Are you in need of accounting tips for cash-in-hand businesses?
Accepting cash as payment for goods and services is valid and legal, as long as your business declares its full income.
In fact, paying with cash is sometimes more convenient for customers as they might not have access to debit or credit cards.
Many businesses prefer cash, as there’s always a possibility that cheques could bounce, and accepting credit card payments can be costly.
Be that as it may, it can be tougher to keep track of your accounts when most of your revenue is derived through cash-in-hand transactions.
These accounting tips for cash-in-hand businesses should make things easier:
Open a business bank account
Yes, business bank accounts do levy charges, but they’re worth the expense. Having a separate bank account ensures minimal confusion when you’re working on your accounts.
You’ll also find things much less stressful if HMRC ever investigates your business, since you’ll be able to show transactions concerned only with your business finances.
Understand your legal responsibilities
It may be that your business consists solely of you, in which case you won’t need to deal with paying employees.
However, if your business has employees you’ll need to keep track of every penny your employees accept so you can properly enter the information using PAYE.
If your employees reach the National Insurance Lower Earnings Limit (LEL), you’ll need to use the employee’s tax code and National Insurance category letter to work out how much Income Tax and NICs to deduct from their pay and how much Employer’s Class 1 NICs you owe on their earnings. Remember to log every cash entry that they provide.
Never use cash to pay for expenses
This is one of the most important accounting tips for cash-in-hand businesses.
One of the toughest things about managing your accounts is keeping your expenses separate. For this reason, try to make sure you never spend money before it has been through your bank account.
Even if you need to pay a supplier or top up the vehicle you use for business purposes, you should either use your business banking card or pay with money withdrawn from your business account.
This helps avoid mistakes when you’re totting up your expenses and revenue. Everything should come into the bank account before heading back out.
Note all transactions as soon as possible
When you’re taking cash throughout the day, it can be easy to lose track of who paid for what. Make sure you note down the amount each client or customer pays right after you receive it.
This is now easier than ever due to the vast selection of accounting apps available. You can also use these to snap photos of your receipts, instantly providing you with backups of vital documents.
Accounting tips for cash-in-hand businesses – a summary
Keeping on top of your accounts is perfectly possible, even if you operate your business on an entirely cash-in-hand basis.
We hope you found these tips useful. If you’d like more accounting tips for cash-in-hand businesses, give us a call today.