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Whether you balance your books yourself, outsource your accounting, or have an in-house specialist, managing your business finances can be very confusing and time-consuming. Sometimes finance management gets so overwhelming it forces an entrepreneur to quit their business altogether.
Amaiz with FreeAgent effortlessly integrates your business banking with your accounting, so you have a cloud-based digital record wherever you need it. Using FreeAgent is incredibly simple and can reduce your admin to just a couple of hours a month, or less.
Just a few small steps without a single line of code
It will take you only a few taps to seamlessly connect FreeAgent to your Amaiz account. To link FreeAgent with your existing Amaiz account, you’ll need access to your Amaiz app and your FreeAgent login details.
FreeAgent API and the Amaiz app. How does it work?
FreeAgent API allows us to post your Amaiz transaction feed directly to your FreeAgent account without you having to do any work manually. There are two ways to do this:
- Automatically sync all transfers posted to FreeAgent every 4 hours
- Manually sync your record with one tap in the Amaiz app
Xero, Sage and more to come
If FreeAgent is not your preferred choice for bookkeeping, you can export a .CSV account statement and import it pretty much anywhere. In this article, you’ll find a guide for integrating Xero, Wave, Zoho Books, and QuickBooks. This may not be as seamless as the FreeAgent integration but is still less time-consuming than adding your transactions one by one. Because our mission is to reduce the time you spend on bookkeeping, we are currently working on making even more accounting services available for integration.
Support with the numbers
Don’t forget our UK-based team of accountants is on hand to respond quickly and personally to any question you have about your small business accounts.
Having a positive cash flow is one of the keys to success for any small business. However, making sure your business doesn’t run out of cash is essential as well, don’t you think so?
That’s why, in the very early stages, the solopreneurs often use different tools that help them cope with the problem — for example, cash flow charts based on their transaction history. You can, however, take it up a notch by producing a cash flow forecast - a simple and effective way to control your cash flow.
Cash flow forecasts help you estimate the money you expect your business to bring in and pay out over a certain period of time. The income your business will be making from sales to customers, investment income and expenses such as supplier payments, staff salaries or payouts to HMRC - all this is very important as well and should be thoroughly considered.
Why making a cash flow forecast?
If you’re wondering whether making a forecast is relevant for you or not, have a look at the benefits it may bring:
- helps you to plan your resources
- assures that your business is aligned correctly
- helps you to make reasonable and realistic decisions
- gives you a better grasp of your funds
- allows you to understand your business performance better
No matter what the size of your business is, keeping tabs on your company’s expenses can be challenging, time-consuming and cumbersome. Time is a valuable but often scarce commodity, especially for sole traders and self-starters.
With the advent of financial technologies and open banking, it is now much easier to collect a digital record of your small business expenses, as the paperwork has been significantly reduced. The Amaiz app automatically records and categorises your taxable expenses as you make purchases, but you don’t have to stop there – the financial health of your business is something you want to keep an eye on constantly.
First things first, you need to get a grasp on some general terms.
Business expenses definition
Any expenses that are incurred to produce the goods or services that your business provides can be classified as business expenses. An expense is only allowable for tax purposes if it's incurred wholly and exclusively for the purposes of conducting your business.
The expenses your business incurs will depend on the industry your business operates in, the stage that your business is at and other factors that relate to the operation of your business.
Below you’ll find some practical and common approaches to slicing your business expenses.
Fixed vs variable
Every business owner must keep track of their daily, monthly, and recurring business expenses. Some expenses will be fixed, and some will vary depending on how many sales your business is doing. Click here to read more on business expenses.
- Fixed Expenses—an optimal way to estimate your fixed costs is to look back on your previous months’ expenses and use this to forecast your expenses for a future period. You will most likely have to assess your fixed costs such as rent, business rates, utility bills, employee salaries, employer’s NI, software subscriptions, mobile phone bills, and professional fees for solicitors and accountants, for example. Most fixed costs generally won’t change much, but there are other factors which may cause these fixed costs to change. For example, if you are planning to grow your business over the forthcoming year, these fixed costs may change. Fixed costs are usually paid on a recurring basis (weekly, monthly, quarterly, annually)
- Click here to read more on variable expenses.
