2019 Year end accounts checklist

2019 Year end accounts checklist

2019 Year End Accounts Checklist

What are my 2019 Year End Accounts?

A year-end report is the end of a business’s accounting year. Your 2019 year end accounts are a summary of your business’s overall performance for this particular accounting year. If you are a small business, you are legally required to file your year-end accounts with both HMRC and Companies House.

With the Christmas festivities beginning to kick-in and end of 2019 being imminent, now is a great time for business owners and Directors to get a real hold on their accounts. Doing a little bit of housekeeping, preparation and getting your accounts in order will make doing your tax and filing your accounts a breeze. Saving you time and money and getting you ready for 2020 so you can hit the ground running.

 

Below is your Year End Check List from Xero:

 

1. Decide on employee bonus payments

If you decide to reward your employees with bonuses, don’t forget about tax. Bonuses are subject to income tax – just like regular pay. If understandably you want to wait to pay the bonus after year end, simply accrue for the bonus and employers’ national insurance cost and reverse when payment is made. This ensures the cost is included within the correct financial year and lower your Corporation Tax Bill.

 

2. Protect your cash balance

Consider delaying payments to your suppliers by a few days to keep your cash balance high. Whilst the supplier liability will be recorded on your Balance Sheet a higher cash balance is still favourable and helps improve some of the ratios used by Credit Agencies.

 

3. Employee Expenses

Ensure all your employee expenses are processed before year end to include the cost in the correct tax year, and again, reduce your Corporation Tax Liability.

 

4. Review your control accounts – an easy exercise to miss

Review your PAYE, Pension, Wages, VAT control accounts, make sure that these reflect the true position of liabilities. Also check your accruals, prepayments, deferred income etc. If your Balance Sheet is not correct, the likelihood is that your Profit & Loss Account will be incorrect too!

 

5. Scrutinize your balance sheet and P&L report for what you did well – and what you didn’t

Use your accounting software to generate Balance sheet and Profit & Loss reports. Then identify what your business did well, and where there’s room for improvement next year.

 

6. Use your cash reports to understand how much cash you have on hand

Businesses live or die by their cash flow – it’s one of the biggest issues for small companies, so use your accounting software to generate your cash flow statement. Xero apps add-ons such as Float can help you manage your cash flow forecast easily if you prefer to look forward rather than back.

 

7. Estimate your potential Corporation Tax Liability

Too many business owners fail to accurately estimate their tax payments, we recommend to keep this money safe and in a separate bank account. By starting now you should have time to put the right amount of money aside. The current corporation tax rate is 19% of your net profit, this is currently scheduled to reduce to 18% from 01-Apr-20 although this may change depending on the outcome of the imminent election. There will be adjustments that your accountant will make as part of the end of year process, adjusting for Capital Allowances and Research & Development Tax credits but better to be prepared.

 

8. Confirm when your Corporation Tax is due for payment

Make sure you know when the Corporation Tax is due, 9 months after your year end.

 

9. Think about whether you’ll need to request a tax payment extension

HMRC will help you here. Talk to them and check out their website for information about how to apply. Do this as early as you can, because there are penalties for late payment.

 

10. Review insurance policies, cover and rates

Talk to your insurance company to see if they have any recommendations and talk to other insurers too, to ensure you have the best deal. Double check that you have all statutory and recommended insurance cover, professional indemnity, public liability, employers liability, Directors and Officers cover etc.

 

11. Arrange a meeting with your bookkeeper, accountant and/or financial advisor (that could be us!)

Each of these will have work to do for your business at year end. Talk to them, and make lists of tasks that they need to carry out which will help them focus on your business at this busy time of year.

 

12. Review your client list, and make sure all contact information is up-to-date

You can kill two birds with one stone here. Go through your contacts database and make sure everybody’s details are correct. While you’re doing this, send them an email thanking them for their business this year, they’ll remember you.

 

13. Review your goals for the year – and make some new ones for next year

Did you achieve everything you intended to last year? If so, great. If not, try to find out why. Making goals for the coming year can help keep you motivated as your business grows. Review them regularly to stay on track. We can help create a Budget that can be imported into Xero so you can compare monthly progress next year.

 


Now you’re ready for 2020!

If this seems daunting or time consuming, please give us a call. We will be happy to help and can even take this burden off your hands. Simply contact us here or call 01392 495483.

Accounting Tips for a Successful Startup Business

Accounting Tips for a Successful Startup Business

4 [Essential] Accounting Tips for a Successful Start-Up Business.

 

If you’re in the process of setting up or have just set up your new business, you will know how tough it can be. Tough, but incredibly rewarding.

At the startup stage of any business, you wear ALL the hats. Even ones you didn’t know about! Sales, marketing, accounting, bookkeeping, cleaning, IT, admin, customer service, business development… The list goes on. 

