What does this mean? – A guide to accounting jargon

One of the things that we pride ourselves on at PBATS is not following the  stereotypes of the industry, not just the stuffy suits but also avoiding using loads of jargon. However, sometimes we just can’t avoid a little jargon, so we’ve made this handy guide to help you out when you’re not sure what we mean!

  • Assets – These are things you own, not just physical things like your computers and equipment, but also your money in your bank.
  • Liabilities – These are what you owe, the bills outstanding that you need to pay.
  • Debtor – Someone who owes you money.
  • Creditor – Someone you owe money to.
  • Debtor days – How long it takes to be paid.
  • Prepayment – Something you’ve paid for that you’ve not yet received in full, such as an insurance policy, which may span more than one financial period.
  • Cost of goods sold – The total of your expenses for making your goods you’ve sold.
  • Overheads – Regular monthly costs such as rent & utilities.
  • Net profit – Your sales less all of of your business costs.
  • Gross profit – Your sales less your cost of goods sold.
  • Turnover – The total of all your income from sales & services sold.
  • Stock turnover – How long stock will take to sell
  • Break even point – The point at where your sales cover the cost of your expenses (so future sales would be profit).
  • Cash Flow – The money that is going in and out of your business account(s), income from invoices & outgoings for paying bills. A cash flow forecast will predict how your cash flow will be based on past information in your books and known future information (such as upcoming jobs or sales), predicting any potential issues you may have when funds get low. 
  • Accrual – This is a charge for work that has been done but not yet invoiced, such as if you pay for your annual accounts monthly in advance of them being done, for which provision is made at the end of a financial period.
  • Balance Sheet – A report that shows the value of your assets plus everything you need to pay out – this should be a positive figure, if it’s negative then we can help look at how to improve your finances.
  • Management Accounts – A series of reports produced regularly, usually monthly or quarterly, showing profit & loss and other useful financial information for the company, produced to suit your company and help you get useful information out of your books.

If there’s anything else you think should be on here please let us know! 

Welcome Susan!

May saw us taking on our first member of staff, Susan.

I originally met Susan when she was my maternity cover 5 years ago, when I returned part time so Susan stayed on where we became friends and worked well together. After I left we stayed in touch, Susan left and moved into another job and it was while she was there that I mentioned potentially needing to take someone on to ensure PBS could continue to provide the same level of service as we expanded.

She (thankfully) was interested in the role and officially joined us. She’s spent the first few weeks finding her feet, seeing how I’ve set the systems up and getting to know our client base, but is already proving a great asset to PBS.

Initially I’ll continue to be the main point of contact for all existing clients, with Susan assisting me where needed, but new clients will have the pleasure of dealing with Susan from the outset. 

I’m more than happy with my decision to employ Susan, I know we can get along both inside and outside of work and that her work ethic fits the PBS way of doing things. It’s not to say I’ll only employ people I know, but as the first employee she’s a great fit! 

Did you need to go digital?

With the first monthly VAT submission due a few months ago in June and the first quarterly MTD VAT submission due a few days ago on 7th August, we’ve heard of some people who were still unaware they needed to comply. Will there be a raft of fines sent out by the HMRC to businesses who haven’t submitted digitally or will there be any leniency? 

The official notice on MTD for VAT introduced a ‘soft landing’ on penalties for the first 12 months, but this is only in respect of the digital links used for transferring or exchanging data between programs, so claiming to be unaware of needing to submit digitally will fall outside of this scope. Indeed HMRC have the power to charge a penalty for failure to keep the required VAT records with a maximum penalty of £500. 

The HMRC also have the power to charge a penalty of up to £400 for filing a VAT return other than electronically without their prior agreement (VAT regulations 1995 reg. 25A), a power that’s not been used much but which will be extended to include using compliant software to file.

Again, a ‘soft landing’ approach is expected but only when a trader has made reasonable efforts to comply – saying you didn’t know you needed to is again unlikely to fit the bill. 

So if you find you should have gone digital but didn’t, please feel free to get in touch and we’ll help you get on the digital track.

We’ve moved!

We should have shouted about this more and definitely sooner than we are now but we’ve moved!

