Limited Company Finances: Getting in Control
There are a few simple steps that you can take to help manage your small business finances:
1. Separate your different sources of income and expenditure. It's good practice to have a business bank account and use this for your business (if you have more than one business, get more bank accounts).
Note: a Limited Company must have a separate bank account as it is a separate legal entity.
2. Set up your business on Cloud-Accounting software such as Xero. This allows you to reconcile your bank account daily or weekly so that you can see your position and identify issues as they arise. Bookkeeping in Xero can be performed by business owners or supported by an accountant, depending what time you have available. It is especially useful to have accounting software once you need to register for VAT as it will help record all of your VAT transactions correctly and to file returns directly with HMRC.
3. Make time each month to understand how your business is performing and what your financial position is, including making allowances for tax due. This will give you peace of mind as well as provide useful information when deciding what money to withdraw from the business and also understand what money is available to spend on the business.
If working with an accountant, you could ask them to prepare Management Accounts which summarise your performance and highlight key points for consideration and discussion. This can form the basis of a monthly financial-check in and identify actions to help move the business forward. This could be related to anything from compliance with HMRC, to managing cashflow and tracking key performance indicators.
4. Create a budget. Budgets don't have to be complicated, they can be managed in excel and follow a simple format. Equally, there are tools that link with Xero and provide a comprehensive financial outlook based on your latest data. Either way, a budget provides an idea of what you are expecting from your business over the coming months and year as well as a basis for comparison with actual results.
Working with an accountant can provide clarity and reassurance when dealing with your business and personal finances.
If you would like to book a free discovery call to discuss your business needs, please get in touch.