Don’t miss out on your Annual Investment Allowance!

Make the most of your Annual Investment Allowance

Since it was introduced in 2008, the Annual Investment Allowance (AIA) has changed four times and is set to do so again on 1st January 2016 when its current limit of £500,000 will fall to £200,000, meaning the benefits for SMEs will be significantly reduced. Therefore, businesses need to act fast in order to take full advantage of the current Annual Investment Allowance.

What is the Annual Investment Allowance?

The AIA is a type of capital allowance that offers 100% tax relief on eligible plant and machinery up to a set limit for the year of expenditure. In simple terms, it means that businesses can deduct the cost of qualifying expenses from their taxable profits in order to pay less tax. It was introduced to support SMEs by encouraging qualifying capital expenditure in order to increase growth and productivity.

How will the change affect my business?

If your business’s accounting period runs into 2016, your AIA will be calculated on a pro rata basis. For example, if your business’s financial year started 1st April 2015 and ends 31st March 2016, then the first nine months will be subject to the current £500,000 entitlement, making a maximum allowance of £375,000 for the period 1st April 2015 to 31st December 2015. The three month period between 1st January 2016 and 31st March 2016, when the allowance is reduced to £200,000, will be prorated to £50,000. This means that by the end of the financial year in 2016, businesses will have a maximum AIA of £425,000 for that period. However, do take into consideration that only £50,000 will be eligible for the first three months of 2016.

With this in mind, any SMEs that have been looking to invest in qualifying assets are encouraged to expedite any purchases with delivery and payment prior to 31st December 2015 in order to fully benefit from their 2015 AIA entitlement.


Need some advice?  We would be more than happy to chat through your options so give us a call on 01392 927902 or contact us here.

 

 

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HOW TO: Add a Bank Rule in Xero

 

As expert financiers, we like to help you out wherever we can. From sharing information about accounting best practice, or hints and hacks for clearer financial planning, to active in-house financial planning.

As life gets busier, and you extend your business to incorporate new clients from further afield, many of us are dealing with transactions from across several platforms: cash, bank transfer, PayPal and others, to name a few. As such entering transactions into Xero can mean facing hours of returning to cross reference different input.

Many clients deal with cash transactions or don’t enter all transactions in Xero before importing bank statements. This is where Xero’s bank rule feature comes into its own. It provides a speedier and simpler way to merge imported bank statements, saving time.

Implementing bank rules allows you to delimit the conditions for each rule so as to ensure a match with your imported statement. Once you have imported a bank statement and then go to reconcile your account, your implemented rules will have effect and start running.

Our expert financiers have started this Xero tips  and are here to guide you through this process to help make your accounting easier. With this guideline you can aggregate transactions and implement deductions as part of Xero’s performance.

  • Go to Manage Account on the dashboard and click the tab named Bank Rules
  • Click on create rule
  • Select the option Spend Money
  • In the 1st column you will see ‘payee’. Select this option.
  •  In the 2nd column select ‘contains’ and in the 3rd column type in the name of the place name you want to add as a condition to this rule. (e.g SWFD, Costa Coffee)
  • Be sure that you select ‘any’ as opposed to ‘all’ at the top of bank rule screen
  • In the description, enter client meeting and create a code for entertainment (deductible) and put 50% in the percent box
  • Add a new line and repeat adding client meeting but this time code to entertainment (non-deductible) and again enter 50% in the percent box
  • Don’t forget to save what you have done by clicking the save button at the bottom of the screen

Sophisticated and advanced use of Xero allows you to take hold of you accounting. You can continue adding to this bank rule as required. This means that whenever more of these transactions are imported, Xero will do the split and implement the code automatically for you. You’ll just have to hit the OK button!

 

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Keeping overheads under control

Here at Finance Department we like to be on hand to help with all aspects of expert financial advice. We recognise that cost management may not be regarded as the most glamorous aspect of the business by most.

Which is why we are here to look after matters for you: we understand that you’d sooner be implementing a road map to help grow the business, or spend the time marketing in order to secure more leads and opportunities for expansion.  However, keeping a sharp eye on costs, and redressing discrepancies as needed, can help you free up your cashflow for control and expense of the more exciting aspects.

Regimenting receipts, dashing after debts and recovering bank statements can only mean one thing: the end of the financial year is nigh! We daresay your accountants are asking all manner of questions which leave you tearing your hair out.