Originally run from my home, we officially moved into our lovely office in Leigh-on-Sea during April. We’re at 1168 London Road if you want to call in and see us, although do check someone will be there as we’d hate for you to have a wasted journey and we’re still on the road a lot visiting clients, that’s not going to stop now we’ve got an office! 

As part of our lease we’ve also got access to a meeting room within the Old Gasworks on Progress Road so if it’s easier for you to come to us then it will no longer involve my dining table at home! 

Finally, you may have noticed I’ve used the term us above, it’s not me being posh, we’ve also taken on our first employee in May too, however I’ll do a lovely blog introducing Susan soon!

Do I need a Bookkeeper?

There is no simple answer to this question – the fact is that anyone can do their own bookkeeping. This might sound crazy coming from a Bookkeeper but with modern, digital software making this even easier most sole traders with simple income and expenditure can indeed do their own bookkeeping.

The question that most small business owners should be asking is ‘is doing my own books a productive use of my time?’ Every hour/day/weekend you spend on your bookkeeping is time you aren’t productively earning for your business.

It doesn’t stop there – while you are happily processing your income and expenses and possibly even your tax return, are you keeping up to date with compliance changes? Tax thresholds? Are you claiming all the tax-deductible expenses you are entitled to?

I think once you get to the stage where bookkeeping is the bottom of the to do list and never moves up or becomes a stress that keeps your business from progressing, you’re overdue a chat with a bookkeeper about how they can help you.

We understand the huge step outsourcing this integral part of your business can be, we also believe it is an affordable and viable option for many small businesses. 

We offer no obligation consultations to discuss your bookkeeping needs – however big or small, so contact us to arrange a coffee or chat.

How to find a great Bookkeeper

Outsourcing your bookkeeping is a big deal – you know it’s the right thing for your business and your sanity, but where do you start?

A personal referral is by far the best place to start – if you have a trusted friend or business acquaintance who can recommend someone they have worked with you are off to a great start!

Someone with experience in the industry is hugely important. A bookkeeper with experience and knowledge in accounting can make a huge difference when it comes to passing records to an accountant. A tidy set of books handed over at year end takes the stress out of tax return time. (Not sure what’s the difference between an accountant and a bookkeeper? Have a look here)

Relevant qualifications, licenses and insurance should also be seriously considered. Bookkeepers can be qualified and licensed by a number of professional bodies (AAT, IAB to name 2) but should always have professional indemnity insurance as well as Anti Money Laundering cover – for their own protection as well as yours.

Finally, once you are happy with the above you need to be able to trustyour bookkeeper. You should feel comfortable with them, feel you can ask questions and seek advice from them. 

We understand the huge step outsourcing this integral part of your business can be, we also believe it is an affordable and viable option for many small businesses. 

We offer no obligation consultations to discuss your bookkeeping needs – however big or small, so contact us to arrange a coffee or chat.

What is bookkeeping and why is it important?

I touched on this recently when writing the What’s the difference between bookkeeper and accountant? blog but will go into a little more detail now. Whether you need an accountant for filing purposes at the end of the year or not, having a well-prepared set of books will make your life easier and could save you money! Presenting your accountant with a well looked after, accurate set of books will make their life a lot easier than being presented a box of invoices and receipts and make your bill a lot lower too! 

Even if you get your bookkeeper to do your end of year self-assessment and reporting on your business, or even do it yourself, a good set of books is still an essential requirement, as they’ll make it so anyone looking can easily find the information they need! It’s not just useful for self-assessments, your books are a wealth of information about your business just waiting to give you an insight from a different angle.

Reports can be viewed easily to allow you to analyse the financial side of your business easier. I’ve mentioned before the case where one of my clients had us setup some reports to get e-mailed monthly to them, analysing a particular client who they did a lot of work for. The reports showed them that although they spent a lot of time working for this client, the profit didn’t justify that amount of time. This caused a restructuring of how they worked with this client, freeing them up to do more work with more profitable customers. 

So many people see their books as something they do simply to meet the legal requirements of them, so they’ve figures to submit in their tax return. However, they can show you so much more, it’s often people either don’t know how to get something from them, don’t have time to or just don’t want to spend their time doing their books, causing resentment towards them. My husband was a great example of this (before I met him, I should add!). He used to lose every Christmas to doing his books, as he was “too busy” to do this during the year doing the work that he could invoice. This timeframe meant they were done just in time for self-assessment, no time to analyse them in any form, they were just there for that one legal requirement. He’s no longer self-employed so I can’t help him, but he has said he wonders if he’d done things differently if he’d had time to actually look at how his business was performing, other than looking at how much money was in the bank! 

