Managing Your Finances

I know that finances can be a dry subject but managing and understanding your finances are key to running a successful business.

We wrote a blog looking at how much to charge for your products and thought we should take this a bit further and look at how to manage your business' finances.

Many people ask how much can they earn from their hobby wax melt / candle business before paying tax. HMRC allow you to earn up to £1000 (known as a trading allowance) a year before you need to pay tax.

You can register your business as a sole trader or as a limited company. As a limited company you need to submit annual audited accounts whereas a sole trader needs to keep accounts for 5 years.

I touch on these areas up front as the type of business that you run may have an influence on how you manage your accounts.

As a sole trader you could operate a spreadsheet, showing income, expenditure, VAT (if applicable) and PAYE payments. You could use the same approach for a limited company. However, the investment in time and the cost of having your accounts spreadsheet audited may mean that accounting software is the way forward. 

We use Quickbooks for our businesses which has many benefits, some of which are listed below :

• Accountant has access to our Quickbooks data so can audit our accounts remotely - saves time and money all around
• VAT calculations are the push of a button - links directly to HMRC for filing.
• Link to our bank account means that we can check off / match all income and expense
• Reports provide Management Information around profit/loss, growth etc.
• Provides a clear picture of income and expenses

There are other accounting packages available but Quickbooks meets our needs. As a hobby business operating a spreadsheet makes sense. As your business grows, managing your finances with accounting software makes life much easier and provides greater feedback on your financial performance.