There are a lot of businesses nowadays who switch from the traditional accounting to cloud. This method is easier than the traditional one since it does not involve physical documents. Small businesses would opt to use cloud accounting to save time in recording transactions.
For users of cloud accounting, we listed a five-step process on how to simplify your cloud accounting.
Step 1: Pick a good cloud accounting system
Nowadays, there are a lot of accounting systems that vary in use and price. You need to know first what your business needs are if it requires a straightforward software or a complex one. Also, identify the cost of the software if it fits your budget. It is important that it will not be too expensive because the business may not be able to survive. Before purchasing the software, may sure you made a test try on the software so that you can have insights if it is user-friendly or not.
Step 2: Plan how to extract profit
Your accountant must be able to discuss this with you since it involves the profit of the business. You need to determine the remaining profit which can be extracted as a dividend. It also takes into account pension contributions, spousal income and the long-term exit strategy, if you have one. Thus, it is important to have an accounting software that allows you to view the profit available for extraction as a dividend. Make sure that whatever the outcome is, you need to file it to prove that you did have profits available to take as dividends. And never forget your paperwork.
If you are not really familiar with this, it is recommended to get an accountant because getting this part wrong can be critical for your business. You can accidentally take away more money out of your business that you are allowed to. Visit Eclat Accountancy Ltd if you need assistance on this. They have all the accounting service you need in order to fill this step. Click here to visit their website.
Step # 3: Monthly bookkeeping
As much as possible, you need to upload your business bank statements into your cloud accounting system and post them accordingly. This should be done every month so that you can easily generate reports accurately in the system. You also need to include out of pocket expenses in the system so that you can reimburse any expenses paid from your personal funds. What’s important is to keep the receipts so that you can properly document these expenses. Also, you need to process your business’ payroll, prepare your payslip, and eventually pay. Then, you will need to file the Real Time Information (RTI) returns to the HMRC. Always pass this on time to avoid paying the penalty fee. Always remember to take the salary out of the business bank and pay it into your personal account. Lastly, you need to declare your dividends so that you can directly take a certain amount from your business bank account and pay it into your personal accounts as dividends. As much as possible, you need to these things monthly to ensure you have accurate information in the cloud.
Step # 4: Do Quarterly VAT
Assuming you are registered for VAT, then it is preferred that you do this quarterly. Your cloud accounting should be able to prepare the VAT return for you and file wit with HMRC. However, you need to make sure it is properly set up to avoid generating the wrong information.
Step # 5: Year-end
If you successfully followed all the steps then this last step will be simple. This is because you did all the work in the first four steps. All you need to do is recheck the information, making sure it is ready for the year-end documents needed. It will be easier to generate this information using your cloud software.