Money is tight and it is likely to get tighter as we see the full impact of the increase in mortgage interest rates hit as people come to the end of their current fixed term agreements.
So now is certainly not the time to be complacent about costs of any description – especially business costs. For small business owners amounts that are shelled out from their business accounts are amounts that do not end up in their own pockets when they extract the profits, by whatever means, from their business.
Here’s our top five ways to cut your business costs.
Bank Account Charges
It’s a good time to review your business bank account charges. Are you paying a fixed monthly amount or a fee per transaction? Could you pay less by swapping to another bank? Bank account switching is much simpler these days with the Bank Account Switching Service (check your new bank is in the scheme) which removes the hassle of making a bank account change. So there’s no excuse to eliminate any unnecessary bank charges that have piled up over the years.
Business Deposit Account
If you are diligent about putting aside amounts on a regular basis for your tax bill then it is worth having a look at a business deposit account. We’ve not needed these for years as the rate of interest payable has been negligible. But one of the positive side effects of the current high inflation rate is that savings accounts are now receiving interest. In fact there are some good deals around for savings accounts right now.
You don’t need to have your savings account with the same organisation as your current account provider. However do make sure that the deposit account is in the name of the business, especially for a limited company, so as to avoid any tax issues later.
Also and most importantly check that the FSCS (Financial Services Compensation Scheme) guarantee applies to the deposit account so that the money is protected up to £85,000.
Having an accounting system in place is a really good idea so that you can keep a careful track on your business finances. The cost of having a good system shouldn’t become prohibitive. There have been price hikes for some accounting software recently. So now is a good time to have a look around at cheaper or free accounting software options.
When looking to reduce your costs in this area a top tip is to start by looking at what is available with your bank account. Some of the new banks such as Tide, Starling and Mettle come with built in bookkeeping functionality. You don’t need anything else as it’s all done within your Banking App including being able to invoice your customer and track payments received from them.
If you do need a bit more functionality than is provided within your Banking App then it’s worth exploring the function rich FreeAgent system which comes free with a Mettle, Ulster Bank, NatWest or RBS bank account. Why pay for software if it comes free? If you haven’t got an applicable bank account then consider making a change – it could save you at least a couple of hundred pounds a year.
If you pay someone to do your bookkeeping then now is a good time to review this area. Technology has come on leaps and bounds with much of the manual data entry and analysis of the past being replaced by bank feeds (a digital link between your bank account and accounting software which drags in the transactions from your bank into your system on a daily basis) and machine learnt rules suggesting the analysis of transactions. For most small one person businesses, especially freelancers and contractors, this will eliminate much of the bookkeeping.
The key is to make sure that you put all of your transactions into your business bank account including your out of pocket expenses, posted up through an expenses entry function readily available in your software or via the accompanying App.
If you are in doubt about any of this then ask your accountant or contact us.
For many freelancers, contractors and small one person business owners one of the biggest outlays in the year will be the cost of their accountant. Now is a great time to review the costs and consider:
- what they do
- what you can do
- what needs to be done
This really is an area where the complacency of not making a change can cost significantly.
The use of technology, such as a Cloud Accountancy system or a Banking App, has automated many parts of the end to end accountancy process. Used well, technology should bring with it a decrease in your accounting fees not least because much of the data capture is eliminated as discussed above.
A good example of this is that software produces the VAT return automatically allowing it to be easily posted, via the system, with just one click. Yet some still pay an additional fee for the filing of a VAT return.
Whilst not within the accounting system, another task that can easily be completed yourself is the Confirmation Statement, which needs to be filed annually by a Limited Company. This really is easy to complete and there is even a video to explain how to do it (click to see it).
If you’re still paying premium prices to your accountant then shopping around for cheap accounting solutions, and accountants who embrace these, is a good way to make a positive impact on your pocket.