Sealed with a kiss – A simple guide to business expenses
Do you understand the ‘Kiss Principle’? If so, you’re well on the way to being a great expense manager. If you don’t, let me tell you a little story that will lead us on to money management, and the revelation that you could achieve a 100% return on your investment in our expense manager app…
An aircraft engineer by the name of Kelly Johnson, working for the Lockheed Corporation, is said to have invented the Kiss Principle, although he didn’t set out to do so. Now said to be more than 60 years old, it has been adopted around the world in all sorts of fields – and understanding business expenses is one of them. It’s this: Keep it simple, stupid.
Why has it been so universally accepted? Probably because it is a good rule by which to live your life, including your expense management. Johnson said that things worked best if they were simple. It wasn’t a new idea. Da Vinci had a go at expressing it with ‘Simplicity is the ultimate sophistication’, and how many of us have said ‘Less is more’ (though the latter starts to miss the point, if we’re talking about expense management, so let’s stick with simplicity.) We’re not saying that anyone is stupid, either; just that it would be stupid to make things more complicated than they absolutely need to be. In anything. And with business expense management, it could hardly be kept any simpler.
Three things to understand
When you get right down to it there are just three things you have to do to understand business expense management:
- be clear about what an expense is
- be disciplined in recording it
- and get some help
1. What’s it all about? You can’t control what you don’t understand. A glance at any first-time dog owner will show how true that is. Sort out in your own mind what a business expense it. Sadly, there is no truly simple answer, because all expense management has to get involved with tax systems, which are beset with ifs and buts. Essentially, business expenses are the money you have to pay to run the business. All the obvious things are there, like staff, business premises, raw materials or stock, advertising, computers, and electricity to run it all. These are all allowable expenses, and you can deduct them when you’re working out the profit you’re going to have to pay tax on. There’s a more detailed explanation for the self employed on the Internet here; it’s a Government web site, but it’s not a tough read; they’ve done a lot to make it clearer.
2. Record it. You can’t claim what you haven’t recorded. Don’t misunderstand me, this is not some petty taxman rule. It’s about you and your memory. If you bought your employees some new overalls in August, will you remember what you paid for them when the April year-end comes round? Unlikely. Will you even remember that you made the purchase? Not necessarily. That would mean you’d pay tax on a larger slice of your turnover than is absolutely necessary. Or, to put it another way, you’d pay for those overalls twice. That’s simply not good business sense.
3. Get some help. If you’re in business as a widget-maker, then you should be busy making widgets, not in doing accounts. (That might seem blindingly obvious, but there are far too many small and micro-businesses in which the owners try to look after their own accounts, soaking up time during which they could be earning more money, or spending quality time with family. Remember, no-one should ever get so busy making a living that they forget to make a life – and no-one on their deathbed said: I wish I’d spent more time at the office.” Two kinds of help are needed. The first is a good accountant, who will round off your business year by collating and completing your year-end accounts to keep you squeaky clean with the taxman, and paying as small an amount of tax as you’re legally required to do. The second is a good expenses manager app, such as Solo Expenses. Installed on your smartphone, this simple app is with you all the time and ready to record every business expense. Each and every spend can be tapped in using the keypad, or, like the lady in our picture, you can photograph documents and collate the pictures, alongside the spend detail, in one of the folders we’ve put in there to begin with, or you can create you own.Every expense mentioned on that government web site can be covered by a Solo Expenses category, so that by the time you get to the financial year end, so long as you’ve been diligent recording spends, the whole year’s spending is there in one place, and ready to be passed on to your accountant, who’ll put all your financial affairs in order.
If you’re an individual, we’ll let you start with Solo Expenses as a free download. Yes, really, free. If you’re running a small business, we’ll ask you to pay just £2.49 a month, in the knowledge that, if you use our product diligently, you’ll probably save yourself more than that anyway by not overlooking claimable expenses. And that would mean you’d achieve a return on your investment of more than 100%. Where else could you do that?
Picture: Ifocus | Dreamstime.com