There are two types of expenses that a business will incur: capital expenses (Capex) and operational expenses (Opex). Capital expenses are expenses that are incurred to purchase tangible or intangible assets. Capital expenses provide future economic benefits to the business and are normally kept in the business for more than one accounting period. Any expense that is capitalised will need to be depreciated over its useful economic life (how long you expect to use the asset for). Examples of capital expenses include the cost to buy machinery, computers, software, etc.
Operational expenses, on the other hand, are all regular expenses that are unlikely to have future benefits and these are expenses that your company has to make to maintain its daily operations. Examples of operational expenses include rent, employee salaries, travel expenses.
Here you can learn more about distinguishing between different subcategories
Capital expenditure is listed under "Tax allowances for vehicles and equipment (capital allowances)." Allowable expenses include:
- vans and cars
- tools and computers
- shelves, furniture and electrical fittings
There are, however, some greyer areas, so when in doubt ping our accountancy experts via the in-app chat if you have an account with us or right from the website if you don't. They will point you in the right direction and help you figure out which rules are applicable in your particular case.
All businesses want a grip on their expenses and are continually striving to save money. The Amaiz app categorises the expenses charged to a Mastercard card based on where the purchase is made and represents them in a neat interactive pie chart. This chart can be used to:
- Keep track of where your business may be overspending week-to-week, month-to-month—this will help you to allocate the resources, plan for the future and change course if necessary.
- Get ready for the next self-assessment nice and early—tracking your allowable expenses in real time can help you estimate how much tax you'll end up paying.
Making your business purchases with the Amaiz card helps to save your time, filling in your self-assessment in real time.
In an upcoming blog post, we’ll be covering another aspect of managing your company’s financial health—cashflow.
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Stuck? Try asking our expert accountant
When you own a small business, you tend to question how best to run it, particularly when it comes to balancing the books. Do I need a dedicated accountant? Could I risk crunching the numbers myself? How about buying specialist accountancy software? Or is that overkill? It’s not cheap. Is it possible to just get help when I need it? Why, when Felix Baumgartner can freefall from space and successfully land on his feet, do I continue to keep my receipts in a shoe box? A quarter of small businesses still do, apparently.
Small business banking apps like ours can certainly help - by itemising and sorting your expenses, or giving you a second account to set aside funds for tax. Self assessment becomes easier too, since you have everything at your fingertips, including historical records. And, getting live alerts and easy to view breakdowns of your income and expenditure undoubtedly makes life simpler.
But what about those greyer areas? What if you're not quite sure how the rules apply to your business, your working arrangements or your industry? What if you work from home, or pay a childminder? Can you claim back these expenses? If so, what percentage? And how do you accurately reflect changes in circumstances on your self assessment form?
You can waste a lot of time head-scratching as a sole trader. So we thought we’d do something to help, by giving you access to a team of expert, certified accountants contactable from the app.
Support with numbers
Our Accountancy Expert Service* handles general queries relating to your accounts, bookkeeping and invoices. You can ask questions straight from our in-app chat any time, and get a reply by email. So if you need help working out which expenses your business can claim back, or how to find your tax code and due date, or what obligations you have to HMRC, or how to better integrate our app into your small business infrastructure, we are just a tap away.
Because we’re not a regulated advisory service, we can only give general guidance, not personal advice tailored to an individual. Sometimes we’ll point you towards a more appropriate set of services or government guidance web pages, but the opinion you’re given will be that of a certified accountant. So you know you’re in good hands.
Subscribe now and ask your very own question to our experts here
So. What sort of questions might you ask? Here are some examples of things our experts can help you with.
