Cautious.

There will almost certainly be parts of the information you give that you have had to estimate; obviously you cannot ever be one hundred percent accurate with financial predictions, but the information still needs to be provided, in these situations it serves everyone well to provide conservative estimates; guard well against over-optimism in figures that are yet to be seen.

Tailored.

Although there will without doubt be someone for whom you are producing a particular financial report, who they are can differ widely; it is important when putting your information together to remember who will eventually read it, because there may be a chasm of difference between how, for instance, an accountant views financial information and how a potential investor might. It is worth bearing in mind that not all of your readers will have the same skill-sets or experience.

Dependable.

It matters not at all who is going to be using the information you provide when it comes to being honest about the facts; whoever reads your report needs to be able to trust that everything they see is completely candid and not fudged or polished or padded in any way; apart from the obvious problems reporting in this way could bring, you cannot rely on the right decision being made if the decision is based on erroneous info.

Pertinent.

Keeping what a report says on track and applicable to the reason for producing it is pretty vital; there are of course many types of financial report and not all concern the same area of your business’ finances. Try to focus on exactly what the report is aiming to say and steer away from extraneous or irrelevant stuff that could get in the way of the heart of the matter.

Comparable.

Your reports will not exist alone in a vacuum. Each time that your business produces a financial report it joins all of those that have been produced before and will be produced in the future, not just by your company, but by every other business in existence. Professionals whose job it is to utilise financial reports will sometimes need to compare the current reports with your business’ historical reports and perhaps also with those of other firms. To do this, there needs to be a certain uniformity about how the information is presented and a consistency to what is included.  There are of course official guidelines laid down by the accountancy profession to help with this, and it is important to follow these with care.

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By taking a bookkeeping course you will get the opportunity to learn about basic accounting information and how to process financial transactions. Many courses will reward you with a certificate and qualification. In order to be a successful bookkeeper you should be focused, detail-oriented and of course you need to enjoy working with numbers.

The first thing to consider when looking for a bookkeeping course is to check its accreditation. People specialised in this field have reviewed the accredited courses offered by the various colleges and other institutes. The administrative and the academic policies of the course need to meet certain standards. Moreover, the colleges and other institutes can sometimes offer you access to some of the government aid programs available.

When you choose your bookkeeping course you need to check the qualifications of the teacher or instructor. You should make sure he or she is a professional in their field; for instance, is the teacher or instructor a qualified accountant or bookkeeper? You should take your time when investigating the teacher and their credentials prior to selecting a bookkeeping course.

There are bookkeeping courses available from numerous career and community colleges or institutes. You should read the description of the course carefully and make sure the material is relevant and up to date. The bookkeeping course should use the most recent software versions and it will need to be based on the current legislation.

The majority of the bookkeeping courses available usually lead to a bookkeeping certification after they have been completed. This is a great way of getting your skills recognised. You can also take other courses in the future, such as inventory or payroll, in order to broaden your knowledge and general bookkeeping experience.

As a bookkeeper, you will be responsible for the entry- level accounting and support; maintaining the financial records and creating accounting reports at the year end. The owners of the business are likely to depend on all this information you provide when they are making any financial decisions. In essence the bookkeeping course you finally choose to opt for should be relevant to the role you are looking to fill in a business and should also result in a qualification that is professionally recognised.

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A company’s financial standing is reflected in its balance sheet, which reveals the exact status of the company in the current market conditions. This important document is also referred to as a ‘statement of financial position’ and it summarises many of the important details concerning a company.

If you are planning to invest in a small business or become a shareholder, then it is very important you understand the basics of how to read a balance sheet, because it is this report which contains the vital statistics and the precise details of the financial position of a company. A balance sheet generally details the assets, liabilities and the net worth of the company at the end of a particular period. Acquiring knowledge only about a company’s profit is not enough to identify how well it is doing. You need to analyse the balance sheet along with the profit and loss account and the cash flow statement in order to get a better understanding of how well a company is performing.

