Running Your Own Business & Doing Accounts

Let’s just get this straight. This is not a boring article. Running your own business is sexy. Accounting is sexy.

As a business owner, you’ll have a more challenging life. And, you’ll contribute more to the wider economy, as you will buy other goods and services for your company and you may even start to employ people – thus increasing demand and employment.

You can do it

Don’t believe me? OK, I’ll reveal how ridiculously stupid I used to be: I was bought up in the UK in the 1980s where most people, including Margaret Thatcher, assumed that in order for businesspeople to make money; other people needed to suffer. Yes, when I was young I really believed that! There’s actually a feeling in England, especially amongst the educated elite, that businesspeople, salespeople and entrepreneurs are somehow brash, pushy and dishonest.

Other than to piss off the English upper classes (and what could be better than that?), there are some solid financial reasons why you should start your own business. I’m reading Rich Dad Poor Dad at the moment and (although that’s an affiliate link, sorry!) I’m not finding it hugely useful. But here are two of the main arguments Robert T. Kiyosaki puts forward:

• You should always be improving your “financial intelligence” of which accounting is “financial literacy”. You should also keep trying to improve you knowledge of investments, markets and the law (government regulations and the like).
• The other thing that Kiyosaki explains is the basic tax difference between people and companies. Employees earn money, get taxed and then spend, whereas companies make money, spend everything they can and then pay tax on anything that’s left. So, working for yourself: good; working for someone else: bad. (Tell us something we don’t know, Robert!)

If you haven’t set up your own company yet I can hopefully further persuade you by saying that you can do this anytime – even if you are in full-time employment.

Once you’ve taken the leap into entrepreneurship, it’s essential to create a plan of action for managing performance within your company. Just as Robert T. Kiyosaki advocates for improving financial intelligence, implementing a performance management plan allows you to monitor and optimize the effectiveness of your business operations. This involves setting clear objectives and key performance indicators (KPIs) to measure progress towards your business goals.

By regularly assessing performance against these benchmarks, you can identify areas for improvement and make informed decisions to drive growth and profitability.

As you embark on your entrepreneurial journey, one crucial aspect to consider is how you will manage your financial and administrative responsibilities, especially if you plan to take on contract work alongside your business. An umbrella company can serve as a valuable resource in this regard, providing you with the necessary structure to handle your finances while you focus on growing your venture.

For instance, utilizing services like dasa-umbrella.co.uk allows you to streamline your income management, ensuring that taxes are deducted correctly and that you have access to various employee benefits. This support not only alleviates the administrative burden but also empowers you to maintain clarity in your financial performance, facilitating better planning and decision-making.

By integrating an umbrella company into your business strategy, you can free up time to concentrate on your objectives and KPIs, ultimately driving your business towards sustained growth and success.

Furthermore, a robust performance management plan enables you to foster a culture of accountability and continuous improvement within your organization. By providing feedback and recognition for achievements, you can motivate your team to strive for excellence and align their efforts with the company’s objectives.

Effective management practices are essential for ensuring that performance benchmarks are met and exceeded. In today’s dynamic work environment, this includes not only traditional office settings but also mobile and remote workforces.

By implementing a robust performance management plan, organizations can better oversee the performance of their teams, regardless of their physical location.

Mobile workforce management has become increasingly crucial as more organizations embrace flexible work arrangements. With the help of expert services tourtrax.com, companies can streamline the management of their remote teams, ensuring that they remain productive and engaged.

These services offer advanced tools for tracking performance, coordinating schedules, and maintaining communication, all of which are essential for managing a mobile workforce effectively.

Additionally, regular performance reviews offer opportunities for constructive dialogue and professional development, empowering employees to enhance their skills and contribute to the company’s success.

As you navigate the journey of entrepreneurship, investing in a performance management plan can be instrumental in maximizing the potential of your business and realizing your vision for long-term prosperity.

Naysayer interjects: It’s difficult to set up a company and even harder to organise! You end up with receipts everywhere and have a nightmare every year working on accounts!

I live in the UK and follow the local tax laws. Things may be different for you but I’ve got some really general accounting advice following that should be useful no matter where in the world you reside.

Setting up a company in the UK is fairly quick, fairly harmless and fairly cheap. After that all you have to do is to supply accounts every year.

Accounting

I have an accountant. He may charge me over $1000 a year (that’s an expense, see below) but, as they say, he’s worth it.

I spend about 3-4 hours doing the accounts for my business every year. Here’s how I collate all the information I give to the accountant and keep everything super simple:

• Have internet banking – I guess that’s a given these days?
• Make sure you make all the business expenses go out of this business account.
• Set up a business PayPal account that withdraws from this business account.
• If you can, get a credit card for the company.

You can simply copy and paste from online banking into an Excel file and give it to your accountant. Bank accounts online are better itemised to it is easy to note to your accountant whether a withdrawal was for marketing, hosting, outsourcing, etc., and whether a deposit was for client work or passive income.

For business owners managing finances, leveraging online banking for streamlined accounting processes is invaluable. The ability to copy transactions directly into Excel simplifies categorization, aiding in clear documentation for accountants.

Each withdrawal, whether for marketing, hosting, outsourcing, or other purposes, can be precisely noted alongside deposits earmarked for client work or passive income. This meticulous tracking not only enhances accuracy but also facilitates strategic financial planning and tax preparation.

Partnering with experts like Clean Slate Tax ensures that financial records are meticulously organized, maximizing deductions and compliance while minimizing the stress of audits or tax season complexities. In today’s dynamic business environment, efficiency in financial management is crucial

Outgoings

If you buy something for $100 then that’s $100 less profit that you’ll have to pay tax on. So I try to claim as much as I can. Here are the expenses I claim for.

• Tools of the trade: computers, laptops, tablets, smartphones, etc.
• Website expenses: hosting, domain name registration, stock images, email management, etc.
• General expenses: travel (to see clients), a proportion of telephone charges, use of house as office, broadband and anything that I use for my company (stationery, courses, books, etc.)

Incomings

My incomings can be roughly divided into two categories: invoiced client work and passive income.

I keep account of the invoiced client work with the use of a spreadsheet on Google Drive throughout the year. It has the following columns:

• Invoice number. There’s a cool little Excel/spreadsheet trick of creating consecutive numbers without having to type them out.
• Date invoiced.
• Client.
• Amount.
• Date paid? Don’t get me started on late payers!
• Extra column for notes. This is useful for a description of the job and other issues like foreign currency conversions, etc.

Other financial considerations

Of course, it’s not so simple and it does involve hard work. Here are some other things to keep in mind while starting or running your own business:

• You could consider purchasing some insurance to cover you against injury or something like that.
• You should also start a personal pension
• If you’re from the US, you’ll need private medical insurance.

More importantly, when you’re running your own business, you should keep large surpluses both in your personal bank account and your business bank account to tide you over during the lean months. Indeed, before you start a business you should also have a few thousand in reserve.

This depends entirely on your own financial position and your ability to find work. I was really lucky as parttime freelance work was coming my way really easily when I started my business and I had that to fall back on during the lean times. If you’re giving up a well-paid permanent job you’ll obviously need more cushioning!

What you can do

Do you dread the time of year when you do the company’s accounts? See if you can automate the process by using your online bank statements as a record of your expenses. Ask your accountant who’s happy dealing with this sort of information on a spreadsheet.

Maybe you have other tips for accounting you can give us in the comments?

Looking forward to your sexy accounting input!