26 January 2017
1 February is a better time to make a New Year’s Resolution than 1 January. If you are one of the ‘just-in-time brigade’ you are almost certainly suffering from tax deadline stress at the moment. Why not make a decision now to avoid the pressure next year by focusing on keeping your records up-to-date throughout the year? Make a resolution! Act now! Find out how to reduce your stress levels and how to put aside funds to avoid a cash flow problem on 31 January 2018.
There is nothing new or difficult in this; in fact, if you are VAT registered, you are already used to preparing quarterly figures and paying tax on time. If you have employees or sub-contractors you will be familiar with the routine of preparing figures monthly and sending remittances to HMRC. Nowadays there is so much technology to help you keep your affairs in order. Excel spreadsheets have been around for a long time and we have many small business clients who use these. However, in my experience few people use more than a fraction of the capabilities of these remarkable tools. The possibilities for automation and data analysis are enormous and can save you a great deal of time. All of our team at UHY are very skilled and experienced in Excel so why not talk to us about enhancing your spreadsheets?
Even better than spreadsheets are proprietary accounts packages such as Sage and QuickBooks. If you use one of these do you set aside some time each month to input all your data and bring them up to date? If you do you will find that they generate management accounts which can be a very powerful tool in helping you to make management decisions. You may not be using this tool as effectively as possible but we are here to help. We can provide you with bespoke training or even share your data online so that we can easily review your management accounts and spot errors early. All this saves time at the year end and helps to avoid the last minute rush.
One step further would be to use cloud accounting. This means uploading your data onto an accounting program on the internet. Cloud accounting has many advantages, including linking it with your bank account so that bank transactions are automatically entered and allowing you to access the data from wherever you happen to be.
What the future will bring?
Whatever method you use, if it doesn’t have the capability of producing quarterly data that will permit a reasonable estimate of your year-to-date tax liability, you are going to have to change your system and your accounting habits in a couple of years’ time. HMRC are in the process of introducing ‘Making Tax Digital’. Originally it was intended that this would be introduced on 6 April 2018 but it now seems likely to be delayed at least one more year. This will require businesses to digitise their data in such a way as to enable it to be submitted at least quarterly online to HMRC. Inaccurate data may result in too much tax being paid. Cloud accounting via your local UHY Torgersens office is the perfect solution to this latest onerous requirement. If you don’t get yourself properly organised the frantic end of January rush will recur every three months; not good when, as they frequently say, you have a business to run.
The benefits of being organised
A recent survey concluded that the average sole-trader spent nine and half hours each year preparing his or her tax return. This huge amount of wasted time is probably explained by the fact that if the job is left until January a good deal of time will be spent looking for information that you no doubt put somewhere safe nearly two years ago. Surely this doesn’t apply to you! If it does, get yourself organised and set aside an hour a month to file things logically and bring your accounts up to date. For personal (non-business) tax information, why not get a box file, stick a label on it that reads ‘Accountant’ or ‘UHY Torgersens’ and put your tax stuff in it as soon as it lands on the doormat? Then hand over the file to us after 5 April. And finally, if you still haven’t let your accountant have your tax information, please do so as soon as possible. No-one wants a £100 fine!
If you would like advice on how to improve your accounting systems, how to get more useful management information from your accounting function or how to prepare for ‘Making Tax Digital’ contact me, Paul McMahon, on 0191 567 8611 or your usual UHY adviser.