AD | what I’ve changed up so that I now love doing my accounts

:: by Lizzie

 

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It’s that time of year again isn’t it!? The dreaded accounts rear their ugly head. Whether you’re self employed, freelance or have your own small business, being a creative entrepreneur isn’t all fun all of the time, is it? Particularly when it comes to the stressful and boring bits like book keeping, VAT and income tax. Doing your accounts, whether you attempt to do them yourself or you have an accountant to work with, can be very stressful and time consuming. Often stopping you from focusing on the things that actually move your business forward, help it grow and make you money, accounts can be an absolute pain. Designing, styling, curating, buying, shooting, writing, recording, teaching, coaching – those for me are the fun bits. But being a small business owner (as with great power), comes great responsibility.

 

In June of 2018, only three months after my son was born (a time that I was hoping to focus my energy on him and learning to be a new mum) I discovered that SMUG’s till operating system was about to become obsolete and that our card machines were going to stop functioning any moment as well! Our till and our card machines were also hooked up to our accounting programme, so this was a lot of stuff to go wrong all at once. You can probably imagine that this was pretty stressful news and that working out what on earth to do, how to do it, when to do it and with what software, was a huge and time consuming job. I now realise, in hindsight, that this major ball ache was actually a blessing in disguise. We’d been using out-of-date till and accounting software for years and now that the business had grown as far as it had, the systems in place really didn’t serve us anymore. Our tech, although it was functioning, had been super limited and in fact, had essentially been letting us down for years. It took the urgency of the whole thing giving up on us, for me to take the time and do the research to find out what would actually work for us and make running the business much much easier in the long run.

 

In the end the till software I went for was Vend. One of the main reasons for this was that it worked seamlessly and automatically with the accounting software I’d been thinking about moving over to for years, Xero. Now was my chance to make the change and it couldn’t have been better for us. SMUG’s card, cash and web sales go through our till and arrive automatically in Xero. Our orders of new stock once placed and received on our till, are sent wirelessly over to Xero where the brands and invoice numbers are recognised and matched to payments made through the SMUG bank account, which has a live feed straight into my Xero account. This also helps hugely with bank reconciliation as it updates transaction daily and my favourite bit, lets you set up ‘rules’ so that Xero will recognise and match transactions to and from people you pay regularly, or receive income from regularly. You just set up the rule once and it takes all the repetition out of it for you. It’s pretty seamless and soooooo much easier and less time consuming than our old system. The most valuable element though is that I have a much clearer picture of the health of my business than ever before. I can now see much better where we’re making money, where we’re losing money and areas where I could be finding ways to save some money. It’s also super easy to calculate the amount of VAT due and have a proper digital record of your accounts that you can access anywhere with wifi. I have the Xero app on my phone so can even do the bank reconciliation while on the go. It’s amazing.

 

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But I don’t just use Xero for my SMUG business. In 2016 I was lucky enough to be in a position to buy 13 Camden Passage, SMUG’s premises. This left me however, in a strange position. I was now the tenant and the landlord and needed to charge myself and pay myself VAT. It was at this moment that in addition to SMUG’s VAT number, I registered myself personally for VAT so I could be both landlord and tenant. I would also for the first time, be liable for income TAX due to the rental income I would receive as the landlord. I’m telling you all of this because I know that each of us have our own complicated stories of how our small businesses work. Sometimes these eccentricities and anomalies can feel a little overwhelming and keeping track of all of the details, let alone communicating correctly and clearly with HMRC, can be really hard work. This is another reason why I am so grateful for Xero. Since registering myself personally for VAT, I have starting taking on freelance work through my Lizzie for SMUG Studio. I’ve been working for brands on sponsored blog posts (like this one), getting sponsorship for my podcast ‘How to Curate Your Life – Work Life Balance for the Creative Entrepreneur’, selling tickets for workshops and coaching, being hired to teach webinars and speak at IRL events. Because I am VAT registered I need to charge VAT on all of this and I need to be aware of the income TAX I will be liable for. These new extra pressures when it’s come to my second set of accounts and communicating with HMRC in a new way with personal VAT and income TAX returns could, to be honest, have been so overwhelming that I’d have been put off from following my dreams and growing my business in this new way. Finding several revenue streams that all lead to work that I love has been the dream for some time now and because of Xero I’ve been able to keep a proper track of my own Lizzie for SMUG business as well as SMUG’s. Because it’s all there safe, accessible and trackable, I’ve been able to employ an accountant to do my personal VAT and TAX returns this year. The dream! How do you file your VAT and TAX returns?

 

HMRC is making it mandatory for small businesses to file VAT returns online. Xero have produced some indispensable guides to help you understand and prepare for Making Tax Digital (MTD). On this page, you’ll find the answers to any questions about this you have. There’s even an animated tax adviser – Dexter, who can tell you all about MTD and what it means for you. The programme goes live on 1 April 2019 so, if your turnover’s more than the £85k VAT threshold, you’ll need to file your returns directly and digitally. The good news is that Xero have been working closely with HMRC since they announced the plan, so their software’s compatible for them and straightforward for you.

 

Making Tax Digital (MTD) means you won’t be able to keep and submit manual records after April 2019. Instead, HMRC will only accept VAT returns sent using software that supports Making Tax Digital for VAT. The use of this technology is compulsory so it’s a good idea to start thinking about your accounting software soon – that way you can avoid any potential complications from upgrading or migrating your software mid financial year. It’s worth remembering it’s far easier to submit returns using online accounting software compared to traditional desktop software anyway so, like me, you might find that this change is actually a huge blessing in disguise.

 

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Just as a quick recap, the things that I find really valuable and you should look for when choosing an accounting software are: Automation – You want something that automatically calculates the tax you owe (including VAT and payroll tax). Connectivity – your accounting software should pull transaction data straight from your bank, invoicing software, or POS systems and finally, Continuity – your software should update transactions daily, helping you to stay on top of bank reconciliation.

 

I hope you’ve found this helpful and educational :) Who would have thought it – TAX can be fun! Thanks for reading and do feel free to get in touch via Instagram or in the comments below if you have any questions. Lizzie x