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Summer’s over, start to think business again

We actually had a summer this year, and with that it is very easy to forget about work and enjoy the weather. But with winter creeping up on us, it’s time to start thinking about your accounts and tax returns. Most businesses are likely to need to meet deadlines around the new year, so why leave it to the last minute?

It may well be 6 months since your year end, so plenty of time to have got together all that paperwork; your invoices, cheque book stubs, bank statements and the like. Now you just need someone to put it all together…

Do you have a December year end?

If your limited company or LLP has a December year end, then your financial statements are due to be filed at Companies House by 30 September.

Don’t leave it too late to have them completed, as there will be penalties due for late filing. Fines start at £150 for up to one month late, £375 for 1 – 3 months late, £750 for 3 – 6 months late and £1,500 for over 6 months late.

If you filed your accounts late last year, you should definitely ensure they are on time as all fines will be doubled this year!

Does your lease agreement include a rent free period?

To encourage tenants to occupy their buildings, many landlords will include an initial rent free period in the lease agreement. This may mean the first 6 months are free. Great for cash flow then, but what does this mean for the accounts? It is wrong to assume that from an accounting point of view there is no expense.

Under accounting standards, where there is a rent free period, the cost must be apportioned equally over the term of the lease, so it will not simply follow what money has physically been paid. Your year end accounts may therefore show a lower profit figure than you first thought.

Are you taking illegal dividends?

If you are both a director and shareholder of a company. it’s likely that you take dividends from the business instead of a salary (or in addition to). However, under Company Law you can only take dividends out of distributable profits. Are you at risk of paying yourself an illegal dividend?

During the year, it may well be that you have a good idea of what profit you are making, and so pay a dividend amount based on this. However, when you have your accounts prepared at the end of the year, and your accountant  has made a number of adjustments to your figures, it may well be that your profit is a lot less than you thought. You may well have taken a dividend in excess of your total profits available.

One way to combat this is to ensure your records are up to date through the year, so you know what is legal to pay out of the business. Regular bookkeeping will be the solution.

Why your accountant would love your records now

Most businesses tend to have a March year end, which means the filing deadline for limited company accounts is 31 December, and for those paying personal tax, 31 January. If you leave it until late in the year to give your accountant your records, you’re doing the same as everyone else, and your accountant will experience a large backlog of work. This last minute rush can lead to stress, mistakes and a souring of your relationship with your accountant. Having been in practice for many years, I have seen it happen.

The summer months are traditionally quiet for accountants. No pressing filing deadlines, few year ends to deal with. So why not have your records ready now to ensure they can be dealt with effectively and on a timescale to suit you? This will give you more time to make decisions about accounting adjustments, dividends and other factors that will affect your overall tax position.

Even out your monthly management accounts

If you prepare management accounts, they are only useful if the information is accurate. Due to paying costs in advance, or receiving payment from a customer in advance of the service you provide, it is easy for your figures to become skewed.

For example, you pay your insurance renewal in July for £12,000. If you record the whole cost in July, the month’s overall profit is going to look low. What you need to do is spread the cost over the period it relates to (in this case likely a year). Each month between July and the following June would then have a £1,000 charge to your profit and loss.

This is exactly the type of adjustment that is made for your annual accounts, so why not make it during the year?

Trying to fit too much on excel?

Microsoft Excel is a fantastic tool, and in my experience almost every business uses it in some way. However, when it comes to maintaining your accounting records, Excel may not be the most appropriate package.

How often have you used Excel, and as time goes on your spreadsheets get larger and larger, more difficult to print on a single page and difficult to follow? There comes a tipping point where your spreadsheet no longer has value.

This is the time to switch to an accounts package. By using Sage accounts, you can input all data into one system and run pretty much any report you want to extract the necessary data, be it profit and loss, aged customer invoices or cost reports among others.


What should you give your accountant?

If you own a business, it is likely that once a year you’ll receive a letter from your accountant asking for your records so that they can prepare your annual accounts. Problem is, what do you send them?

If you send your accountant folders of your bank statements, sales invoices and purchase invoices and nothing else, all you’re doing is asking your accountant to spend time piecing it all together. At their hourly charge out rates, the more they have to do, the higher their cost and the higher your fee is likely to be.

If, however, you were to give your accountant a file containing all the information they need, they can pretty much import it into their accounts software, and their job will be to just ensure they use the right disclosures in the accounts.

This is where a bookkeeper can help, especially a bookkeeper who is a chartered accountant. For a fixed monthly, quarterly or annual fee, we can ensure that your accountant gets a finished product, and you will also have the benefit of having up to date and accurate figures during the year.

How much is your time worth?

When you run your own business, more than likely you are keeping the books yourself. Even small businesses generate a large amount of paperwork, be it sales invoices, purchase invoices and receipts, bank statements etc. For you to deal with the accounting side of the business can really take valuable time away from the area of the business you need to concentrate on in order to make sales and grow.

This is where a bookkeeper can be invaluable. By outsourcing this task, you can feel reassured that your records are up to date and accurate, and that you are informed of financial results and dates for important things, such as VAT returns and corporation tax payments. You are then free to deal with the business in the way you want.

Not many people want to deal with the accounting side of the business, so give it to someone who does!

Is your accountant highlighting the same accounting errors to you year on year?

During the accounts prep process, your accountant will highlight to you adjustments they have made and where you may have errors in your figures. Trouble is, sometimes your accounts won’t be done until 9 months after your year end, and you have almost completed the subsequent year. That means at least 2 years of accounting errors.

By using a bookkeeper during the year, you can be assured that your figures are free from these errors, and that you have up to date information to use in the course of business.

Don’t wait for your accountant to tell you your figures are wrong and pay them for the privilege!