When you start your new business there’s a lot to do including getting on top of your accounting and tax responsibilities.
This can be a daunting task. So we’ve put together a check list that you can work through to get everything on track.
Whilst there is a lot to do at the outset our best advice is to:
- Keep things simple
- Set up just what you need to get started
- Have a good overview of what you need to do (use our blog https://thecheapaccountingway.co.uk/ as a reference point)
- Only ever claim for true business costs meaning outlays that you have incurred wholly and exclusively for business purposes – read more about costs at https://thecheapaccountingway.co.uk/what-costs-can-you-claim/
- Tackle each thing as you need to – tax is too big to digest all at once!
- If you have any (general) question then ask us here and we’ll post an answer up on our blog
This guide assumes that you have already made the decision to use FreeAgent as your accounting tool of choice. If you read our blog you’ll know that FreeAgent is what we recommend because you can get it for FREE with a Nat West or Mettle business bank account. We tell you how at https://thecheapaccountingway.co.uk/how-to-get-freeagent-free/
Where to start with FreeAgent
FreeAgent is easy to use for the things that you need. It is a function rich system but, like most software, you’ll probably only need to use a fraction of it. It’s important to know what you need to do at the outset to get set up and what functions are essential.
Everything that you need to know about FreeAgent can be found in their Knowledge base at https://support.freeagent.com/hc/en-gb.
Setting up FreeAgent
If you’ve a Nat West bank account or Mettle then you’ll know that FreeAgent is free. You will need your bank account and sort code handy as part of the set up.
The set up process is explained at https://support.freeagent.com/hc/en-gb/articles/4405955565842-How-to-get-started-with-FreeAgent
Opening Balances
If you are a new business (no transactions yet) then you can ignore the section on Opening Balances.
If you have been trading a while talk with your accountant about how best to get your existing accounting data into FreeAgent.
VAT
Unless you are VAT registered you can ignore everything about VAT. You do not claim it or add it to sales invoices unless you are VAT registered. If you are VAT registered then talk with your accountant about getting set up, what you need to do and how to file your quarterly VAT returns.
If you are not VAT registered but think that you may need to in the future then do keep an eye on your turnover remembering that VAT registration is based on a rolling 12 months and not your accounting year or the tax year.
You must register for VAT if your total VAT taxable turnover for the last 12 months was over £90,000 (the VAT threshold) or you expect your turnover to go over £90,000 in the next 30 days.
Setting Up Bank Feeds
Your accounting will become even easier if you use bank feeds. Bank feeds merely mean that your bank account is connected to your accounting system with the transactions being dragged from the bank account into your accounting system every day without you having to do anything. Well except for one thing which is to link your accounting to your business bank account.
Once you’ve set up this function, all bank transactions will pass across to your accounting system where you will be able to either explain (provide the analysis of the transaction) or approve (the analysis for the transaction has been remembered or assumed from previous postings) the transaction’s machine based learning posting.
That’s the bookkeeping done!
How to set up your bank feeds in FreeAgent can be found at https://support.freeagent.com/hc/en-gb/articles/360006470520-How-to-enable-an-Open-Banking-bank-feed
You can connect as many business bank accounts and other accounts as you like. Avoid connecting accounts which are personal as you do need to explain all of the transactions – so you are just creating work for yourself.
Explaining transactions is covered at https://support.freeagent.com/hc/en-gb/p/explain-a-transaction
Invoicing
Obviously it is vital to get paid. FreeAgent covers how to set up your first invoice at https://support.freeagent.com/hc/en-gb/p/send-your-first-invoice
Paying for things
The best advice is to always pay for costs through your business bank account. That way the transactions will flow into your accounting system via your Bank Feed and all you need to do is to explain the transaction.
Expenses
Expenses are things that you have paid for from your own funds such as mileage, the odd cost like stamps or just things that you forgot to pay for via your business account.
Adding an expense in FreeAgent can be found at https://support.freeagent.com/hc/en-gb/p/add-an-expense
The Dashboard
The dashboard, or overview screen, is super important as it summarises the essential figures about your business. You can read more about it at https://support.freeagent.com/hc/en-gb/articles/115001218610-An-introduction-to-the-Overview-screen
For example, for a limited company the Profit and Loss Account section shows income less costs which equals your profit with the estimated amount of corporation tax to be paid from the profits before you can withdraw a dividend. It is important to check these figures before you pay a dividend to avoid it being illegal or resulting in an unintended director’s loan.
Understanding how much you can take out as a dividend is key (see How to pay yourself – Limited Companies have Salary and Dividends at https://thecheapaccountingway.co.uk/how-to-pay-yourself-limited-companies-have-salary-and-dividends/)
Obviously it’s slightly different for a sole trader as any money taken from the business is known as drawings.
Using the FreeAgent App
Using the FreeAgent App makes it easy to do your accounting on the go as well as keep on top of things such as explaining transactions and monitoring your dashboard. A little bit of accounting on a regular basis will make things much easier and put you in better control of your business finances.
An introduction to the FreeAgent mobile app’s functionality can be found at https://support.freeagent.com/hc/en-gb/articles/115001218510-An-introduction-to-the-FreeAgent-mobile-app-s-functionality
How to download the FreeAgent mobile app can be found at https://support.freeagent.com/hc/en-gb/articles/360016618740-How-to-download-the-FreeAgent-mobile-app
Need more help
If you do need any help getting started the support crew at FreeAgent are really helpful. You can send them an email at support@freeagent.com.
