Funding and Finance
- Coral Ryder
- Mar 20, 2024
- 7 min read
Updated: Jun 13, 2024
Bookkeeping: According to dictionary.cambridge.org bookkeeping is: "the job or activity of keeping an exact record of the money that has been spent or received by a business or organisation."
Good bookkeeping practice is essential to your business. Its important to keep accurate records of all your incomings and outgoings in relation to your enterprise. Keeping accurate records, in an orderly fashion, lets you know exactly how much profit or loss your business has made over the tax year.
Keeping your books up to date makes it easier and less time consuming to finalise them at end year. Which in turn means you can submit your self assessment tax returns earlier in the year, and not have to worry about looming deadlines. Having accurate figures helps HMRC calculate your taxes correctly. It also makes it easier for HMRC to check your records, should a need arise. It is also useful in working out and predicting your financial and cash flow forecast.
There are Allowable and Disallowable expenses, and it is important that we know the difference and what they are. Allowable expenses cover things like bills, staff, raw materials, insurances, marketing, premises, office supplies, staff, bank charges, website, marketing, business and employee training. etc. It is the necessary things needed to run your business. Disallowable expenses are personal things that are not directly connected to your business such as everyday clothing, loan repayments, fines and penalties, donations, or business entertainment as in gifts or hospitality for clients or suppliers.
Allowable business expenses in relation to my work are things like, travel expenses for fuel or flights, PayPal charges, zoom, creative fabrica, canva, insurance policies, internet, business cards, art materials, website, tablet, camera, projector, overhead camera, portable screen, leads, clothing specific to your business. advertising, teacher resources etc.
Its noteworthy to remember that some things come under both allowable and disallowable expenses depending on what type, for example training: you can claim expenses on training to improve your knowledge and skills you currently use for your business, keep up with your industries technology, or to further knowledge and develop new skills in relation to your industry, or to support your business. But, you cannot claim expenses on training to "start a new business" nor to "expand into new areas of business that are not directly related to what you currently do". For an easy aid to memory and to make bookkeeping easier it maybe prudent to keep a list of allowable expenses to use as reference and to check anything your unsure of.
HMRC contributions: you pay tax on profits over your personal allowance:
Methods of bookkeeping, tracking your cash flow through cloud software, spread sheets or note books.
Note books work well for those who are not tech savvy, or who just prefer working on paper, they come in simplified versions such as accounting ledger books, to the more in depth Simplex 'D' Account book that includes guidelines on how the simplex system works.
Spreadsheets such as Microsoft excel and Google Sheets are electronic documents where data can be arranged in rows, columns and grids. Its software allows you to manipulate and interconnect data to create business spreadsheets that can be utilised in bookkeeping, calculating tax, making charts, calculate revenues and forecast future performance etc.
The cloud is a global network of interconnecting remote servers used by various industries and individuals to store, access and manage information. Cloud software such as Sage, or Quick books provides an accounting system for keeping track of all incomings and outgoings, invoicing, receipts, cash flow, they even enable you to submit your online tax returns.
HMRC require your books, receipts and invoices etc., to be kept for a minimum of 5 years. It is thereby important to ensure we store evidence of all our incomings and outgoings. You can keep them digitally or by hard copy. However, even if you prefer working with paper it is wise to keep a digital back up, which can be done through scanning or photographing them and then storing them on a memory stick, or in the cloud.
Presently I keep records using a combination of spreadsheets and accounting software. I use an excel worksheet that is designed to add up all incoming and outgoings for the month, it then links those to a yearly summary. The summary provides at a glance the total incomings and outgoing for each month along with the end of year total and if its in surplus or deficit. As I have a poor short term memory, I find it prudent to input the data as soon as possible upon receipt of payment or upon paying a bill. If dealing with payments on a daily basis, then the books need updating on a daily basis; otherwise it can become overwhelming or I may miss something if its been left too long. I have recently updated my excel spreadsheet and then created a new folder to store digital copies of my accounts incoming and outgoings, receipts and invoices, set out April to March to correspond with the tax year. Each folder represents a specific tax year with a subfolder for each month. I also store copies physically and digitally for back up purpose's.
Business bank accounts:
The advantage of having a business account is that it helps with your businesses financial management. It keeps your personal and business bank accounts separate, making it easier to track your businesses transactions. It also stores your bank statements securely, and safeguards against fraud through secure login methods and account protection.
The downside with business accounts is that they can be costly and may have hidden charges, so always check the small print. Some branches offer free business accounts for a set amount of time, but then when the times up charge a set fee every month and or transaction charges which is yet another expense taking away from your profits.
With business banking apps you can track your expenses, access your data, digital receipts, expenses, and take or make payments.
In an attempt to try and keep the cost of my enterprises overheads down I looked up the top best free online business banking apps. After which I decided to apply for a Monzo account due to its reputation, it being free and aimed at budgeting, something I need to become better at. Monzo was ranked 2nd and 3rd in the top 10 banking app reviews, and was reasonably easy to apply to. Most transactions are free but there are a few that may incur some charges. For Monzo pro account it costs £5 a month.
Financial planning and forecasting: If I was reliant upon my business to make a living wage then I would need to make at least £35,000 to £39,000 a year to cover expenses and make a profit.
So how do I get there? I would need to work out how much I need to earn to cover all outgoing bills, taking in allowances for disposable income and reinvestment into keeping my enterprise up and running. By taking a look and what I have earned over past years and examining for patterns, where the highs and lows are. As well as taking into account how my health and family commitments impact upon my ability to work, can give insight and aid in forecasting future planning. Knowing this information helps planning for the year/s ahead on where you will be able to make the money up verses the dull months you don't or cant work.
Invoices and Receipts
An Invoices is a type of bill you send to your customers with a list of goods you have sent or services provided with a statement of the total sum and due date for payment. A receipt is what you give your customers after they have paid for goods or services to thank them and acknowledge receipt of payment. They are important documents, as they are required for warranty and returns for customers. They are also essential in providing evidence that you have received a payment or paid a bill, for HMRC purposes.
For my new invoices I utilised a template from Canva and then altered it using the information from my old invoices combined with my new brand colours, logo and new payment details. An invoice should includes your business name, address, contact details and logo, along with the customers name, address and contact details. It should also include an invoice number for easy referencing, plus the date, payment terms, description of products or services provided, and an itemised list of costs, shipping, quantities, total amounts, and the payments due date. For my new receipts I used the same format but altered the layout enough so that they match, but can be easily told apart. The receipt the itemised list and cost of what the customer bought, along with an acknowledgement and thank you for the payment, the date it was received and how.
Costing and pricing
What kind of costing and pricing should be charged for our products and services provided.
How much does it cost to produce one item? Working this out, helps in working out how much to charge for your products and services. For my merchandise that is sold via print on demand, there is no initial production costs, just time for designing and listing the products. The customer pays the printer directly and I get paid commission on every sale. For seminars I get paid between 50% to 80%, out of which I pay for my travel expenses
At present I do not have, nor have I set any wholesale prices, as I have not got an outlet yet. However when I do, the price will be lower than the RRP so that they too can make a profit.
Retail price is the price I sell my items to the customer for, referred to as consumer price. Online sales are sold at RRP, if not working through retailers its customer price.
REF:
Comments