Spring clean your business finances and tax admin


Date: 18 March 2024

It's spring and a small business owner is spring cleaning their finances and accounts

With the weather getting warmer and the world outside looking much greener, spring has most definitely sprung. It's a time when many of us spring clean our homes, an end-of-winter custom that's thousands of years old.

Thorough spring cleaning can transform our living spaces, leaving us feeling revitalised, healthier and happier. You can also spring clean your business finances and tax affairs and introduce beneficial changes. Even seemingly small changes can make a big difference. So, where should you start?

1 Tidy up your financial records

Make sure your financial records are up to. Regularly set aside time to update your financial records (weekly is advised). This helps ensure your financial records are always as accurate and current as possible. This allows you to reliably judge how well your business is performing.

Consider whether any other bookkeeping bad habits need addressing. Could your system be better organised? Could your costs and expenses be better categorised? What about retaining and organising receipts or logging your business miles? Should you replace your current bookkeeping system with something that's easier and more beneficial? When was the last time you researched your bookkeeping options?

Top tip! Although sole traders aren't required by law to have a separate business bank account, doing so can enable you to better track your business transactions and ensure that you claim for all of your business costs.

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2 Reassess your business costs

This should always be a key priority, but it's crucial at the moment with the eye-watering price rises that business owners are battling. Minimising your costs is vital if you want to keep your cash flow healthy.

Carefully assess your current spending in all areas. What do you buy and how much are you paying? Are you happy with the value and service you receive from all of your suppliers? How much has your spending increased in the past year? Are you wasting money anywhere? Be honest. Seek to eliminate waste from all areas. Find cost-savings wherever possible. Negotiate better deals with your suppliers. Set new tighter monthly spending budgets and stick to them. Never spend beyond your means.

Top tip! You must be prepared to make difficult decisions when controlling your costs, but caution is advised. Overzealous cost-cutting can damage your business.

3 Reconsider your prices

There can be serious cash flow consequences if you do not increase your prices to cover your higher costs. Understandably, you may be nervous about losing sales or customers, but if you don't increase your prices, your business becomes less profitable. If justifiable and well communicated, price increases need not lead to a customer exodus. Good customers will appreciate that your costs are increasing, because theirs are, too. Even putting up your prices by a small amount will help to cover your increased costs.

Top tip! Get into the habit of reviewing your prices regularly. Every quarter or six months is advised for most small businesses.

4 Make better use of digital tools

Harnessing the power of digital tools, apps and software can enable you to be more productive and save lots of time and money when managing your small-business finances and tax affairs. If you're using basic spreadsheets to keep financial business records, upgrading to accounting software could be a game-changer. If you're already using accounting software, could you upgrade to save more time and make your life easier?

Digital tools can also make completing and filing your Self Assessment tax return much simpler, saving you time and possibly money, while rendering mistakes less likely. Tax return software can be integrated with your bookkeeping software, which can be linked to your business bank account, saving you time and effort.

Top tip! Invest time in finding out about digital tools that can save you time and money and help you to make your business more successful.

5 Start working with cash flow forecasts

Cash is the lifeblood of all businesses. Businesses fail because they can't access enough cash to cover their outgoings when required. Even seemingly profitable businesses have found that out the hard way. Keeping your cash flow healthy must always remain a key priority.

The best way to try to avoid a serious cash flow crisis is to produce cash flow forecasts based on likely future sales and costs, which you'll need to estimate. Comparing the two enables you to predict when your business risks running out of cash, so you can take steps now to avoid serious cash flow problems coming your way.

Top tip! Invoice finance can provide a cash flow solution. Basically, a bank or other provider buys your unpaid invoices for a fee or percentage of the amount due and either you or they chase payment. Although you get less cash, you get it sooner, which can ease your cash flow worries.

6 Find out about tax changes for 2024/25

Several changes will be introduced in April 2024, in addition to those already introduced in January, and they could increase your income.

  • As announced in the Spring Budget, the VAT registration threshold will increase from £85,000 to £90,000 on 1 April, which will free many small businesses from the unwelcome admin burden that comes from being VAT-registered.
  • The deregistration threshold is also increasing from £83,000 to £88,000.
  • The Recovery Loan Scheme will be renamed the Growth Guarantee Scheme and be extended until the end of March 2026.
  • Also announced in the Spring Budget, the main Class 1 National Insurance rate for employees will decrease to 8% from 6 April 2024 (ie the start of the new UK tax year). This follows a reduction from 12% to 10% introduced in January 2024.
  • And for the self-employed, Class 4 National Insurance contributions (NICs) will be reduced from 9% to 6%, while Class 2 NICs will be abolished altogether. According to the government, an average self-employed person on £28,000 a year will save about £650 in NICs from both cuts.

7 File your Self Assessment tax return sooner

You don't have to wait until the last minute before the Self Assessment deadline (31 January) to file your Self Assessment tax return online. You can file your Self Assessment tax return at any time after the UK tax year ends on 5 April. So, springtime can be the ideal time to begin gathering the information you need to complete your Self Assessment tax return, so you can get the job done and dusted in April or May.

Filing earlier doesn't mean you have to pay your tax bill any sooner. But it will mean you will get to know how much tax you owe far sooner, so you can budget and save to pay your bill on time.

Top tip! Get into the habit of putting money away each month to cover your tax bill. About 20% of your gross income should be enough. Put it into a separate bank account and don't touch it until you need to pay your tax bill.

Copyright 2024. Sponsored post by Mike Parkes of GoSimpleTax - tax return software that can help you manage your self assessment.

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