One area that needs close and scrutinous attention, is your business finances. All of the great ideas in the world can’t keep a new business afloat if you run out of money. If your primary area of expertise is not in accounting or bookkeeping, then take a look at these accounting tips for startups below: 

 

Accounting Tips for a Successful Startup:

 

Leverage Finance Solutions

One of the biggest hurdles for a small business, especially when trying to gather momentum, is cashflow. However, you can actually avoid potential startup burnout. Don’t skip paying employees, or yourself, because you don’t have the money in the bank. You should also not put off major growth opportunities because you need to have the money first. Discover financing options – so you don’t have to wait on incoming cash. 

 

Use Accounting Software

This is still overlooked by some businesses as unnecessary, with the business owner preferring to work from a spreadsheet. However, the time saved, accuracy, decision making data available completely outweigh the comfortable spreadsheet. 

Using a cloud-based accounting software programme such as Xero, will enable you to have a good, accurate handle on where you stand financially at all times from anywhere in the world (with wifi).

Startup owners carry the weight of their businesses on their shoulders and though there is a lot to keep an eye on, financial health is absolutely fundamental to your business success. Using smart accounting tactics will help you navigate the tricky ground in the early days of your business with ease and reliability.

 

Create Different Bank Accounts

Just like your granny used to do with different pots of money for different events, sent up several bank accounts so that you can keep track of your outgoings. Operating expenses, tax, owners pay and profit. Each pot is then allocated a different percentage of your total income.

Financial analysts suggest having at least 3 months’ operating expenses but we suggest if you can build it up to 6-months you will have a firm buffer should anything happen.

 

Hand it over!

As you will presumably be the technician in your business, trying to learn another trade quickly and competently is time-consuming and will end up eating into your time selling.  Working with a good, reliable bookkeeping or accountant is worth its weight in gold.  Accounting and business finance experts will save you valuable time, will know tricks and tip for saving you money and will warn you when a potential financial hurdle is approaching.

 


FOR MORE INFORMATION ABOUT THE FINANCE DEPARTMENT, PLEASE GET IN TOUCH AND WE WILL BE HAPPY TO HELP.  CONTACT US HERE OR CALL ON 01392 495483.

New – Xero CIS (Construction Industry Scheme)

New – Xero CIS (Construction Industry Scheme)

Do you work in the construction industry and use, or are thinking of switching to Xero?

Manually calculating CIS deductions can be time-consuming, and it’s easy to make costly mistakes. So let Xero do the hard work with accurate, automatic calculations and deductions.

One of the biggest developments to Xero recently is the Construction Industry Scheme add on. Xero CIS makes it easy to manage your Construction Industry Scheme obligations including – deductions and payments, managing contractor invoices, subcontractor bills, filing your CIS returns with HMRC and bulk email payments.

Xero Benefits to the Construction Industry

  • Automatically calculate the right CIS tax deductions and file your monthly returns directly from Xero
  • Sync Xero seamlessly with third-party apps for for inventory management, project management, time tracking and more.
  • Invoice clients and pay subcontractors faster with online invoicing.
  • Check on cash flow at any time with the online dashboard.
  • Store all your documents online in Xero in one central, secure and easy-to-access place.

Basic CIS features

  • Automatically calculate and apply CIS deductions to your invoices and bills.
  • Report on deductions you’ve made from payments to subcontractors, and file manually with HMRC.
  • Download payment and deduction statements to manually send to your subcontractors.

CIS Contractor add-on

You’ll need to add the CIS Contractor add-on to your pricing plan to use some features.

CIS Contractor only features:

  • Online filing of CIS monthly returns with HMRC from Xero.
  • Bulk email payment and deduction statements to subcontractors from Xero.
  • CIS Contractor is free until 31 March 2020.

 

Whether you’re a builder, plumber, plasterer or carpenter, Xero is simple accounting software that gives you an up-to-date view of your numbers while you’re on the move. Use it from your office, van or the building site and keep your business healthy.

 


FOR MORE INFORMATION ABOUT USING XERO CIS, PLEASE GET IN TOUCH AND WE WILL BE HAPPY TO HELP.  CONTACT US HERE OR CALL ON 01392 495483.

 

Making Tax Digital (MTD) starts on 1st April 2019; but no need to panic!

Making Tax Digital (MTD) starts on 1st April 2019; but no need to panic!

Making Tax Digital (MTD) is the most fundamental change to the administration of the tax system for at least 20 years.

The essential elements for businesses and organisations are:

  • Paper records will no longer be sufficient: It will become mandatory for almost all businesses and organisations (self-employed, partnerships; limited companies and others) to use software or a spreadsheet to keep accounting records. Paper accounting records will cease to meet the requirements of tax law.
  • Returns and quarterly reporting: There will be a requirement to submit VAT returns and income tax updates (quarterly and annual) to HMRC, directly from software.