I have just started trading as a sole trader, what do I need to know?
You are a new solopreneur! Well done you! As a solo entrepreneur, you need to register with HMRC for self assessment within three months of being self-employed and complete a tax return every year.
With the new digital age, more and more people are choosing to complete their tax returns online, so the deadline for completing your tax return and paying any taxes due is 31st January following the end of the tax year in April. So for the tax year ending 5th April 2019, the deadline to complete your tax return online is 31st January 2020.
However if you still preferred the old fashion paper tax return, you have a lot less time to complete this and this has to be received by the HMRC on 31st October!
The link below shows you a step by step guide of setting yourself as a sole trader Set up as a sole trader
In time, our app will be able to calculate an estimate of your taxes using data from your bank transactions so you don’t have to worry about an unexpected tax bill that will eat into your cash. The following is a handy guide for some forms that you may need to fill if you do a paper tax return. Self Assessment forms and helpsheets
I am a sole trader, should I be using cash accounting or the traditional accruals accounting?
If you are a sole trader, you will be able to use the cash basis accounting method unless your turnover (income from doing all your work) is over £150k or if you have stock for resale, have losses, or want to claim back interest or bank charges of more than £500.
The cash accounting method is when you account for income when it’s received or when expenses are paid.
The traditional accrual accounting method is when you account for your income or expenses when they are billed or when the cost was incurred.
For example if you raised an invoice for a customer on 5th April 2018 but received the payment for on 5th May 2018, you would show this income on your 2017-18 tax return if you were using the traditional accounting method. If you were using cash accounting, you would show this on your 2018-19 tax return as this is when you received the cash for it.
How do I calculate the profit of my business for tax purposes and self assessment?
To calculate your profit, you will need to add all your income from all your trading activities and deduct your 'allowable expenses' from this.
Which expenses can I claim against my income?
You can only claim expenses incurred wholly and exclusively for carrying out your business (allowable expenses). You cannot claim any personal expenses against your trading income.
Below is a link showing which expenses you can and cannot claim.
Expenses if you're self-employed
As a sole trader, you can work out and claim either the expenses incurred against your income on your tax return to work out your taxable profit, or you can use a simplified expenses method.
A simplified expenses method works out your business expenses using a flat rate instead of working out the actual expenses. You can decide which method will work best for your business.
I work from home. How do I claim these expenses on my tax return?
If you work from home and don’t use the simplified expenses method, you will have to apportion the costs such as rent and utilities using a reasonable method. For example if you have four bedrooms in your house and you use one of those bedrooms as your office full time and your annual gas bill is £2,000 per year, you could claim £500 per year as gas expenses.
Can I claim phone expenses?
If you are using the actual expenses incurred method, you can only claim the proportion of the expense that was used for business purposes.
For example, if your phone bill is £30 a month (£360 per annum) and your phone plan is unlimited calls and texts on this plan and out of the 100 phone calls you make in a month, 10 of those are private calls. You can claim 90% of your annual phone bills on your tax return as your expense. So you would claim £324 as your business expenses.
I am a self-employed plumber who goes out to different client sites and don’t have a fixed place of work. How do I claim for the cost of my travel (fuel/mileage) of going to different client sites?
If you don’t have a fixed place of work that you travel to, you can claim for the travel costs incurred while travelling to client sites. If you are claiming for expenses using the flat rate method, you can claim for mileage expenses at the following rates: 45p for the first 10,000 miles and 25p for the miles over 10,000. Check out the following link Simplified expenses if you're self-employed
I have just started up trading as a sole trader. How do I take money out from my business for my personal expenditure and how is it treated for tax purposes?
A sole trader and their business are considered one entity, therefore you can take out money from your business bank account as drawings. If you are taking any salary like amounts (regular payments from your business for personal usage) from your business these don't need to be declared on your tax return as an expense.
If you have a question, just shoot us a messagehere!