A survey by “Certify” has revealed that while 55% of small business owners currently use spreadsheets or Microsoft Excel as their expense management system, 7% still prefer to use pen and paper.
There’s nothing wrong with taking a traditional approach to expense management – it does actually work very well for some businesses. But as the roll out date for Making Tax Digital (MTD) approaches like a hurtling freight train, incorporating new expense bookkeeping techniques into how you run your business will help your company prepare for the new tax regime.
Today, we guide you through the top five challenging areas when managing your expenses and the best solutions to overcome them.
What is Making Tax Digital?
MTD is a new initiative by HMRC that is set to roll out in April 2019 but will you actually be affected?
Every VAT registered business with an annual turnover which is higher than the VAT threshold (currently £85,000) will have to keep their records digitally and complete their VAT return online. If you are self-employed or a landlord and produce a turnover higher than the VAT threshold, then you too will be affected.
How could MTD help your business?
The UK government says that MTD will help make easier the filing of your VAT returns and make the whole tax system far more efficient. But how?
Using MTD-compatible software to file your VAT returns will mean, HMRC says, that you can complete your tax return form in less time with greater accuracy and with greater ease.
Because your business’s records will be online, you won’t have to worry about losing an important piece of information or spending hours searching through piles of papers to find one document.
If your company keeps a petty cash float to cover trivial business expenditure, such as a fund to buy coffee for the office, it’s very likely that you have had problems in the past when both accounting for and keeping track of this money.
Let’s say that you gave a trusted employee an amount in cash to buy new stationary for the entire office. Not only does that employee have to be careful to keep their personal money and petty cash separate but you also need to record how much money has been spent, where, and on what.
This can be a very tedious and time-consuming task. A better option is to issue your employees an expense card which gives you complete control over how much money they can access and which can track every purchase that they make. Unlike a credit card, an expense card doesn’t come with interest so it won’t be costly to use.
The idea of sorting through and managing your business’s receipts probably doesn’t fill your heart with glee. However, keeping track of your company’s receipts is vital to claiming them back. If you lose a receipt, you lose the evidence needed to back up your claim.
With MTD coming, the hassle of paper receipts can be a thing of the past. Mobile receipt capture allows you to take a picture of all your company receipts and it keeps them safely stored online. In fact, some banking and accounting services even let you upload your receipts and attach them to items that you have purchased.
If you’re a small business owner or if you’ev just set up your business, you may not be overwhelmed with paperwork just yet. But if your company has grown in size, your record-keeping responsibilities will have done just the same. Suddenly, managing your paperwork is even more tedious, complicated, and time consuming than before.
Because of this, many businesses invest in an expense management platform to remove the risk of human error and save their precious time. A good expense management platform can quickly analyse your incomings and outgoings to simplify the upkeep of your business’s records. And if your business’s records are up to date, the process of filing your VAT return via the more detailed MTD will be far simpler.
Do you need help with expense management or MTD?
While expenses management will never be a particularly enjoyable activity, you could make it a lot more painless just by following our advice. If you want to take the first steps to incorporating our expense management tips into your business or if you want to better understand MTD and the effect on your business, we can help you.
Contact Sunny Accounting on 01623 559 362 or email us on [email protected] for advice and support.
For a free chat on how we can help you, please complete the contact form below and we will be in touch.