Posts Tagged ‘accountants in manchester’
Bank Reconciliation- A Few Common Mistakes
Preparing a bank reconciliation is a very important element of bookkeeping. Whether you are keeping your own books and records or you have employed the services of a bookkeeper, preparing a monthly bank reconciliation should be a ‘must do’ on your bookkeeping checklist.
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:
- 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.
- 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.
- 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.
The VAT Cash Accounting Scheme: The Basics
Accountants in Manchester – VAT Tax Tips
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.
10 Ways to Lower Your Small Business Costs
Accountants in Manchester – Lowering Business Costs
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.
The Importance of Having a Business Bank Account for Your New Business
Accountants in Manchester – Accounting Advice
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.
The Forecast is Good – A How To of Financial Forecasts in Business
Accountants in Manchester – Financial Forecasting
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.