A balance sheet is structured in such a manner wherein the company’s assets should be equal to the liabilities’ and the shareholder’s equity. This is the equation on which the balance sheet is created. One portion of the balance sheet is entirely dedicated to the company’s assets, which includes current assets and fixed assets, whereas the other portions contain the liabilities and the shareholder’s equity.

Usually the assets are mentioned in the descending order starting with the most liquid one and then the list narrows to the least liquid assets. Basically there are two types of assets, namely current and fixed assets. Current assets have the capability of being converted into cash quickly, within a year or less. Accounts receivables, inventory, cash and cash equivalents are included in the current asset category. Cash equivalents are considered the most safe and easily convertible assets. There are assets which take a longer time, more than a year, to be converted into cash and these ones are referred to as fixed assets. They consist mainly of tangible assets such as buildings, machinery, etc…, and non-tangible assets such as patents, goodwill and copyright.

What a company owes to its creditors and outside parties constitute the liabilities of the business. These liabilities can be further broken down into current liabilities (to be paid in less than 1 year) and long-term liabilities (repayable more than 1 year). Current liabilities include items like trade creditors, whereas long- term liabilities include items like long-term bank loan balances. Lastly, the shareholders equity is the total of all the profit and reserves of a company plus the share capital issued.

A balance sheet basically represents a ‘snap- shot’ of a company’s assets, liabilities and shareholders funds at a point in time. If a balance sheet is positive at end of a period this is generally a good sign and can indicate that a company is financially sound. As stated above, the balance sheet can tell us a lot about a company’s make-up but it should always be read and interpreted along with other financial statements before any important decisions are made.

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However, the assets subject to CGT do not include our personal car or the home where we live or any personal possessions up to £6,000. As well as these exceptions, there is also an amount set each year, up to which we are allowed to profit before Capital Gains Tax kicks in; this amount is known as the ‘Annual Exempt Amount’ (for 2010-11 it was £10,100 per person).

Capital Gains Tax is currently charged at 18% on all gains made. It is important to remember that disposing of assets and making gains can happen at all sorts of points in one’s life when there was perhaps no intention of making a profit, for instance, if you separate or divorce and belongings are moved between you and a financial gain is made Capital Gains tax will be payable on amounts over the ‘Annual Exempt Amount’.

Capital Gains Tax was introduced to prevent those of us who would otherwise escape paying tax on taxable income, by converting it in to tax-free gains; the Capital Gains Tax means that this income is also included in our taxable income. This tax tends to hit those of us selling second homes or stocks and shares hardest, as it was designed to harvest revenue from the profit made on such activities.

Increasing Capital Gains Tax is often a popular choice when governments are looking to raise revenue, perhaps because it was traditionally seen as the tax that affected mainly the well-off, who could better afford the extra burden, however, nowadays it tends to be pensioners selling second homes to fund their retirements or ordinary people who have invested in shares as a way of saving that are affected the most.

In our current economic climate, it looks probable that our government will need to take drastic measures to raise money and the possibility of Capital Gains Tax increases is looking more certain; on top of any increase there is also the option of lowering the ‘Annual Exempt Amount’ and setting it at a level that spreads the net wider catching more tax payers in it.

There are however, ways to reduce, escape or defer Capital Gains Tax in some cases, so it is worth sitting down with your accountant to explore the options available to you, a professional tax advisor will be able to explain what if anything you can do to lessen the amount of tax you might have to pay.

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Whether one is a chipper young thing still living with a belief in their immortality, or a more mature individual looking to the winter of their years, considering what will happen once we’ve gone is never a pleasant thing. Most of us will leave any planning that’s needed right until the very last moment, simply so that we don’t have to think about the whole business of death.

Unfortunately when it comes to some things such tax, not planning can waste a lot of money that could have been saved. In the UK we are subject to many different taxes, some attached to our working lives, some to our shopping trips and one in particular attached to our deaths.