By achieving a better understanding of how your overheads affect your business, you can break down these expenses and analyse them critically. This helps you to identify ways to combat potential issues and stabilise your cashflow.

In business, there are some recurring costs, which are core essentials, but we often find it amazing how others creep in over time, sometimes until they pervade the overall performance and cashflow.

It can be a real eye opener to focus your attention on distinguishing between what a sale costs and what it costs just to keep your doors open.  This can be broken down further and overheads can be segmented in a variety of different ways, dependent on the nature of your business.  Once you have established what your overheads are, and if your business is divided into different departments, you can allocate overheads more accurately to the different departments; you can look at ways to keep these maintained at a low level.

For example, an engineering business might look at overheads as split between manufacturing and administrative overheads.  Overheads in the manufacturing category are general costs associated with the efficient running of the factory to make the engineering goods.  As such, they’re costs associated with production, but aren’t usually attributable to a more specific product line. In this category the devaluation of factory equipment, the quality control, rent and maintenance, plus utilities specifically associated with factory operation are all included.  Conversely the administrative costs are essentially linked to the provision or improvement of goods or services. These can include front office administration and sales, marketing, procurement of office supplies and the power and utility bills.

Each of these sections can be broken down further so you can understand exactly what is being spent where, and negotiate ways to keep these costs down.

Redefining and segmenting these systems for tracking and analysing costs put you in a better position for forecasting your budget, and identifying and predicting problems as they arise, helping you decided if you need to adjust prices or try to expand your profit margins.


If this seems daunting or time consuming, please give us a call and we will be happy to help, simply contact us here or call 01392 495483.

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How to create a successful cloud accounting model

 

Cloud accounting should be considered as a way to improve and run your business in a more cost effective and efficient way, especially in an environment where online technology can be used for pretty much anything.

Taking each of the major accounting feeds in turn, we explain how they can be used effectively with any cloud software application:

Cloud accounting inputs

1)      A Purchase Order represents the intent to buy a product or service and can be a useful process confirming authorisation of purchases, especially where your Finance Department is not in the same physical location.  Specific access can be granted in Xero for authorised employees to create a Purchase Order or alternatively these can be generated using specialised Xero addons, e.g. Unleashed, an inventory solution.

2)      A Purchase Invoice is the bill received from your supplier, this can be ‘matched’ to a Purchase Order if these are used, reducing the amount of data input, entered directly onto Xero within ‘Purchases’ or by using Xero Addons like Receipt Bank.  We ensure the Contact (supplier) details are correct, and also upload the Purchase Invoice onto Xero against the appropriate nominal code (e.g. stationary).  This enables the business owners and advisors to view the invoice directly wherever they are, providing an extremely useful audit trail.

3)      Employee Expensesare processed via the ‘Expense Claims’ module, receipts can easily be uploaded onto a Claim via the Xero Apps for Iphone/IPad or equivalent for android devices in preparation for authorisation.  Your Finance Department can then check the coding and ensure VAT can be recovered where appropriate as well as actioning payment once authorised.

4)      A Sales Order is the equivalent of a Purchase Order but on the Sales side.  These can be directly entered by your Sales team or via Xero addons like Unleashed or Salesforce.

5)      A Sales Invoice is what you send your Customers as proof of purchase.  These can be created within Xero (via Word) in a format of your choice, including Company logo’s or once again via Xero Addons (e.g. Vend) which either integrate directly with Xero, or with pdf/scanned invoices uploaded alongside the transaction by your Finance Department.

6)      Payroll can be calculated directly on Xero via the ‘Pay Run’ function, although this is not as developed as more established payroll solutions such as Sage Payroll or Brightpay, and currently requires work arounds for the £2,000 Employers Allowance.  Our preferred route is calculate via Brightpay, whether weekly, bi-weekly, four weekly or monthly payroll, emailing payslips to the employees and then entering a manual journal to the control accounts which is reconciled on a monthly basis.

7)      Entering Bank Transactions is where Cloud Accounting really stands out.  Automatic bank feeds by the majority of UK banks enables transactions to be uploaded daily without the risk of manual error.  Rules can also be created to ‘suggest’ payments/receipts using payee details, to be coded to certain nominal codes, e.g. British Telecom to Telephone expenses.  If invoices are added (Sales or Purchases) and are of the same amount, Xero suggests they might be matched against the receipt/payment.

