I know, as a business owner, you’re really busy. Collecting receipts and dealing with paperwork is not the most interesting task. But the downside is you could lose thousands of pounds in your business every year. So, all that hard work that you’re putting into your business could be lost by not using one simple hack. Follow my video or read below to find out more!
Why is it important?
From the HMRC perspective, it’s important that you keep a receipt of every single transaction as a backup. As Making Tax Digital is here, you are meant to keep copies of all your receipts; this can be in electronic format. But if you want this to be a valid business expense and claim the VAT from it, you must keep all the receipts supporting your VAT claims. It’s massive because if you don’t, you could be throwing money away every single month.
I know you’re not really interested; there’s a balance between work and life. But we are making it this simple. All you need to do, as a minimum is take a picture on your smartphone. With the number of times we have these in our hands continually throughout our day, this is not a tough exercise. So the first thing to do is if all you’re doing as a base minimum is taking a picture of your smartphone. This is where to start.
Simplifying your receipt management process
Having your business under control is massive on whether you’re a success or not, and there are some really cool bits of software that you can use to help you with this. The one that we really love is called Hubdoc; this syncs with the accounting software Xero.
You can take the picture on your phone and upload it later, or you can have the Hubdoc app on your phone to take the pictures, so it will go directly onto your accounting system, ready to be coded. It really is that simple.
This way, You haven’t got a massive bag of receipts or scooped the bottom of your van or piled them all out of your wallet, take the pictures of you go and get on with your life.
Do not waste money
If you’re not keeping copies of these receipts, and you’re paying for this out of your own personal funds or out of your own personal bank account, and you’re not claiming it, you are losing money. If you add up all the receipts, and they may be small, over a year, they could come to a lot.
By not claiming these, a higher-rate taxpayer is losing 32,5% in dividend tax, and you’re not potentially getting the 19% corporation tax relief on it. That’s half!
So you’re putting money into your business, not claiming it is then costing you another half on top; this is mad; please do not fall into this trap, as it is just wasting money.
Reclaiming VAT
As a VAT-registered business, for you to be able to claim the VAT on your costs, you need to have a copy of that invoice. And under Making Tax Digital, this needs to be in electronic format. So make sure you’re not just wasting your own personal money but also VAT that you may not be able to claim. And it’s literally just as easy.
How many receipts do you think you have not claimed? How much money have you lost by not claiming back VAT?
If you don’t have Hubdoc, that’s not an issue. There are various cloud storages that are available to you. So, if you’re taking a picture on your phone, you can upload this to either a Google Drive; they’re free up to a certain amount. You may be on Microsoft Office, you can save this to a OneDrive account, or you can save it to a Dropbox account. There are loads of places where you can store these receipts. And yes, you may have zero interest in doing the bookkeeping yourself and giving it to your accountant, so it is even easier to share these documents with your accountant via online cloud storage.
Regular Bookkeeping
When you’re doing your bookkeeping, there are no set definitions of when you need to do bookkeeping; my preference is to do it monthly.
So, what you could always do is set up a habit reminder on your phone, or you could set yourself a default appointment that at a certain point in the month, you need to get all your expenses over to who’s going to process them for you, or putting them on your accounting system.
But deadlines do have a big effect on VAT returns; most small businesses in the UK will be doing their VAT returns quarterly. So, you need to ensure all receipts are loaded before your VAT quarter ends.
Otherwise, you are potentially going to lose out on claiming VAT to pay less money over to HM Revenue and Customs.
No, I’m not talking about anything illegal like making up receipts; I’m talking about real receipts that you’ve spent and consumed within your business that you are allowed to claim legally.
Make it simple
If your receipts are in order and all your costs are on there, some providers may not collect their money by direct debit. By having everything on there, that’s accurate; you’ll then be able to review your accounts payable on something like Xero or QuickBooks, and then you can run down and set up scheduled payments for when the supplies are meant to get paid.
Suppose you’re going to break this down; so it’s even more manageable, which I prefer is break it down into potentially weekly tasks. Instead of building everything up for the quarter-end VAT return or its monthly end for when you want to get your bookkeeping done, could you allow a shorter amount of time to get your admin exactly in line? It just becomes quicker once you get used to it.
And if things are quicker, it becomes less onerous, painful, and easier. Easier is always good because it will allow other areas of your business to give you the exact information to make better decisions.
So, could you break these tasks down weekly basis? Many of our clients we work with find this has a big impact because it’s less painful.
If you like to get some further information, or if you have some questions from this article, I offer a 30-minute free discovery call.
I will answer all your questions and aim to give you value without a pushy sales pitch. Click my Calemdly link below.
