In the UK, HMRC have said they will be introducing compulsory quarterly accounting periods for all businesses sometime in the not too distant future (if you’re in any other country and you don’t already have this, be warned, it will be coming to a place near you soon – just as VAT will eventually replace Sales Tax in the USA – it’s just a matter of time).
The new legislation (if implemented) will mean every 3 months you will need to know exactly where you are in your business from a financial perspective.
Anyone who keeps their accounts up to date will have no problem. But those (which is by far the majority now) will find it impossible.
And that’s because they have no idea how to account for their business.
The upside for HMRC is that they will rake in a lot of penalties. The downside for us as business owners is they will have plenty more reasons to go after us.
So how can we learn to take responsibility for our finances as business owners?
And (more importantly!) why would we do that?
What’s the benefit?
I drew up a list of 10 ideas to help:
10 reasons for getting to grips with your accounts on a regular basis.
- You will know if you’re making a profit (and so have the opportunity to revise the way you do business).
- You will know if you have the cashflow to continue next month (and have enough time to do something about it).
- You will know how much you owe and when you need to pay it (and so make contingencies in advance as you will now also have the answer to #2 above).
- You will know who owes you money and whether it’s overdue (and so put in place a plan to collect that money a.s.a.p. if you need to having done #3).
- You will know if you have enough money to take your business up a notch (of all of the above).
- You will be able to negotiate a better deal with the bank if you need extra cash to grow your business (because of all of the above).
- You will know the value of your business should you wish to sell it (because of all of the above).
- You will be able to take longer holidays because the business will run better when you’re not there (because of the above).
- You will be able to hire more staff to do the things you hate doing (because of the above).
- You will be able to retire earlier or sell the business or do something else. And all because you took the small amount of time it needs to take control of your finances.
If you’d rather do this yourself, take a look at the Accounting for Everyone online bookkeeping course. It will help you understand the basics.