Small businesses often have straightforward financial affairs so it can be possible for the business owner to do the accounts themselves and file or submit the relevant returns to Companies House and HMRC. HMRC provides plenty of advice on their website to help you understand the processes involved, and the fact that tax returns are now done predominantly online makes it easier to complete them as you are guided through the whole procedure step by step.
One of the most important aspects of completing your own company accounts is to keep a record of all the incomings and outgoings for the business; this can easily be done using a spread sheet. Also remember to file away every single receipt and invoice – be absolutely rigorous about this and it will be much easier to reconcile your bank account at the end of your tax year. Never leave receipts or invoices on your desk to “file later” as they are just going to get lost. Find a filing system that suits you and stick to it.
It will probably be a struggle at first, especially since you will be predominantly focussed on actually running the business but if you can get into good filing habits early on it will make your life much easier when it comes to your tax year end and save you the cost of an accountant.
DIY accounting means that you will fully understand what each part of the business costs; which parts are profitable and which are simply expenses with no benefits. It may also reveal missed opportunities for making a profit. You will also, obviously, save on professional accounting fees but there are some significant disadvantages too.
You may not understand which expenses you can claim, which can be unclear if you work from home as the rules are complex. You may also be unaware of tax incentives or particular ways of structuring the business to minimise your tax burden. Even things like how you pay your employees can have a negative effect on your tax bill if not optimised properly.
So you may fully understood the financial details of your business and be perfectly capable of doing the accounts and tax returns yourself but you may be losing out on some tax reliefs by doing so. Handing over responsibility to a professional chartered accountant can relieve the stress of doing it yourself and will almost certainly save you money in the long run. Unless you have a financial background accounting may not be the best use of your time and energy.
If you are worried about the costs of using a chartered accountant look for one with a range of fixed fee accounting packages. These are paid for on a monthly basis to help with budgeting and can offer a variety of fully inclusive services to suits businesses of all sizes and complexities from a basic service suitable for startups or small consultancies to those that include tax planning advice and regular review meetings for large or fast-growing businesses.