In this article we’ll look at why you need to keep accounts, and why it’s a good idea to get a professional accountant.
It’s tempting to just put all your payments and earnings in a spreadsheet and save money on an accountant. Indeed, you can do this, and simply put your self-assessments in. However, there’s more to monitoring your money than a simple ‘in/out’ record and you could be losing more money than it would cost to bring in an expert.
Most businesses are required to produce a set of accounts every year. These accounts will form the basis for the information to submit the tax return which tells HMRC how much tax is owed.
Apart from accurate accounting being a requirement, you can benefit greatly from carefully considering the fine detail within your set of accounts.
Accounts can tell you how well your business is doing and highlight areas that need to be focussed on. For example, if you sell products or offer a service and your accounts show that the money you receive is less than your overheads, you may decide to increase your prices or negotiate harder with your suppliers to increase profit and keep your business healthy.
Accounts can be produced as frequently as you need them. If you require frequent up to date information about the performance of your business then monthly management accounts will possibly be best suited for you. However, if your business is very small and you have a rough idea of how well you are doing then you may only want the statutory annual accounts.
It is nearly always better for a professional to produce your business’ accounts because an accurate and comprehensive set of accounts will be of much more use to both you and your business, and will ensure that you are paying the correct amount of tax to HMRC.
Doing your own accounts may save you money but mistakes can prove very costly. You may incur penalties and interest charged by HMRC for underpaying tax, or by not claiming for all of the expenses and allowances the business was entitled to claim and overpaying tax.
Producing accounts can be very complex and it’s easy to make mistakes, this is why it’s better to hand it over to a professional and get on with the more pressing task of running your business!
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