Small Business Bookkeeping – When to Outsource?
Running a small business can be [read ‘is’] all consuming. You have to wear so many hats that’s it’s no surprise if [when] something gets missed. Sound familiar?
But, as the business owner it’s only natural to want to manage everything yourself; marketing, sales, accounts, customer service etc. If you’re in the start-up phase, then I suspect you will definitely be attempting this yourself. However, unless you have been trained or have experience in working in any of these industries, it can not only be time consuming, expensive (ask yourself how much is an hour of your time worth?), but also frustrating and demoralising.
So, the question is: ‘Why should you outsource your bookkeeping? And when should you do it?’
8 Advantages of Outsourcing your Bookkeeping
We’ve put together a list of the 8 main advantages you gain when you choose to outsource your bookkeeping to The Finance Department.
- Get up to the minute reports at the touch of a button – AND always be sure that the information is correct
- You will discover where money is being made and lost in your business allowing you to adjust your business strategy
- Implement a process for credit control and debt chasing – Xero automated invoices can assist with this
- Outsourced bookkeeping allows you to keep on top of the books without paying for an in-house salary
- You only pay for what you need and use
- You submit your VAT returns and company accounts on time
- Stop feeling guilty about the bookkeeping being on your ‘to-do’ list and feel confident it’s being taken care of
- Expert advice to help grow your business
Our team of bookkeeping and accounting specialists have many years of experience and can come in and take charge of your finance function relieving you, or any managers in your business, from the stress and allow them to concentrate on what they’re best at.
IF YOU WOULD LIKE TO EXPLORE HOW WORKING WITH AN EXPERIENCED BOOKKEEPING TEAM CAN HELP YOUR BUSINESS, CONTACT US HERE OR CALL ON 01392 495483
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THE TASKS OF AN ACCOUNTANT – EVERYTHING YOU NEED TO KNOW
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.
SO WHAT DOES AN ACCOUNTANT DO?
1. Help launch your startup business
Starting a new business can be exciting and terrifying, but it takes more than a good idea. You need to know it will make money – and you may need to convince investors and lenders of the same thing. An accountant can do that for you.
They’ll help test your idea, identify your startup and operating costs, and create credible revenue forecasts. They also know which lenders are playing ball at any one time, so you can approach the right people for finance. Plus they’ll work on your pitch, so you’re ready to impress those lenders.
2. Help with a business strategy for growth
There are so many moving parts in a business. Sometimes it’s hard to know where to focus. Accountants can help you figure out what’s important.
They’ll work with you to set goals – personal, professional and financial – then give you tools to measure your progress. You’ll end up with a set of key performance indicators (KPIs) that tell you how your business is doing.
If you have accounting software (such as Xero), your accountant will set up dashboards that allow you to check your KPIs at any time of the day or night. And if things aren’t going as planned, what does an accountant do then? They’ll help you troubleshoot the issues, test solutions, and reset your KPIs as needed.
3. Fix your cash flow
Many profitable businesses fail because they run out of money at the wrong time and can’t afford to pay suppliers or staff. Even a highly active business won’t last long if payments are slow to come in, or expenditure is too high.
Accountants know that revenue ebbs and flows, and that costs do the same. They’ll help you predict the effect on cashflow and come up with strategies to manage the situation. They’ll organise cash reserves and come up with a spending plan that ensure there’s always money in the bank. It’ll make payday less stressful, supplier relations easier – and sleep deeper.
4. Listen and support you
Being in business is tough. It can be lonely, too. When things seem too hard, and you start thinking about the cozy 9 to 5 you left behind, a top accountant or virtual finance director can keep your head in the game.
They know how much your business means to you. They can reassure and reset you on your journey. And they’ll help you cope with stress by breaking down big business problems into manageable parts. Giving moral support is an important part of what accountants do.
5. Manage your debt
There’s good debt and bad debt. Your accountant can help you tell one from the other. They’ll find the least expensive borrowing strategies for your business – with the right mix of repayment flexibility and low interest. If you need refinancing, they’ll take care of that too.
