Bookkeeping for Beginners
Helpful information on bookkeeping for beginners
Franchise, franchise bookkeeper, franchise owner, franchise business, franchisee, franchisors
There is absolutely nothing more critical when you start a business than keeping on top of your finances. Everything you spend, every order you make and take, every item of income; it is all vital information that you will need so you can understand your financial position, how much tax you may have to pay and even whether you can afford to pay your employees.
Some people are good at the financial side, some aren’t. Some of us know to the penny what we have in our bank account but, to be honest, most just have a vague idea. When you are running a business, you simply cannot be that lax. And it is never too late to start and get those good practices instilled.
So, where to start?
Depending upon how complicated your business is, how many transactions you have (money going out and coming in), you could possibly manage it on a spreadsheet. Keep all receipts to include in the spend column (not forgetting all the costs for running your business like electricity, rates etc) and make a note of each sale in the income column – making sure of course that you have received the money and it is in your bank account or till. That will give you an indication of whether you are making money or losing it. But it might not give you the complete picture – how much tax you may have to pay for example.
So unless you really have a very simple business model, it is probably best to look at one of the cloud software packages there are on the market. These have been designed for people like you – you are not an accountant or a trained bookkeeper so they are really straightforward to use. We use Xero here at Roden Associates and love it for its simplicity and the wide range of functions it has – you really can run your business through it. It is also HMRC MTD-compliant which means, once you are at the required £85,000 annual turnover threshold, you get make your quarterly VAT returns through it too. See our recent blog [insert link to MTD article} for a bit of background about MTD.
We are Xero-certified and that means we can help you with set up and we even run training which can give you a head start with the implementation. And we are there every step of the way as you run your finances through it. Choosing software to use on a day-to-day basis doesn’t mean you might not also need the input of a bookkeeper to help you and make life that bit easier for you.
You do need a basic grasp of bookkeeping terminology and we recently put a glossary together of the main financial statements and what their relevance is when it comes to your business finances. You can find it here: https://rodenassociates.com/bookkeeping-terminology-for-franchisors-helpful-glossary/
Even if you feel confident using software to get on top of your franchise business finances, you may not be operating in the most tax efficient way and that is where the skills of a bookkeeper or an accountant can really help.
What else do I need to consider?
There are many business finance elements you need to be aware of when you start out:
As covered above, you need to ensure you manage all of the outgoing and incomings of your business – so you have a clear record of your financial position. Ideally this should be undertaken on a very regular basis – get into the habit of recording everything on a daily basis and reviewing it regularly.
Quarterly VAT return
As soon as you reach £85,000 annual turnover you need to register for VAT and make a quarterly VAT return and VAT payment. It is always good to know what you owe the tax man, even if you haven’t reached the threshold amount – there is nothing worse than a large tax bill when the piggy bank is empty.
At the end of the year, and when your end of the year is depends upon whether you are operating as a sale trader or a limited company, you need to present the financial performance of your business in a formal record. This is frequently the stage that franchise owners decide to bring in the expertise of an accountant.
This is relevant for all UK limited company and is charged against the profit your company has generated. You or your accountant will need to complete a return and the tax is due to HMRC within nine months and one day of the accounting period.
Self-assessment income tax
You will need to calculate your personal income tax on your income and again, keeping on top of your finances from the outset will mean you have put that money aside.
Touched on above and relevant if you reach the £85,000 threshold.
If you employ staff, then income tax and national insurance need to be calculated and deducted from grow wages and paid to HMRC on their behalf.
Don’t let this list put you off; the majority of businesses will use the services of a franchise-experienced bookkeeper like ourselves, or those of an accountant. Just give us a call, and we can talk about what is going to be best for your circumstances.
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