As your accountants we will support you through these changes and provide the ongoing services that you need.

When does it start?

  • VAT: As your business is registered for VAT and your turnover is above the VAT threshold you will be required to keep digital accounting records and to file your VAT returns using MTD compliant software from April 2019 (the first VAT period starting on or after 1 April 2019). The current online VAT return will no longer be available.
  • Income Tax (self-employed, partnerships, trusts and landlords who compete self assessment tax returns): MTD is expected to become mandatory for income tax reporting, but not before 2020. Pilots of MTD for income tax have started.
  • Corporation Tax (limited companies): The timings for MTD for corporation tax have yet to be confirmed but it will not become mandatory before April 2020.

What do I need to do now?

If you already use MTD compliant software to submit VAT returns, contact your software provider to confirm timings and/or additional costs. For the majority of our clients, Xero will be upgraded automatically so that you can easily submit your MTD VAT return to HMRC with no additional cost.

If you’re looking to move to accounting software, we’re here to help you make the transition run as smoothly as possible. This is your opportunity to streamline your accounting and business management, as well as getting MTD compliant.

If you currently maintain records on excel or paper your processes will need to change. You will need to provide records to us promptly after each quarter-end and engage us to do the bookkeeping or acquire and use appropriate software such as Xero.


Please note, all businesses already using Xero (or other MTD compliant software) to submit their VAT returns have nothing to worry about.  Xero will automatically upgrade the VAT functionality so you will be using MTD-compatible software come 1 April 2019 – and there will be no upgrade fees.

If you would like to engage us to implement software for you, please call 01392 495483 or email info@finance-department.co.uk.

Download the factsheet here »

 

Should I hire an accountant or a bookkeeper for my small business?

Should I hire an accountant or a bookkeeper for my small business?

This is a question we often come across. When starting out or building a business it is difficult to know which is the right solution to accelerate business growth; an accountant or a bookkeeper?

Ultimately, they both play an important part in your business growth, especially when it comes to avoiding fines and making the most of your hard-earned income.

Here are a few tips on which is the perfect solution for your business right now.

Bookkeepers

Bookkeepers are trained and use the same financial recording methods as accountants. They do this so that your accountant can quickly and easily process your financial information. They will:

  • take all your receipts, invoices and other transaction details.
  • record the information in accounting software using proper accounting methods.
  • work with you to make sense of the numbers, for example assigning costs to specific clients.

But there’s more to bookkeeping than recording daily transactions. People who do this work are usually highly skilled at using accounting software. They will be able to advise you on:

  • add-on solutions to streamline your business workflow, such as POS tools (see our blog on Xero Apps here) payroll services to simplify the way you pay your staff
  • bookkeeping rescue work, tidying up mistakes made by inexperienced staff training for small business on using accounting software.

They can also offer day-to-day support for small business owners. In fact, a good bookkeeper is your partner in keeping things running smoothly within your business.

Accountants

Accountants can give you strategic advice and come up with clever ways to save money or boost revenue. They’ll also remove or automate administrative tasks that distract you from your core business. Getting an accountant will help you run your business with more clarity and confidence.

  • They’ll help launch your start-up business by testing your idea, identify your start-up and operating costs, and create credible revenue forecasts.
  • Help with your business strategy by working with you to set goals – personal, professional and financial – then give you tools to measure your progress.
  • Fix / manage and advise on your cashflow
  • Help with financing and debt strategies by finding the least expensive borrowing strategies for your business – with the right mix of repayment flexibility and low interest.
  • Deal with unpaid invoices – therein of every business owner’s life.

For your business to run smoothly, ideally you need both people. You’d hire a bookkeeper to look after the day-to-day work. And you’d hire an accountant to handle official reporting and high-level business advice.

The Finance Department specialises in helping your business go from start-up to scale-up by being able to provide bookkeeping, accounts and your full finance department throughout your entire business lifecycle.

 

Take a look at how other businesses have benefitted from outsourcing their bookkeeping and accounting »

Business Budgeting

Business Budgeting

Businesses need budgets.

But how do you go about setting a business budget? What are the main things you need to put in? And what will it tell you?

 

A budget gives you the knowledge and insight to eliminate wasteful spending and get to profitability faster. A well-planned small business budget will:

 

  • show you how many sales you need to cover costs
  • figure out how much money you can reinvest in the business
  • find out when you can afford to hire help
When setting a business budget, you need good numbers. Don’t guess at what’s coming in and what’s going out. You could be making assumptions that aren’t true. Take the time to look into your accounts and dig out the real figures. It might sound like hard work but it’s worth it.

 

Creating a budget sounds complicated and daunting but setting a budget for your small business is easier than you think. Here are 3 simple tips to get you started:

1. Getting started – Your Profit & Loss Statement Report

Your profit and loss report (P&L) tells you at a glance whether you’re making money or not. To do that, you’ll subtract your expenses from your income.

