Deep work - Professional activities performed in a state of distraction -free concentration that pushes
Well done! You have made survived the mad January rush to get your receipts in and your accounts up to date.
But do you really want to go through all that again every time?
Lots of people just hand over a bag of receipts and invoices to their accountant on the 31st Jan each year. Through your Accountant’s work this covers you for your statutory obligations but you are kind of paying them to do a lot of work that is needed but useless to get to a figure that they can put on your tax return for you.
Because if you give your receipts etc to your accountant in January they are at least 9 months out of date so there is not much you can do with the information apart from see that you have made a loss or a profit and what your tax bill will be.
END OF YEAR V ONGOING
For the same price (or maybe a little bit more) if you drip feed your receipts and invoices to your Accountant/Bookkeeper or log them yourself say monthly you can see there and then how much you are spending, if you are on course to make a profit and with the information you can make ‘real time’ decisions and work out what your return on investment is.
HOW TO RECORD IT
If you do very few transactions you may get away with using a paper leger or a spreadsheet.
If you do quite a bit of business then there are various free options online such as Wave where you and send invoices and log outgoings on the same system.
Once you are fully up and running then it is best to move over to an accounting package such as Quickbooks or Sage or Xero.
Also there is an argument to go straight for an online system as the HMRC are in the process of rolling out the Making Tax Digital concept, at present it is only for people above the £85,000 VAT threshold and to log VAT returns but in time the HMRC is wanting all business tax, VAT and Self Assessments to be done online.
Some of the free online providers have said their products will not be MTD Approved and currently you can set up bridging software for Excel but it will probably be phased out.
A lot of the paid for software come with add ons and apps such as letting you scan receipts etc and other things to help you keep on top.
Whatever system you use make sure you ‘USE IT’.
RETURN ON INVESTMENT
If you are logging your in’s and outs as you go along you can monitor the return on investment and amend things accordingly if things are not going as planned,
Return on investment is how much income you make from spending money on a certain activity. For example if you spend £10 on an advert and get work of £100 from it your return on investment will x 10.
You can do on purchases such as heating bills, broadband deals, stationery, printing costs etc – are you getting a good deal? If not you can switch to another provider.
But also don’t forget things like time, advertising and networking.
For example with time you may save money not getting somebody to do it for you but did it stop you doing other things as it took you that long to complete what you were doing.
As stated above with advertising if you are not getting orders from it them you need to look at changing your message or where you put the advert.
Networking needs a similar outlook to advertising. You may have had a good morning/evening chatting to people and eating food but were there any leads from the meeting.
Networking can be quite expensive and if you are not careful you could spend hundreds of pounds a year and all you have to show for it is some photos and a plate of chips. You could save a lot of money and get the same outcome just taking a selfie and buying a sandwich from the shop.
So if it is not working look at what message you are giving out, what audience you are giving the message to and where in the world you are doing it.
If you only pass over your receipts in the January after the tax year has been completed then you have no way of altering the costs or income of that year because it is over.
Log as you go and be in control!