8)      Manual Journals are the last piece of the jigsaw to enable to view the complete financial picture and should be completed by a qualified bookkeeper/accountant.  These can include adjustments for revenue if sales invoices are raised before/after shipment ensure sales are aligned with costs, depreciation, stock adjustments, accruals, prepayments etc. and should only be completed once all invoices have been entered onto Xero.

Once the journals have been completed, the Business owner can either review their financials direct on Xero, ask their Finance Department to forward the relevant reports for review, or utilise Xero Addons which provide tailored user friendly reports such as Spotlight Reporting.

All of the above need to be entered accurately to ensure meaningful financials, but with ‘real-time’ accounting now available to SME’s, should also be entered in a timely manner.  With the majority of UK banks providing automatic bank feeds (Barclays being the noticeable exception), the challenge is receiving the purchase and sales information from the relevant departments.

Each of our clients are different in terms of resource, location and industry, and we will work together with you to review your current systems and processes to ensure the most effective route of inputting and storing the data in Xero.  If your processes are not broken, we will not try to fix them, but we will try and improve them for you!

 

Thinking of moving to the cloud?  Here’s some advice on which package may suit you.

 

 

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Cloud accounting is the new buzz word – but which package should I use?

Cloud cropAccounting software has moved beyond spreadsheets into the world of cloud-based computing.  Cloud technology is so much more accessible nowadays and gives you access to your data from anywhere, providing a real time view of your financial position whenever you need it. Your data can now not only be accessed on your computer, but also from any mobile device, providing there is internet access. As you upload and create more data on your mobile/tablet, it will be viewable immediately on any other device or computer, and vice versa.

Keeping up to date bookkeeping records for your business can be time consuming – especially if they are not updated on a regular basis. However, many accounting packages can now speed up the process and offer electronic invoicing, as well as automated bank reconciliations and reporting.

Thinking outside the box: cloud computing

Picking the right cloud based software solution for your business depends on your needs and how easy you find each application to navigate.  There are many more cloud-based accounting solutions on the market, and it could be advisable to have someone with strong accounting skills to help you pick which is best.

To know which is right for your business, you need a clear picture of what you’re wanting: are you tracking direct and staff costs, or time on projects? Do you have stock or inventory that needs managing, and are there operational costs that can be built in?

Here are some examples of the best cloud accounting packages on the market:

  1. Xero hails from New Zealand, and kindly offers a free trial with price plans starting from £9/month. Unique amongst the accounting solutions investigated, Xero doesn’t additionally charge you for new users. It has a similar feel to QuickBooks, and also has an import feature for businesses wanting to give it a trial.
  2. Clearbooks – Make bookkeeping a quick and easy task. Create and edit customers, suppliers, invoices and quotes; use multicurrency functions; support for CIS; save data offline and sync with your account later.
  3. Quickbooks – Enjoy the ability to work anywhere. Create and email professional invoices; record sales; create and manage expenses by attaching receipt photos; receive overdue invoice notifications; produce Profit & Loss reports.  It’s a crisp and minimalist looking software package, with intuitive designs and professional-looking document templates.
  4. Saasu – Create professional invoices and quotes. Create, view and update business contacts; send quotes and invoices; keep up to date with inventory items; view your data offline; encrypted data keeps your records secure.

Quick switch over

What’s changed from previous software incarnations is the time and financial commitment it takes to switch.  Switching to cloud accounting can be pretty much instantaneous and with the help of a reputable accounting practice to help smooth out any blips, you will be up and running in no time.

Apps for ‘on the move’ accounting

There are also more than 1.2 billion apps are available on both Apple and Android devices amongst which there are some star apps for businesses.  Using a mobile-friendly design and layout, apps developed for a range of bookkeeping software now make it easy to manage your finances on the go.  Here’s an example:

Xero Touch – Track your finances and easily manage your cash flow on the go with this easy to use App.  View bank & credit card accounts, outstanding invoices & expense claims; reconcile bank statements; create & send invoices; upload receipts from photos; use multicurrency support; integrate with other popular apps; set up a pin for quick access.

Cloud accounting is here to stay so seriously think about getting your own systems updated and see the benefits almost immediately.

 

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