Luckily, with accounting, there isn’t much difference between the information small business owners need to supply, and the information larger businesses need to supply.
What does that mean for you?
Well, if you’ve been in charge of small business accounting for a few years and your profitable business has grown into a larger one, then you essentially just keep doing what you’re doing.
Of course, you’ll have more cash flow, profit and loss, income and expenses, and financial statements than before, but the same basic principles apply.
Still, you might need a refresher and some additional support, so stick to our advice below to help implement an accounting system for your business bank account that will make things much easier now your small business is a little bigger!
Small business accounting basics
The reason we’ll cover this briefly below is so you know you have everything in place already to then build on as a larger business.
So, in small business accounting, you need a few things:
- Separate bank account (a business bank account for all business transactions)
- Recording transactions (record all your income and expenses and cash receipts)
- Start a bookkeeping routine (and stick to it)
- Payroll system (start a payroll system that pays employees and yourself and deals with things like tax and national insurance for you)
- Know your tax obligations (so your tax efficient and pay everything you need, i.e. income tax, corporation tax, etc. to help manage taxes)
- Turnover, profit and loss statement, cash flow (knowing these are important)
- Find accounting software that works for you, OR
- Hire an accountant, OR
Once you’ve got all that covered, then you’re set to go. But things start looking a little different when your small business is no longer small.
Stepping up a gear
Business finances become even more important to track when you’re a bigger business. You’ll need to track expenses and income, be on the ball with accounts receivable and accounts payable, prepare for different taxes (knowing if you now need to file a company tax return or corporation tax return), etc.
The point is, this can all be very time consuming and keeping accurate records becomes more difficult as you have a larger annual turnover and need to manage how much cash comes in, and how much cash goes out.
But why does it all step up a gear?
Because HMRC needs to know more about you and your accounting system. The bigger your business, the more accurate you’ll need to be when filing tax returns, so when you pay tax, it’s the right amount.
But don’t worry, HMRC makes things easier through something known as ‘Making Tax Digital’.
Making Tax Digital explained
When you’re a bigger business or company, HMRC offers something known as Making Tax Digital (MTD) which applies to all VAT registered businesses above the £85,000 threshold.
Making Tax Digital means eligible businesses can use HMRC recognised software to keep records of their annual accounts so they have an accounting method in place to provide all the financial records and financial information HMRC needs in one convenient place.
By law, businesses with VAT-able sales above the VAT threshold of £85,000 must keep digital records with HMRC. The benefit is that the HMRC recognised software helps with keeping accurate records, so businesses can be sure that they have all the information to hand that HMRC will need.
Xero, for example, is HMRC-approved software that will aid with MTD for construction, e-commerce, and other industries.
You’re still responsible
Despite this helpful software, you’ll still be responsible for everything within the accounting period, from business expenses to the money you make, and you’ll still need to keep records for yourself too.
The HMRC software just applies to VAT registered businesses, so if you’re not one of these, you’ll definitely need to be keeping your own records for your own business. So, what can you do?
Accounting software for larger businesses
Accounting software isn’t just for small business bookkeeping purposes. A small business owner and large business owner alike can get use out of accounting software.
You’ll need to look for the accounting software that works for you and your business structure (if you’re a sole trader, you might benefit from different software to a limited company, for example), but there will be something out there to suit your needs and help you understand your fiscal health.
So, what can accounting software help larger businesses with?
Auditox Accountancy says that when you keep records, you’ll need everything in one place so you can quickly access what you need at any given time. Things like;
- Your balance sheet,
- Allowable business expense,
- Business money in your business bank account,
- Bank statements,
- Business credit card statements,
- Business documents,
- Expenses for your business premises,
- Income statement,
- Import tax, and
- Cash flows
These will all need to be stored in one place for you to bring up at any time. Accounting software can help with that so it can give you a snapshot of what your company owns and what your company owes (assets and liabilities).
Predicting future business success
Away from the standard bookkeeping duties, such as recording transactions, reconciling bank statements, paying bills and staff, and paying tax, accounting software can also help you prepare for the future.
Cloud accounting software is smart, so it can predict future patterns based on past events. Not everybody with a business idea is capable of dealing with sales tax and accounting systems, predicting future growth, collating supplier invoices, or organising financial statements for your balance sheet to understand financial health – so let your accounting software do it all for you.
All you need to do by law is register your business with companies house or HMRC, open a business bank account, and set up a system to record all your business transactions. After that, you can let your accounting software take care of the rest.
The point of today’s post is to show you that accounting for larger businesses is no different than accounting for small business owners. So long as you have an accounting system in place to care for your business finances over an accounting period, then you needn’t worry.
Remember to stay on top of your accounts (as you would have done whilst small business bookkeeping), keep a record of every business transaction and all your financial statements, and think as business owners do, and you won’t have a problem.
An accounting system with software to deal with all of this is especially useful when your business grows, as there will be far more records to keep, so bear this in mind as you leave today!
Interesting Related Article: “3 Common Accounting Problems Small Businesses Face“