Existing customer or not, please feel free to have a chat with us about how we can help you get the most out of your books! 

So what is the difference between a bookkeeper and an accountant?

A question that we often get asked by people is what is the difference between us and an accountant? While there’s a lot of information out there on the web about this, we thought we’d do a little blog to try and help too! 

Bookkeeping is essentially the recording of all the financial transactions within the business. Accounting is the interpreting, analysing, reporting and summarising of the financial data. So, without the bookkeeping step, the accounting cannot happen. While you’d think from this that bookkeepers will therefore handle the recording part while the accountants analyse, it’s not always that clear cut! The roles often overlap, with bookkeepers analysing and reporting on the data they’ve entered, both for client analysis and also as part of checking their work. Accountants can also create and modify data as part of their analysing, such as moving items from one account to another to help with tax liabilities. 

Some accounting firms will offer a full service, where they perform both functions, however they’re often done by separate departments so it would still be a bookkeeper performing the bookkeeping role, the accountant doing the accounting and this situation is where you’d find less crossover in the roles, sticking to their defined areas. 

Having a separate bookkeeper can be an advantage for many reasons. Either employing a bookkeeper or using an external one such as ourselves can be more cost effective than using an accountant alone. Giving your accountant a looked after and nurtured set of books makes their work easier, plus if they do have any questions, they can speak to someone in technical terms and get the answers they need easier. The bookkeeper can also generate reports using the transactions, handling some of the accounting process again in a more cost-effective way, plus knowing your business well will allow them to know what you need to know.

Bookkeeping and accounting can appear to some people as the same thing, as their both working with financial data. Some people, especially the self-employed, don’t even need an accountant, a bookkeeper can take care of all their requirements. We pride ourselves that we advise our customers honestly when we feel it would be beneficial to them to have an accountant work directly with them alongside ourselves, rather than trying to hide it! We work with a number of accountants who we can get help and advice from as required on your behalf when required, so starting with a bookkeeper is often a good starting place! They certainly wouldn’t end up costing you more than just going with an accountant!

If that’s still left you with questions, why not get in touch with your questions and we’ll do our best to help you. 

QuickBooks Advanced Training

Yet another day in London last week, this time accompanied by my husband, to attend training for Advanced Online Certification of QuickBooks. Held at their training centre near Tower Hill, it was a good refresher of some skills that we don’t use day to day, we learnt a few tips and tricks and proved we’re actually quite good at what we do!

As with QuickBooks connect, lovely food and drink and a lovely training centre to spend a day in, while the classroom is quite intense to ensure you get through everything in a day, the centre is very relaxing and regular coffee breaks help keep you awake! The day ends with a timed exam, lasting a maximum of an hour, thankfully with your result at the end so no waiting to see if you passed! We did both pass, so expect to see our new Certified ProAdvisor, Advanced Online badge on our website soon!

QuickBooks Connect

Last week QuickBooks hosted their annual QuickBooks Connect event, held in London at Old Billingsgate Market, an event for Bookkeepers and Accountants. Starting Monday afternoon allowed me a couple of hours in the office before jumping on the train to head to the city. An interesting afternoon speech aimed at accountants all about Making Tax Digital, followed by a brief drinks reception before retiring to my hotel to enjoy an evening of childfree silence! 

The main day featured a mixture of keynote speakers and breakout sessions, with a wide variety of subjects, thankfully I’d studied the agenda before leaving so I’d got my day all planned. One of the highlights was Dr Brian Cox, although not directly linked to bookkeeping and accountancy was a highly motivating speech, giving me lots to think about. Other highlights including the delicious food on offer throughout the day and getting lots of swag from the various exhibitors around!

One of the only disappointments of the day was how an accountant managed to alienate any bookkeepers within the audience of his speech within the first five minutes, seemingly forgetting that a good set of books can make an accountant’s job so much easier and rubbishing the work we do! Think someone may have not thought about their audience somehow! 

A highly valuable day overall, seeing lots of new innovative software solutions coming up from QuickBooks and their partners. Looking forward to next year’s event already!