This article follows on from the last two articles about running your own business: Starting up your own business (part 1) and Accounting: first of the ABCs to run a good business (part 2).

Necessary pins to tailor your business administration

Registrations

There are other considerations for any business, some legal and obligatory, some regulatory, some administrative, some financial, and others just either necessity or paper-chasing!  I’ve bulleted these below for your attention in the order of priority in which you set them up for your business:

  • Registering your business: an obvious one, but you must create your Limited Company via Companies House for a small fee. See their website on how to do this.
    If you do not wish to use your home address as your business address,  for registration purposes, you can ask your accountancy firm to use their business address instead (usually for a small annual fee). This is very useful if you change residence often, don’t wish to adminster tons of marketing materials and need safe storage of your registration paperwork.
  • Registering your business for VAT: there are thresholds on whether or not you register based on your expected annual turnover. If you have no idea but you anticipate more than £70,000 per annum, then register for VAT. This basically means your business can claim back any VAT it has paid in business transactions.  Besides not paying VAT on business artifacts, you don’t really gain anything else (except for the extra administration on behalf of the tax office!) though if what you accrue in VAT paid to you (via your invoices to clients) is more than what you pay out in VAT on business expenditure you do gain a little extra bank interest!You can process your VAT online via the HMRC website, once you’ve registered for online services with HMRC. If you maintain your VAT accounting in your accounting software then you simply insert your figures into the VAT online calculator.De-registering for VAT takes a little paperwork. You can also claim back all VAT paid during the administration period of closing a Limited Company.
  • Registering as an employer: to avoid the ‘grey zone’ I mentioned in the beginning of this article, it’s wise to separate your role as Director and as Employee. The difference being simply that as a Director you receive dividends (only when profit is healthy of course!) and as an Employee you receive a regular salary. It’s usual in this case for your salary to equate to the minimum wage, so that your payroll expenditure meets the legal requirements for employees as well as maintaining an healthy pot for profit (from which you forecast your own dividend distribution).Contacting HMRC to register as an employer is very easy and quick! One telephone call is all it takes. However, taking on the administration for payroll is not recommended by me – it is a complex overhead unless you have a dedicated financial administrator – so I would advise outsourcing this business function.  It is the only function I actually outsourced, and I used several service providers.  Do your research as there are plenty offering the service. After using an household name in these services I later transferred the function to my accountancy firm’s payroll services based on cost and quality.  Based on a monthly payroll service, you should expect to receive monthly payslips for each employee in your business, monthly summaries of NICs, tax, etc. and of course a friendly professional advisor to assist with related matters when they arise.  The latter is an important quality for all accounting and business services!
  • Set up a Business bank account: necessary for your business transactions. Shop around because banks offer different incentives for new businesses. Being consumer conscious I opted for The Cooperative Bank for a ‘green’ business bank account which also came with some joint incentives with the Federation of Small Businesses like free business advise in the first year.  You will receive the usual business cheque book, paying-in book, etc. but more importantly an online bank service. This is absolutely vital for your business these days.
  • Business insurance: professional indemnity and facilities/building insurance, etc. can all be covered. Shop around for the best for you.

Data management

  • Business data management: I suggest creating a directory on your PC to store as much business data as possible (and do regular back-ups on external storage!). A typical structure could look similar to this – if you download the suite (1) I have included this structure already:
  • Company Name
    • Tax Year YYYY to YYYY
      • Accounts (core accounting data is stored in here)
      • Accounting Codes (simple spreadsheet for your own codes – see my example – used for invoices, purchase orders, etc.)
      • Business Bank Account Statements (contains statements of business your bank account)
      • Business Invoices (contains all the business invoices to clients)
      • Credit Notes (contains all credits notes you send out)
      • Dividend distributions (must include dividend vouchers for each director and meeting minutes for each distribution)
      • Entertainment receipts (scanned copy of receipts for business entertainment)
      • Ledger (for the book-keeping spreadsheet!)
      • Payroll (contains payroll and payslips for each distribution)
      • Purchase Orders (contains all POs you raise for purchases)
      • Remittance Advice (contains all remittance letters you send out)
      • VAT (contains the VAT calculations and payment due)
    • Home As Office (if you have an office at home for your business then scan the bills – your accountant will use these bills when calculating your Year End accounts as part of the tax reduction)
      • Broadband
      • Council Tax
      • Electricity
      • Gas
      • Telephone
      • Water
  • Clients (should include a directory for each client you have to store quotes, letters, timesheets, T&Cs, signed contracts, project data, etc.)
  • Suppliers (should include a directory for each supplier to store their invoices, remittance advice, letters, receipts, etc.)
  • The Office (your virtual filing cabinet to keep your own business info, such as insurance policies, CVs, scanned registration certificates / legal docs (VAT and Limited Company, etc.), HMRC guidelines (VAT, Payroll, etc.), electronice stationary…)
  • Year End Archives (contains previous financial year data)

Accountability as a Director

There are plenty of books out there on how to be a Director or Company Secretary, but I thought it would be useful to provide a quick snippet of advice on the additional obligations for all Directors, in terms of personal accounting. In the UK, this obligation in the Tax Self-Assessment which is to be returned annually to the Tax Office, ideally via your accountant. In any case, you will need to keep separate accounting records for your role as a Director (you’re welcome to download my example spreadsheet (1)).

Again, I suggest you create a directory on your PC as follows:

  • Director Self-Assessment YY-YY
    • Accountant correspondance
    • Charities (info on tax-relief charity giving)
    • Dividend Vouchers
    • Expenses (scanned copies of hardcopy receipts)
    • Final SAT HMRC Statement (scanned copy of final HMRC statement of payment due)
    • HMRC Refunds (scanned copies)
    • Mileage info
    • Mobile phone usage (if not company mobile)
    • P11Ds (scanned copy of P11D declaration)
    • P45s (scanned copy of last P45)
    • P60 (scanned copy of last P60)
    • P87 (scanned copy)
    • Payslips
    • Pensions
    • Personal Bank Interest Certificates (details of bank interest on current and savings accounts)
    • Subsistence (scanned copy of receipts)

If you have any questions about the article or the download please let me know.

The next article in this series may also interest you, Corporate image: third of the ABCs to run a good business, which covers a few starter tips on building up your corporate identity.

(1) In the suite of spreadsheets I have provided, the fields should be self-explanatory – I have added comments where extra guidance may be needed. All cells in grey should NOT be changed (unless you are updating the VAT %, Corporation Tax % or Mileage quotas, for example). All currency cells in blue text are awaiting your numeric input. If there is nothing to insert, leave values at zero. There are text fields in black for your input also.
If you are not registering for VAT, also leave the relevent VAT cells at zero.
The suite includes:
  1. Example Ledger DDMMYY to DDMMYY.ods
  2. Example Accounting Codes.ods
  3. Example Dividend Voucher Template.ots
  4. Example Invoice Template.ots
  5. Example Purchase Order Template.ots
  6. Example Remittance Advice Template.ots
  7. Example Board Dividend Minutes Template.ots
  8. Example Directors Self Assessment Tax Calculations.ods
In the spirit of Open Source philosophy, I used OpenOffice.org to create the spreadsheets and templates. For those folks who use Microsoft Office, simply download OpenOffice.org Calc (the equivqlent to MS Excel) and open each file above – then, using Save As, save each one as MS Excel spreadsheet or template. Simple!
I also included the directory structure as described above.
To download the ZIP file  New Business Startup Suite and save to your desktop. You can extract the files using something like WinZip or WinRar, for example.

Originally published: Thursday, September 9th, 2010 at 22:45 in Industrialism, Money

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