What accounting records are required?
Every business registered for VAT here in the United Kingdom is required to maintain financial records according to the guidelines given by HMRC. Similarly, it is a requirement of the Companies Act that every company should keep proper accounting records of money received and paid, of all sales and purchases, and of assets and liabilities. HMRC requires every business which employs staff to keep proper records for pay as you earn (PAYE) and for the calculation of tax liabilities. All employers’ payrolls are linked to HMRC using real time information. In some types of business, there are additional records that have to be kept to satisfy government requirements. If your records are inadequate in any of these areas, you could fall foul of the law. The Accounting Group is there to make sure that this does not happen.
Identify profit and loss
Many businesses do not have adequate systems for identifying the amounts of profit or loss generated by different products and services, or even by the business as a whole, yet this information is absolutely essential if the business is to grow stronger. It is also important to know the costs of different areas of administration, so that overheads are not allowed to swallow the profits made from gross margins. To keep track of where profits and costs are coming from, you may need to have a properly designed management information system which can provide all the essential facts quickly and accurately..
Obtain timely information
Annual accounts are not enough to control a business. You must know what is happening to profits and losses on a much more regular basis. Most businesses need to produce operating statements at quarterly intervals at least, and better still, at monthly intervals. There are even some businesses where financial information is available in real time.
Set financial objectives
Businesses need to plan ahead and compare forecast figures with actual results. Break-even analysis, business ratios, budgets and discounted cash flow, perhaps built into a financial model on a computer, are some of the methods which can be used to set realistic financial targets and then keep you on course to achieve them. The Accounting Group is qualified to advise you on the most appropriate systems for you to use and which methods to adopt.
Should I use accounting software?
Almost certainly! If you already have a computer, using accounting software to run the accounting and management information systems can make such a big difference to your business. They provide fast and detailed information. They save your time and time is your money. There is now a wide selection of small computers and standard accounting software, which do not cost too much. It is important, however, to obtain independent professional advice on the suitability of a system for your particular business and to ensure that proper controls are provided.
Should I use cash accounting?
Sole traders and partnerships with turnover below the VAT threshold can now report their business trading to calculate their taxable income using Cash Accounting. This simply allows for receipts and payments to be supplemented with simplified expense allowances for motor expenses, use of home and private use of business premises. The new basis of reporting is optional. Businesses need to understand their choices before opting for Cash Accounting. The Accounting Group, one of the firms Rome Effs has a controlling interest in, can explain what is involved to you if you get in contact.