How Can SMEs Keep Track of Finances and Taxes?
According to a recent survey, keeping accounts and company books is a constant headache for many of the UK’s small businesses, with an amazing 17% still relying on pen and paper.
As a leading provider of flexible serviced offices, Basepoint is always working to help SMEs. Here we look at the major issue of financial record-keeping.
If you’re a small business owner, you may often find it a struggle just to keep on top with everyday accounting, yet at the same time you should also be looking ahead. It’s important to be aware of how alterations to the financial system could impact on you. For instance, in 2016 there is a change looming to the way in which tax is paid on dividends, which will mean many SME owners could face higher taxes. Small businesses also need to be preparing for, and implementing, automatic pensions enrolment.
Struggling to Keep the Books
All small companies have a responsibility to keep proper financial records, while limited companies and limited liability partnerships have to file accounts with Companies House each year. There are also various other types of records that have to be kept, as well as the requirement for business owners and directors to fill in self-assessment tax returns.
It can be difficult keeping track of all this, yet, as well as those UK SMEs who still do their accounts on paper, the survey by Worldpay found that another 75% only use basic home software. As a result, around 40% don’t have access to up-to-date figures for how their business is performing in terms of profit and loss. Also, more than 70% don’t have a 3-year financial projection, even though this is an important way of looking at how business is doing and planning for the future.
If you miscalculate tax, your business could easily lose out financially as a result, and failing to send out invoices promptly will inevitably have impact on cashflow. Another problem for companies struggling with financial paperwork is the loss of staff time. If you or your key staff have to spend a long time sorting out your books, this is time that isn’t available to your business. Too often, if there isn’t time for all this in the working day, small business owners can end up having to take their accounts home and tackle them in the evening.
What’s the Answer?
So what is the answer? One possibility is to invest in some courses to improve your staff’s financial expertise. Another is to invest in specialist accounting software which will make it easier to keep accurate records and make projections.
However, many small businesses find that it is a better option to outsource accounting, payroll and tax affairs to an expert in this area. Some of our business centres have accountants based there who provide professional services to other small businesses, including other licensees within the centres.
Alistair Porter of Orwell Accountants Ltd, which is based at Basepoint’s offices in Ipswich, said: “I find Basepoint a great place to work because of the networking opportunities and we now do the accounting for some other businesses based there. As accountants, we can help clients to grow their businesses and prepare business plans, as well as with book-keeping.”
More Changes Ahead
A change to taxation which is due to come in from April 2016 could mean many small business owners paying more tax on dividends paid by their business. Under the changes, every individual can receive up to £5,000 of dividends tax-free over a tax year, but any amount over this sum will be charged at higher effective rates than in the past. SME owners may need to get advice over the implications of this for them.
Another major financial change affecting small companies is the roll-out of auto enrolment pensions, which is due to affect more than a million SMEs and micro-companies over the next two years. The Federation of Small Businesses recently carried out a survey showing that three quarters of small businesses felt auto-enrolment was putting them under too much pressure. Many are still not clear about what they need to do.
Other changes to tax and employment law are also likely to cause extra demands for company financial record-keeping in the future. All this is all the more reason why SMEs need to get to grips with their finances now, and ditch the pen and paper method for good.
If you are looking for flexible serviced offices for your small business, Basepoint has a whole network of affordable office centres in towns including Chatham, Folkestone and Southampton. We provide the infrastructure and support you need to run your business, and our flexible terms mean you will not have to commit to a long-term office rental.
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