Accountants will also advise when spare cash should be used to pay back loans, and when it should be reinvested in the business. They’ll do that by considering the numbers behind your business and looking at how your debt’s structured to develop a specific strategy for you. It’s not just blanket advice.
6. Deal with unpaid invoices
Unpaid invoices are a fact of business. Chasing those debtors is a distraction you don’t need, but you can’t afford to ignore the problem. Your accountant can take the headache away.
Xero has a function that can set up and send send automatic invoice reminders to customers when their bill is due and/or overdue.
If invoices remain unpaid after this, your accountant can arrange debt financing – where a business will buy your unpaid invoices from you and chase the payment themselves.
HOW DO ACCOUNTANTS DIFFERENT FROM BOOKKEEPERS?
Accounting is a vital service; but how does it differ from bookkeeping? The two services are often compared, but actually they are complementary:
- Accountants will look at the accounts that have been created, often on a quarterly basis. They will make any minor adjustments required.
- They will use the information in the accounts to file tax returns and other official reports. They will also provide high level business advisory services.
- Bookkeepers do the day-to-day work and bring the accounts up to a high standard of detail and accuracy.
- They can also advise you on issues that might affect you in the near future, such as cashflow problems or late invoice payment.
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.
IF YOU WOULD LIKE TO EXPLORE HOW WORKING WITH AN EXPERIENCED FINANCE TEAM CAN HELP YOUR BUSINESS, CONTACT US HERE OR CALL ON 01392 495483
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Find out how to create an invoice that will be accepted by your most fussy customers. This guide takes you through the basics of raising an invoice and putting all the right information on it.
The etiquette of raising an invoice
Make sure your customer is expecting your bill. If it comes out of nowhere, they may be slow to approve it, or even annoyed. Explain your process before you supply anything, so they know when to expect your bill. If you don’t have an agreement in place, at least tell them when an invoice is about to be sent.
What information goes on an invoice
Information about you
Your name, address and contact details. Freelancers can use a personal name, otherwise use your business name. You should also quote your company number and, if VAT registered, include those details.
Information about the customer
Add the customer’s name and contact details. If it’s an organisation, confirm their legal name. It could be different from the brand name you’re familiar with.
Details about what was sold
List the products you supplied, their prices, and the quantities of each. Or list services, with professional fees against each.
Total all your charges, making sure to apply any discounts you’ve offered. Add VAT at the end, if you’re VAT registered.
The customer reference
If your customer has given you a reference or purchase order number, include it. This will increase your chance of being paid promptly.
Instruction on when and how to pay
State when the invoice is due, and be clear if there are late fees (or on-time discounts). Tell them which types of payment you’ll accept and give the information they need to make those payments, such as a bank account number or a link to online payment.
How to create an invoice number
An invoice number can be anything – and can include letters – as long as none of your invoices have the same number. You can simply number them sequentially – INV-001, INV-002, INV-003, and so on.
If you want your invoice number to be more informative, you could:
- Give each customer a separate code (Vandelay Industries becomes VAN)create a job number for each project (001 for cleaning their sales offices and 002 for cleaning the factory offices, for example) include the invoice date (using the yyyy-mm-dd format will make it easier to group jobs this way).
So for cleaning the factory offices on January 21, 2018, you’d make an invoice with the number VAN002 – 20180121.
Invoice details – how much is too much?
Always provide a description of the goods or services supplied, so the customer knows what they’re paying for. But don’t add so much detail that it slows down your invoicing process. Here are some guidelines to help you make an invoice that’s straightforward:
- Use language from your original quote so the customer can see you’re delivering on your promise.
- Be as concise as possible. You can keep a more detailed record of the work in a private diary, but don’t put it into the invoice unless you’re asked for it.I f a customer requests a lot of detail, add it as an attachment.
- Keep the invoice itself to one page if you can.
- File a copy of the invoice for your tax records.
