Financial management can be one of the areas of business that gets avoided. This could be due to a history of bad financial management, or purely due to a lack of understanding of what is required to ensure that your business is financially secure.
These are our top 8 accounting tips for enabling your wedding business to thrive.
Keep your personal and business finances separate
There are a few reasons why this is a good idea. Firstly it helps when it comes to filing your taxes. You will easily be able to see what has come in and out and easily track any transactions you need to find. If business transactions are interspersed with your utility bills and your gym membership, things become less clear.
It will be much easier for you (and or your accountant) to file your tax return.
It will help you to be able to forecast your cash flow.
If you're flitting between 'hobby and 'business', setting up a business account will possibly give you that mind shift into believing that this passion is no longer just a hobby but It can be a viable business. Believe in yourself ????.
And finally, you will be removing some personal liability by having a separate business account. Of course, when you set up a new business you often have to invest your own money into it but the goal should be to reinvest from your business finances, not your personal finances. Having your finances separately will help you to do this.
Keep your receipts and have a filling system in place
You never know when your business may be audited so it's really important to have your receipts in order. This can be done physically or digitally - whichever works best for you. Try and find a best practice; be that collating and logging your receipts weekly or monthly. Just don't leave it until the week before your tax deadline because you can guarantee you won't remember what half of them were for and you may well have misplaced some by then too.
Don't miss your tax deadline
Speaking of tax deadlines, don't miss them. In the UK the deadline for filing online self-assessments with HMRC is 31st January and paper tax returns is the 31st of October. You must pay any tax owed by midnight on Jan 31st too. So for example for this year, if you are filing a paper tax return it needs to be received by October 31st 2021. Online returns need to be received by midnight on 31st January 2022.
Failing to meet the deadline can result in a penalty of £100 if your return is up to 3 months late.
When you set up a new business you often have to invest your own money into it but the goal should be to reinvest from your business finances, not your personal finances.
You don't need to become an accountant but it's good to widen your knowledge of how to manage your tax and business finances. HMRC have a really good set of e-learning courses you can take based on taxes and business finances. They cover everything from record-keeping to self-assessments and business expenses. These are all free so well worth taking.
Budget for and set tax aside
How do you budget for the tax you'll need to pay? How do you even know how much tax you'll have to pay? Here's where HMRC come in again. They have a really good calculator that can help you work it all out. Once you've made your calculation, you can start putting that money aside so that you don't have any surprises when tax day comes. You can find the calculator here. Don't forget to revisit the calculator if you have fluctuations in your earnings too.
Understand your cash flow
You can see our previous article about cash flow to find out everything you need to know about it and why it's important to your business.
Create a profit and loss
Alongside your cash flow statements your profile and loss (sometimes called P&L) will give you insights into both profits and expenses. There are lots of free forecasting tools that you can use to create your P&L, but if you want to do the maths yourself we thought this article from digital.com was really comprehensive.