Hidden expenses
I've found over the last 14 years that although I keep a pretty good track of what's going on in terms of costs, there are hidden expenses, often cash items, or things that you already have in your possession that then get used for business that often get missed out on, and so i thought i'd list them here so you can be aware and look out for them
Postage - the odd stamp here or there (this is my worst one)
Car parking - been to see a client?, - that odd 50p or £1 soon adds up
Tea and coffee and cakes for Tours and talks - yes you are entitled to claim for the flour that you used in that cake. I now have a jar in my office into which I put all those kind of receipts, and if I have time i’ll highlight or tick the items I bought.
The single plant you picked up at the garden centre
The £1 shop item that your friend/ mum / volunteer saw and thought of you!
How much are your costs and expenses per year
We've now worked out all the things that we can call costs and expenses. Some of you will be thinking, - well I won't be making any money this year then, but expenses are good because - they are tax free.
If you are employed, then you get a salary, and it gets taxed, and then if you get perks of the job, like a company car, some childcare, telephone, uniform then they get taxed as well.
If you are a sole trader, There are just 2 figures to put in your tax return if you use the simplified version. The amount of money that comes in (turnover/ income) and the amount of money that goes out (allowable expenses).
You get taxed, on the amount that is left, and then All the rest of the money is for you to do what you want with.
Salary for work you’ve done (drawings)
Invest in the business( to make it grow) or
Give yourself a bonus
All of these are technically Profit, (with traditional accounting and Ltd companies it is slightly different, ask your accountant) But I'm working towards the 3rd one. If i've paid myself at a minimum rate for the work that i've done, and i've put in some extra to allow my business to grow, - when can i pay myself a bonus.
What you also need to take into account, and we’ll be talking a lot more about this in Module 4, is that your expenses need to be taken into account in all the items that you sell.
If your Expenses are £12,000 a year, then they are £1000 a month, this means that you’ll need to divide that amount between the sales you make that month as well as taking into account the cost of sales, and your time to process the order.