Luckily Xero does all this for you (and much more) leaving you free
to tackle to day to day running of the business!
Thanks to Xero for their expert tips.
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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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The Start of your Startup…
Starting a business is perhaps one of the most exciting things you’ll ever do, amongst a whole host of unknowns and risks, there is so much to look forward to and be excited about. You are your own boss, it’s your time to run things in your way and your huge journey of discovery starts on day one.
For many entrepreneurs, all they have known before is the world of employment, a world where there are divisions where certain people in an organisation carry out specific roles, where you have a focus and a job description. Suddenly as a start-up you have to find creative ways to deliver a whole host of roles. The tendency is to try and do everything, to wear many hats, but the reality is that it is better to know what your strengths are and to outsource from day one.
So as a new business owner, what sort of tasks can be outsourced and how do you make sure you aren’t overspending from day one?
1. Online Accounting
So it goes without saying that as a business at some point you will probably need an Accountant, but as a start-up or a sole trader we often try to go it alone initially or live life in excel with spreadsheets for just about everything and process in our business.
There is nothing wrong with a spreadsheet, it’s a few steps ahead of running a business from your bank statement, but the truth is there are a whole host of feature rich online accounting platforms which as a start-up you simply can’t ignore. Suddenly you can see all of your financial information, see snapshots of your financial performance and even run your tax returns and annual accounts from a single system.
Our advice is to assign the task of setting up your online accounting platform to the person who is looking after your finances. It isn’t always a case of heading straight for a directory of Accountants as you will find there are a range of organisations who have specialist expertise with online accounting platforms.
Setting up your online accounting package from day one, will take a weight of your shoulder and will mean you always know exactly where you are on your exciting journey.
2. An Outside Perspective
For a start-up and more specifically for a sole Director in a business an outside perspective can be one of the most valuable assets. You will have a vision, you will have a plan and you will have all of the excitement that comes as a result of starting a new business, but are you ready for the hurdles you will meet along the way, the sometimes difficult decisions you will need to make. Even if you don’t commission someone when you get started with business, our advice is to start the search for someone who can act as your business mentor or a business consultant from day one. There are lots of people who offer these services, but finding someone who can complement your vision and provide advice that supports it, is often a whole different challenge.
3. Call a Director
As a start-up and when working with a traditional Accountancy firm however big or small, you will often find there are things you don’t know, there are gaps in what you can get from your Accountant and you will often find that advice comes only when you ask for it. Ultimately you are paying for your Accountants’ time and they will make sure your accounts are filed and your tax returns are calculated, but what they may not always be able to do is give you an idea of how well you are performing financially and provide the longer term perspective you really need.
The first year for most businesses is make or break, sink or swim. You typically either make money or run out of money. It may seem like overkill when you are just starting out but having someone who can provide external advice on your overall financial performance is one of the most valuable things you can do. This insight will help you to identify the areas of your business that are making you money, but also the areas that are a drain on your resources. You will also be able to look into the future and develop forecasts based on a clear financial strategy.
4. Focus on your strengths
We are in an exciting time in the world of business where more and more talented professionals are opting to work alone and go freelance across a whole host of industries. Don’t try and be all things to all people and instead think about areas of your business where it may be best to collaborate to strengthen your portfolio and service offering. Outsourcing successfully can be a profitable way of doing business while also adding additional value to your customers, but watch out for your pricing model because outsourcing badly can mean lots of work for limited return. Another valuable reason why having the external perspective of a financial director and adviser can be of huge value.
Whatever sector you are in, the truth is that even in the earliest of days it pays to outsource. As a start-up your time is hugely valuable, so don’t waste your time trying to develop skills to save money, give yourself more time to make money letting the experts take care of it for you.
At The Finance Department we offer a flexible financial solution starting from your basic bookkeeping and online accounting set-up, and ranging through to a full management accounting and Finance Director service.
Call 01392 495483 or contact us here to book your free consultation today to find the level of support your start-up needs.
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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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