Keeping your accounts in order

Photo by OhTilly on Unsplash

The end of the last financial year and the start of the new one can be a stressful time, but it’s also a great time to review, plan, and make any changes you need to for the year ahead.

If you sell your work through Felt or other channels, you must file a tax return at the end of the year to report any income you earn to the IRD, and work out how much tax you owe. Keeping your accounts in order throughout the year, filing your return on time, and putting plans in place to pay your tax can save you a lot of hassle, stress, and even money at the end of each financial year.

Keeping and collating your records

The IRD requires that you keep records of all your business transactions for seven years, so it’s helpful to have a good system in place. It’s a lot easier, quicker, and cheaper to do your end-of-year tax return if you keep records consistently throughout the year, and it gives you the advantage of having an accurate picture of your financial position to hand whenever you need it.

  • Keep separate bank accounts for your business, so you have a record of all your business-related transactions in one place. Most banks will let you set up additional accounts for free.
  • Keep all of your receipts/invoices for income and expenses related to your business.
  • Keep records of your home expenses if you are working from home at all (electricity, rent/mortgage, phone/internet).
  • Make sure you’re familiar with what you can claim as an expense. Read more about business expenses here »
  • A physical or electronic cash book, or accounting software package such as Xero or MYOB can be useful for tracking your income and expenses during the year. Read more about record keeping here »

TIP You can keep your invoices and receipts in physical or digital form, or both – it doesn’t have to be highly technical or even tidy, as long as you keep them in an accessible form and can present them if required. Taking a photo of a receipt and saving it to the cloud is an easy way to keep it secure and accessible.

The IRD has a handy checklist on record keeping, outlining the records all businesses should keep, and the many benefits of doing so. Download it here » 

Review your pricing

It’s good practice to review your pricing on a regular basis to ensure that it accurately covers your costs and makes you some money! Pricing can also be a useful tool to manage workflow and demand, and if you’re checking in on it regularly, you can get a better feel for whether you’re hitting the mark.

  • Price your items to ensure that you’re covering costs, paying yourself (preferably a living wage) for your time and work, and ideally making a healthy profit. Learn more about pricing your work »
  • Consider whether your approach to pricing is still relevant and reflective of the work that you’re doing. Read more about value vs cost »
  • Remember that costs can change over time, so it’s valuable to check in regularly and make sure you’re calculating your costs and overheads accurately.
  • Remember to cover your overheads as well as the material costs of making a product. Learn more about overheads »
  • Plan your holidays! And allow for sick leave. Remember to account in your overheads for the times that you may not be working during the year.

Planning your financial year

It’s easy to get overwhelmed by accounts, especially at this time of year. Future you will thank you later if you do a little planning now to help you keep on top of things throughout the year ahead.

  • Sketch out any key dates for payments (tax, bills, etc.) on a year planner and set reminders in your calendar.
  • Remember to include your annual leave so you can plan for it when reviewing your pricing (and give yourself a goal or incentive to aim for!).
  • If you’re registered for GST, it’s usually due every two months, on the 28th of the month.
  • It’s helpful to have one bank account for income and expenses, and a second account (usually a savings account) to put aside money for tax. Without separating this out, it’s easy for it to disappear throughout the year, leaving you short at tax time.
  • Schedule in a couple of reminders to review your pricing, particularly if costs have changed.

TIP The year planner in your diary (or a photocopy) is handy to jot down key dates, get an overview of the year, and use as reference to set up your calendar and any reminders you’ll need during the year.

Do you need an accountant?

There are plenty of tools and resources you can use to do your bookkeeping and tax returns yourself, but it can be stressful and overwhelming if you’re not a numbers person.

If you feel confident managing your own accounts, you may not need an accountant. If not, finding a good accountant to help manage your records and file returns can ease any financial concerns, and make sure you’re meeting all of your tax obligations.

  • Your accountant needs to be someone you feel comfortable and confident with. Take time to meet and talk with them about your needs before you commit. Xero has a handy tool to match you with an accountant in your area of NZ – check it out here »
  • Accountants can quickly become expensive – the more time it takes for them to process your accounts, the more it will cost. Keeping your records in order throughout the year makes it both easier for your accountant, and cheaper for you.

TIP Check with your accountant about how best to supply your records and what information they will need from you so you can be well-prepared for the end of the financial year.

Running a business alone can be stressful. Accountants aren’t just there to manage your taxes – they also provide planning, budgeting, and advice for your business to grow and succeed.

If you’ve got questions or tips of your own to share on keeping on top of your business accounts, get in touch!

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