Inheritance Tax comes into play when someone dies and their ‘estate’ is valued as being worth over the threshold set by the Chancellor (for 2010-11 this was £325,000). Someone’s ‘estate’ comprises of any cash in bank accounts, investments, property and businesses, and so even a moderately well-off business owner’s estate could be effected. When your estate is valued over the threshold set, Inheritance Tax is payable at forty per cent on the amount over the threshold.

Gifts and trusts made during a person’s lifetime are also subject to the tax, unless made at least seven years before they die, and so it is not possible to avoid the tax by simply giving everything away prior to death (unless of course you are happy to live without your cash for at least seven years in order to benefit your heirs!) There are ways however that gifting can lower your Inheritance Tax bill, if it is done within HMRC’s rules, so it is worth sitting down with an accountant to see what is possible.

Even if an estate is valued over the threshold, there are situations when Inheritance Tax does not have to be paid for instance:
When an estate goes to a spouses and/or civil partner it is usually exempt from Inheritance Tax, as are wedding gifts to others, although it is important to note that any wedding gift given must be genuine and not for profit.

The tax is also not usually payable on gifts bequeathed to UK registered charities, and if the deceased owned woodland or National Heritage property there is usually some tax relief available.
It is obviously important that you make a will, to prevent things happening to your estate that you had not intended, but before you do, it is important to get some good professional tax advice. If your estate is likely to exceed the threshold set by the Chancellor, sit down with your accountant and discuss your options, there are ways to lower potential Inheritance Tax bills after you’ve gone that stay within the rules, but you really do need a professional to explore these for you.

Once your accountant has given you the options and you have made your decisions, sit down with your legal advisor to put everything in a will. Forcing yourself to face the subject of your estate after your death, could save your relatives and other beneficiaries thousands of wasted pounds.

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A bank reconciliation basically allows you to reconcile your cashbook records (receipts and payments) to the business bank account statements. It is fundamentally a check to confirm you have not missed any business financial transactions in your cashbook during the period.

Outlined below are a few of the common mistakes which some people make when preparing a bank reconciliation:

1. One common mistake, if you use a manual cashbook or spreadsheet, is that it does not add up properly. Indeed, it is very easy to make a mistake when adding up a column of payments or receipts with a calculator. Similarly, even if you use a spreadsheet make sure you check the addition formulas, because if one of them is wrong, the total column will be incorrect as well.
2. Omissions of payments are another type of mistake, which some people make when completing a bank reconciliation.  For example you may have written out a cheque but forgotten to enter it in the cashbook. Not entering all the direct debits or standing orders in the cashbook is also another common type of omission problem. To avoid these types of errors it is a good idea to tick the bank statement entries to the cashbook payment entries and also make sure at the same time you have entered all the direct debits and standing orders.
3. Related to the above point, forgetting to enter certain receipts in the cashbook, for instance bank giros, is another common type of error that can occur. Again it is crucial you follow a strict monthly routine whereby you tick up the bank statements to your cashbook receipts and make any necessary adjustments.

Lastly, some entries on a bank reconciliation involve listing the amounts of any cheques which were written before the end of a particular month, but do not appear in the bank statement until after the end of the month. These are known as outstanding or o/s cheques. It is important to make sure the outstanding cheques on the bank reconciliation for the previous month all cleared. Indeed, it is perfectly possible that a cheque for the prior month, which you expected to clear, is still outstanding. If it is still outstanding it should be carried forward and entered again on your current reconciliation. Failure to carry forward these un-cleared cheques is a common mistake that many people make when completing a bank reconciliation.

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In our current challenging economic times, it has become a fact of business life that there is far less money to go around. Because of this, businesses are tightening their credit control and chasing debts harder than they might usually do. In turn, debtors are delaying payment as long as possible and trying to stretch credit terms out for as long as they possibly can.

