Business accounting is a wide-ranging topic that can sometimes feel overwhelming to even the most experienced business owner, but if you want your company to be a success, it's essential that you start by getting to grips with the basics. Here are the top five things a business owner needs to do to ensure their business accounts are in order.
1. Open a business bank account
If you have a limited company, then you are required by law to have a separate bank account. Even if you run a business as a sole trader, separating your business account from your personal account makes sense. You will usually have to pay for business banking, but there are some online and app-based accounts that offer free business banking.
2. Keep on top of bookkeeping
It's vital that your day-to-day bookkeeping is up to date. This means ensuring your financial records are organised and that you keep track of all incoming and outgoing transactions, for example, payroll, pension payments, and expense claims from employees.
3. Maintain a steady cashflow
Cashflow is one of the top priorities for any business owner, and invoicing is a key aspect of this. Invoicing regularly is essential because, without it, you will end up limiting your cashflow. Ideally, you should invoice clients as soon as you have finished a piece of work as most invoices are paid at least 30 days after they are submitted. If you need more wiggle room between payments, learn how a charge card could help you balance your cashflow with up to 54-day1 payment terms.
4. Understand your tax liabilities
Every business has to pay tax and how your business is set up will determine what your tax liabilities are. For example, a company will pay corporation tax on profits, but may also need to pay National Insurance contributions for employees as well as VAT if the company has a turnover of more than £85,000 a year or it registers voluntarily. Directors will usually be paid in dividends, whereas a sole trader will usually do a personal tax return in which they declare all business income. Using an accountant is sensible to ensure you meet all of your tax obligations.
5. Consider online accounting packages
These can help businesses deal with their accounts much more effectively, and most of them also have apps available so you can upload expenses and create invoices while you are on the go. Some worth exploring are Xero, Zoho Books, Freeagent, and QuickBooks. Others are available, so do some research to find out which suits you best in terms of services and costs.
Getting your accounting right will give your business the best possible chance to flourish and grow. Find out how one of our customers gained better control over their finances and balanced their cashflow with an American Express® Business Card.
1. The maximum amount of time for a payment period on purchases is obtained only if you spend on the first day of the new statement period and repay the balance in full on the due date. Approval is subject to status and Terms and Conditions apply.