jobs and nearly everyone will make some sort of New Year's resolution. Many of those resolutions will be about working for yourself, starting a business and getting a better work/life balance.
We work with a lot of new as well established businesses and we give our customers tips to help them be organised and develop their business. So if you are thinking of starting a business or have recently become self-employed you might find some of the following tips will help you.
Top Tip 1
Have a separate bank account for your business and your personal transactions. You need to know what your business income and your businesses expenses are so that you know how you are doing. If business and personal are muddled you will have no idea whether you are making a profit and on top of that you are creating more work for yourself separating out business and personal transactions.
Top Tip 2
If you need to supply your customer with an invoice for services or goods provided do this promptly before you forget. If you can't invoice immediately keep a record of work done or goods sold to invoice at a later date.
Top Tip 3
Don't allow customer debt to build up. Where possible have payment terms on your invoice which suit you and chase up late payments promptly. You need cash to flow into your business in order to develop it.
Top Tip 4
Keep a simple record of your income and your expenses - you can write them in a book, record them on a spreadsheet or use accounts software. Keep it simple - all you want to know initially is whether you are making a profit. If your income is more than the total of your expenses you have made a profit, if your expenses are more than your income you have made a loss.
Top Tip 5
If you are a sole trader you will need to submit a tax return for any income incurred during the period 6 April to 5 April (the tax year). You must therefore register with HMRC as self-employed and provide them with a tax return and any tax due on your income by 31 January the year after the end of the tax year (after 5 April).
Top Tip 6
You do not have to set up as a limited company or become VAT registered when you start a new business. It is up to you to decide whether either of these are advantageous to your business. However you will need to become VAT registered when your income reaches the VAT threshold (currently £83,000 in 2016-17).
If your New Year's resolution for 2017 is to become self employed or to set up a business I hope these few tips might give you some guidance with managing your finances and accounting records.
Running a business will not necessarily give you a better work/life balance but it will definitely be challenging and rewarding.