With businesses finding the days of fast payment long gone, cash flow issues abound, especially for the ever pressed small business. In such trying times anything that the Tax Man can offer to help out is a positive boon. The Cash Accounting Scheme is therefore an incredibly useful lifeline for today’s struggling business community.

In the simplest of terms Cash Accounting for VAT allows qualifying businesses to pay VAT only once a customer has paid them for the goods or services they’ve provided, as opposed to standard VAT accounting where by businesses must pay VAT on their sales, regardless of whether or not a customer has paid. In the current climate standard VAT accounting may see businesses shelling out VAT on sales that they may be waiting a very long time to get paid for.

Not every business qualifies for the scheme of course. To qualify your business’ estimated turn over for the year must be less than £1.35 million, making this scheme an ideal tool for small businesses that could do with a helping hand as they struggle with cash flow difficulties often exacerbated by bad debtors.

As well as the obvious financial benefits of using the scheme, there are other advantages for businesses including simplified record keeping. If a manual record system is being used VAT can be accounted through a simply cash book, without the need for a separate sales/purchase day book; on a spreadsheet it can be recorded alongside the expense payments.

The scheme is obviously most valuable to those businesses that have to wait the longest for payment from their customers and conversely those businesses that receive instant payment for goods or services could actually find themselves worse off under the scheme as they would no longer be able to reclaim VAT before they have settled purchase invoices; in a similar vein the scheme does not benefit businesses with sales that are all or mostly zero-rated (in the range of VAT but rated nil e.g. books, children’s clothes, basic foodstuffs or prescription drugs.)

If a business opts to use The Cash Accounting Scheme for VAT, it is not obliged to notify HMRC either when it joins the scheme or if it decides to leave it. There are no application forms to complete and providing a business qualifies, the scheme is free to enter. If a business is already registered for VAT it must enter the scheme at the start of any VAT period or if it is not already registered on the day that its registration begins.
Although businesses must have a turnover of less that £1.35 million to qualify to use the scheme they will not be forced to leave it until their taxable sales exceed £1.6 million.

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How to lower business costs and increase profit, without compromising on customer service and quality, is a challenge most businesses are faced with. A company which adopts the right cost reduction techniques can prosper, where others lose out. So here are a few simple tips you can use in order to reduce your costs.

1. Make use of the technology: Store your business documents on electronic media, which are cheaper when compared to the conventional files and paper. There will be less of a need for expensive overheads like cabinets, cupboards etc.

2. Hire students: Hire students from colleges to do short term work or projects. This would be mutually beneficial, the student gains experience and you save the cost of hiring a more expensive individual. Many colleges have programs where they can refer students that may specialize in your industry and some of them are government funded.

3. Avoid Phone calls: Avoid making phone call whenever possible and use emails instead. You can also switch to VoIP, which are a lot cheaper compared to the conventional telephone lines.

4. Outsourcing: Outsourcing long term projects to outsourcing agencies present in developing nations may be a good way to reduce to costs for any administration functions that your business undertakes.

5. Buying in Bulk: Buying through a wholesale route or in bulk should be considered as procurement strategies to reduce your material and stock costs. Indeed, ordering through traditional retail channels, or ordering small quantities of stock, may be more costly for your business in the long-run.

6. Reduce Energy Consumption: This is one area that many businesses tend to over look, but where a lot of money can be saved. Do away with the old CTR monitors that tend consume a lot of electricity and replace them with second hand low energy consuming laptops or LCD monitors. Getting energy efficient lighting installed in the office premises can also save a lot of money.

8. Cut travel costs: Large amount of money can also be saved by reducing your travel costs and making use of communication technologies like Tele – Conferencing or Group Webinar Meetings.

9. Printing Less: Reducing the use of printers can be beneficial to both the business and the environment. It is estimated that 90% of the printed materials end up in the dustbin, so only printing absolutely necessary documents can save both paper and the cost of expensive ink cartridges.

10. Blowers instead of Tissues: This might sound silly, but Installing ‘blowers’ in the washrooms can prove to be very cost effective by saving money spent on tissue papers throughout the year.