 

Income (revenue): How much money are you generating from sales of your products or services? It helps to break these into:

 

  • Recurring income: regular and reliable revenue from client retainers and contract work
  • Expected income: predictions of future income. This is a forecast of what your business is likely to earn.
  • Expenses (costs): How much money are you spending on business costs such as staff, raw materials and marketing? As with income, it helps to break these into:
  • Direct costs: any costs incurred directly relating to your sales, this could be services engaged or raw materials.
  • Recurring expenditure: your monthly payments for rent, utilities, payroll and so on
  • Sundry costs: occasional payments for office supplies, client entertainment expenses and other items
It can be easy to overlook some of the costs of doing business. To help capture them all, consider:

 

  • Depreciation: business assets, such as computers and equipment, lose value as they get older, include your current depreciation and add an estimate of any assets purchased in the year.
  • Overheads: make sure you don’t overlook fixed costs such as rent or energy (e.g. electricity, gas, transport fuel)
  • Payroll: the total cost of employing your staff – including national insurance, pension and other benefits.
  • Loan interest: interest costs of current and/or new business loans or HP agreements
If you have more revenue coming in than costs going out, you’re making a profit, well done. If it’s the other way around, you’re making a loss which is okay in certain situations, but losses aren’t sustainable over the long term.

 

If you make a profit, think carefully about what to do with it. Could you:

 

  • drive bigger profits by reinvesting in the business?
  • save money by paying down debts quicker?
  • keep cash in reserve to ride out future revenue dips (this is an especially big consideration for seasonal businesses)?
There are many ways to treat a profit and setting a business budget will help you decide on the right strategy. A financial advisor will help you come up with the most tax-efficient plan.

 

Balance sheet

This tells you what your business is worth. It’s the difference between what you own and what you owe. On the plus side of the balance sheet you’ll find:

 

  • the value of the assets owned by your business, such as work tools or real estate
  • cash you have in the bank
  • invoices that have been sent to clients but have not yet been paid
All of these are business assets. On the other side of the balance sheet are your liabilities, which include:

 

  • expenses that have been incurred but not yet paid, such as bills from suppliers
  • taxes that are due to be paid in the near future
  • loans or other business debts that you have
The balance sheet shows your assets minus your liabilities, if it’s positive you’re on the right track!

 

With all this information at your fingertips, you’re ready to start setting a budget for your business.

 

2. Creating your first small business budget

Now that you have all your current financial information in black and white, you can create a forward-looking budget. It will tell you how much you:

 

  • spend running the business
  • can invest to improve the business
  • can pay yourself (and any shareholders)
A budget will also give you a much better idea of what your cash flow will look like. This will help you avoid running out of money and getting into a tight spot with creditors. Your budget will also show you where you can make savings.

 

Once you have a basic small business budget, you can start playing with the numbers.

 

  • What if sales go up by 10%?
  • What if you lose your biggest client?
  • What if you negotiate lower rent?
You can try dozens of different variables here. Many businesses use this type of exercise to find out when they can afford to hire staff. You can too, by adding additional payroll to your costs and seeing how this affects your profit.

 

You can create several versions of the budget to cover many variables. Experiment as much as you like and see what the outcomes look like.

 

Painless budgeting for your business

Now that you know how to go about setting a budget, there’s nothing stopping you from getting started – except, perhaps, the effort. Sifting through financial records to pull the data you need can be gruelling. Even so, it’s best to avoid shortcuts such as estimating costs.

 

If you’re looking for a quicker and less error-prone way to build a small business budget, consider accounting software such as Xero. When set up right, an accounting system will automatically record all your income and expenditure, so you don’t have to manually gather the information.

 

3. Don’t be afraid to ask for help

Setting a budget isn’t complicated but it can still help to involve an expert. A bookkeeper or accountant can double-check the numbers and help you make realistic predictions about business growth, upcoming expenses, and tax exposure. They can also advise you on what to do if the actual numbers deviate from the predicted ones.

 

Bookkeepers and accountants charge for their time. But when it comes to business budgeting they will often save you far more than they cost. So, if in doubt, ask one for help.

 

Budgets put you in control of your business

The real advantage of setting a budget is that it helps you make strategic business decisions. Not sure what’s going to happen over the next six months? Try a variety of different scenarios and see what numbers emerge.

 

Always remember that a small business budget isn’t set in stone. As your situation changes, you can make changes to your figures and see what it means for your profit.

 

The Finance Department specialises in helping your business go from start-up to scale-up by being able to provide bookkeeping, accounts and your full finance department throughout your entire business lifecycle.

 


Take a look at how other businesses have benefitted from outsourcing their bookkeeping and accounting »


 

Blog adapted from our friends at Xero – Bookkeeper, Emma Northcote-Green.