Regardless of which business structure you choose for your business, maintaining accurate business and accounting records is essential. From calculating your net profit for your tax returns to utilising reports and figures to help you manage your business more effectively, accurate accounting records and software are vital.
With HMRC’s continuing rollout of MTD – Making Tax Digital, it is inevitable that all businesses will need to use accounting software in the future. Currently, all VAT and payroll submissions must be submitted electronically using MTD compliant software. You can learn more about MTD and the implementation time frames on HMRC’s website:
Overview of Making Tax Digital – GOV.UK (www.gov.uk)
DIY bookkeeping
Starting a new business comes with a hefty workload of tasks, one being the day to day bookkeeping. Initially, you probably won’t have the budget to employ the services of a bookkeeper or accountant, and you may decide to take this task on yourself. The good news is there are plenty of accounting software packages available to help with this.
There are numerous accounting software packages to choose from, some of which are targeted at small businesses operating in a self-employed capacity, through to software packages that offer a choice of functionality at different price points. There are several banks offering free accounting software when you open a business account with them.
Accounting software
Before choosing an accounting software package, take some time to consider what your current functionality requirements are and what you may need in the future. Furthermore, check whether the software packages have the option to add applications to the core software, allowing for additional functionality. Some factors to consider are:
- Tax position – are you paying tax as a self-employed individual or are you paying corporation tax through a limited company?
- Are you VAT registered or likely to be in the near future?
- Reporting requirements – what reports would be beneficial to help you run your business more efficiently?
- Growth – what are your future aspirations for growing the business?
- Payroll – will you be recruiting staff and how many?
- Projects – do you need to allocate income and expenditure against specific projects?
- Cost centres and departments – if you are looking to grow your business and want to attribute costs to specific departments or cost centres.
- Fixed assets – will your business own fixed assets such as machinery and equipment?
Software suggestions
FreeAgent and Xero are both great accounting software packages and are worth looking at. FreeAgent, is very user friendly and ideal for smaller businesses. It includes self assessment tax returns as part of the offering – great for DIY bookkeeping business owners. Additionally, if you have a bank account with NatWest Bank or Mettle you can get FreeAgent for free!
Xero offers different functionality options and pricing levels, so great for all business sizes and ideal if you have a growing business. Xero has good reporting functionality with standard reports and the facility to generate bespoke reports. The software also comes with plenty of functionality for project reporting and cost allocations. There is a payroll module that can be added for a modest subscription. Furthermore, there are numerous and varied applications that can be integrated with Xero.
Both software packages have the facility for bank feeds from business bank accounts directly into the software. This functionality helps save time and improves the accuracy of accounting records.
Payroll software
If you operate a payroll, you will need payroll software to submit RTI returns – real time information. All payroll returns must be submitted to HMRC electronically under MTD (making tax digital). HMRC has a free payroll software, Basic PAYE, which is suitable for businesses with less than 10 employees. You can download the software using the following link:
Download HMRC’s Basic PAYE Tools – GOV.UK (www.gov.uk)
Accountants
When the budget permits, it is advisable to have an accountant to review your accounts and calculate your tax liability. Accountants can help and provide advice for your business, from structuring your business tax efficiently, to cash flow management, financial forecasting, budgeting and general business advice!