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Many small business owners avoid or do not pay too much attention when considering whether to open up a bank account in their business name. They make the mistake of using their personal account to carry out their business transactions, just so they can save a small amount of money required to open a new business bank account.

Having an account in your business name has many advantages. For example it gives your business a more professional look when dealing with your customers or clients. Using your personal account for business purposes gives the impression you are not really serious regarding your business and it is more like a hobby.

Having a separate business account proves to be beneficial when you need to complete the accounts for the business and any related tax returns. Indeed, you can quickly check the income and expenses for the year, rather than having the hassle of separating your personal and business transactions if you only have a personal account.

Another good reason to have a business bank account is to show the tax authorities that your business is transparent in terms of the financial transactions it carries out. All the income and expenses should be accounted for through the business account. Thus, if HM Customs & Revenue want to look at your records, this will demonstrate that you are declaring all your income and only claiming expenses related to business.

Opening a company account with a bank also has other additional perks. For example, you can usually obtain free banking for at least a year as a new business. Also some banks even offer new clients special deals on accounting software to use in their businesses. Lastly, as regards this point, it may be easier for you to obtain a business overdraft or loan if you have a company bank account.

Some entrepreneurs are put off from opening a business bank account because they think it will be complicated in terms of the formalities and legalities. This is a misconception as it is very easy to open a bank account most of the time.

A few points that one needs to keep in mind while opening a business accounts are:

• The account maintenance fee
• Different transaction modes available e.g. online banking, debit card etc.
• Overseas transaction charges
• Interest rate charges
• Minimal balance that you need to maintain

A company bank account may initially seem to be an extra overhead on your business, but the amount paid will be worth in terms of the time and money you will save by not having to separate out your business transactions from your personal transactions. Having a business bank account also sends a clear message to other businesses you deal with and the tax authorities that you are a proper business with nothing to hide.

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Financial forecasts in business come in all shapes and sizes and each is as important as the next. Financial forecasts are the things that allow you to plan against potential crises such as cash flow problems and so it is important to make them a staple of your regular business planning.

There will also be times during the life of your business when you will be required to provide financial forecasts requested by others, especially if you are looking to finance something such as an expansion or merger, everyone from lenders to potential partners may ask for a particular forecast and the quality of what your prepare for them may determine whether or not you achieve your desired outcome.

It is however surprisingly easy to get things wrong in financial forecast preparation and understanding just what to include is something that many business owners have learnt the hard way. There are one or two simple rules to remember that should help you produce the most effective, professional financial forecasts.

The first rule of forecasting, particularly when the forecast is at the request of a third party is to be very thorough; ensure that you have remembered to include all expenses and all income, don’t forget expenses that occur annually, monthly and/or are just occasional; leaving something out may look like deception and could be awkward for you to explain.

However positive your view of your business, it would be wise to remove the rose-tinted specs before sitting down to prepare a financial forecast; kidding yourself about how much money you will be bringing in or cleaning up the expenses a little is not helpful to anyone; if you are at all unsure about the accuracy of the picture you are paining, run it past a colleague or partner first, they should be able to provide a more objective opinion.

When putting together a forecast for professional reasons, for the benefit of other business people ensure that it is clear and concise and makes sense. How you present your financial information will say almost as much about your business as the information itself, so keep it as professional as possible; make no mistake you will be judged by such things.

Probably the most important thing to remember when preparing a financial forecast, whether for your own planning or at the request of your bank, is to research the information; strange as this may sound, it being a forecast relating to your own business, far too many business owners try to ‘wing it’ when it comes to forecasting and this is never good enough. You should approach the research in exactly the same way as you would any other part of your business planning; as with things like ‘competitor research’, gather all of the information together from all of the relevant sources before you compile it; taking this more dispassionate approach will give you a less biased, more accurate forecast, and whether for yourself or for someone else, the more accurate your forecast the more useful it will prove to be.

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