A Shrove Tuesday recipe for success
When you’re in business there’s a lot of fun stuff to do.
Regardless of what kind of business you run - whether it’s embroidering cushions, digging gardens or writing children’s books - it is almost certainly something that you’re passionate about and that you enjoy doing for a living.
Add on to this all of the marketing, the networking and the buying you can get stuck into, and it’s clear that the day-to-day running of a business can be an incredibly enjoyable experience.
But what do you think about the numbers, the accounting and the tax calculations that you have to do? Is it boring? Scary? A necessary evil?
Accounting can be all of the above, but it is also a vital part of your business. And in the same way that egg is the key ingredient to make the perfect pancakes this Shrove Tuesday, it is accounting that is the most important part of your business’s recipe for success.
Emily Coltman ACA, Chief Accountant to FreeAgent, who provide an award-winning online accounting system specifically designed for freelancers and small businesses, explains why it’s important to always keep your accounts at the forefront of your mind when running your business:
Important information
Keeping your accounts isn’t just about making sure you’ve got the right information for the taxman, although this is of course important in itself.
Rather, the numbers can also provide vital information to help you run your business. Whether it’s your cash flow, your profits, how much tax you owe, your outstanding bills or your expenses, your accounts are the key to determining how your business is performing and finding out how to make it work better for you.
Pricing
You might be working on a project that you really enjoy doing, but which doesn’t bring in enough money to cover its costs. So, should you put your prices up - and by how much?
You won’t know unless you’ve recorded all the income for the project and all its associated costs, such as materials, and time that you and your team have spent on the work.
Until you’ve done all of the number crunching, there’s no way of telling what your new pricing should be - or whether you can afford to keep doing the project at the original price and cover the costs from elsewhere in your business.
Cash coming in
Equally, you might have customers who are always slow to pay.
As your business grows you won’t be able to remember who has paid you and who hasn’t.
By keeping your records up to date - and by using a simple yet robust system like FreeAgent which lets you quickly and easily issue invoices to your customers and record payments as they come in - you can see at a glance who has yet to pay you and how much they owe.
Without enough cash coming in, your business can’t survive for long - so you need to always stay on top of your payments.
Cash going out
Trying to remember your business’s costs in your head is something else you’ll very quickly lose track of. (Trust me, I’ve tried.)
It’s very easy to spend money thinking “oh, that doesn’t cost very much”, but it’s surprising how quickly costs rack up.
How much did attending that networking event cost you – not only in terms of attendance fees, but also travel, parking, and your time?
Did it bring in enough customers to make the cost of attending worthwhile? If not immediately, then might they come in the future?
Remember it does take time to build trust.
Don’t try to add up your costs in your head. You will forget some of them and it’s not the best use of your brainpower, which you can spend better on helping your customers and providing a great service or product.
Saving tax
Nobody likes paying tax.
However, you can make sure you’re not paying too much tax by keeping your books up to date.
There are often steps you can take to save tax on your business - for example, by buying a piece of equipment at the right time of the year. However, if your books aren’t up to date, you won’t remember to do this and it could cost you in the long run.
Crunching the numbers can help you make sure your business is profitable, viable and will stand the test of time – and can even save you some money, too. There may be many aspects of your work that taste sweeter and are more fun to do, but when it comes to making the perfect business pancake, there’s no more important ingredient than your accounting.
Emily Coltman is Chief Accountant to FreeAgent, who provide an award-winning online accounting system designed specifically for freelancers and small businesses.
Try it for free at www.freeagent.com
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