The role of virtual assistant can be incredibly rewarding- especially if you have a roster of high paying clients. Naturally, virtual assistants are incredibly organised people; however, bookkeeping is an area which is usually forgotten about.
Bookkeeping is the act of compiling and recording your ongoings and outgoings as the year progresses. This has a range of advantages.
Legally pay less tax
The first advantage of good bookkeeping for VAs is that it improves the likelihood that you are able to pay less tax. Notably, most virtual assistants are registered as self employed. As a result, tax is only paid on profits. However, in order to be able to claim a meal, rent, transportation and so forth as costs it is important that you are able to have evidence. It is common for VAs to throw away receipts because it “doesn’t matter”.
Over the course of a year, all the “little receipts” you felt weren’t important could add up to thousands and make a big difference to how much tax you pay. Moreover, education related costs are tax exempt under most circumstances. Therefore, any online courses, higher education and so forth can be regarded as education related expenses.
Moreover, good bookkeeping ensures that tax season would be a lot smoother for you. Instead of hunting for receipts, statements, etc, it would already be ready to send over to HMRC. Furthermore, making a mistake on your tax return could land you in trouble or extra paper work with the tax authorities. Good bookkeeping reduces the chance of this happening.
Enable you to track financial performance
As a VA, it is important that you are able to reduce costs and increase revenue. Besides the typical ways to increase your hourly rate, making simple changes can make a big difference. For instance, you might find that you spend a late sum of money on tools, ongoing training, website hosting etc. Good bookkeeping arms you with the knowledge to make changes. For instance, instead of buying a range of courses throughout the year, perhaps it would make more sense to buy books or find cheaper alternatives.
Taking the above into account, bookkeeping enables you to reduce costs and keep more money.
VAT-registered businesses are legally obligated to record all transactions so that they can report the VAT charged. However, some virtual assistants end up paying VAT on transactions which they didn’t have to pay it on. For instance, if a client asks for a refund (things happen) or when they have had to write of debts owed to them by a client.
When a virtual assistant’s bookkeeping isn’t accurate it is easy to lose track of transactions and end up paying too much or too little VAT. Paying insufficient VAT can lead to issues with HMRC.
Spot inaccurate transactions
A typical VA uses a range of tools, and the best ones are always looking at ways to improve so that they can charge their clients more. The services you work with can make mistakes. For instance, double transactions, charging after a service has been cancelled or charging too much can occur. At times, this issue can occur over a long period. As a result, your VA business could literally leak money.
Bookkeeping throughout the year ensures that you don’t get overwhelmed when it is time to submit your tax return. As a VA, each hour of your time is valuable. You don’t want to be stuck in a situation whereby you have to choose between completing good quality work for a client or filling out the tax return. You can save time and drastically reduce stress levels during tax season by filing well ahead of time.
In conclusion, bookkeeping is an integral part of running your VA business. Unfortunately, some VAs needlessly leave thousands of pounds on the table. If bookkeeping is too time intensive for you, it is worth hiring a freelance bookkeeper close to tax season. All you would need to do is send them all your receipts and invoices. They would then file it away on your behalf. As a result, you will have more time to service your clients. Moreover, a good bookkeeper is accurate and would be able to advise you on ways to legally reduce your tax bill.
Accounts And Legal provides accounting services to small and medium sized businesses, doing it in a way that translates into growth. Their Commercial Managers have experience across a range of sectors.