What are management accounts?

We prefer to call them a business review, which is a better description of what they are – they’re not compulsory but this is a benefit as it allows them to be completely customised to your business to give you the insights you want about your business.
 
They form a financial report to be used by the owners and management to aid them in their day to day decisions along with planning for the future. They’re usually produced monthly or quarterly. It’s important to make sure they only contain the information you want to see, we’d be happy to advise what kind of information people usually like to see and this can be tweaked from report to report to ensure they are giving you the insights you want, otherwise you probably won’t actually read them! 
 
Most to start with will contain a summary of your accounts, profit & loss and your balance sheet. As your business develops you’ll want to add more detail in, such as debtors and creditors, budgets and cashflow analysis, plus comparisons to previous periods to see how your growth is going. 
 
So why not do this yourself? All this information is available within your bookkeeping software so you could but it comes down to time – it’s not just a simple click and it’s there for you to read, the information you actually want will often be spread over a number of reports and need to be collated together so you’ll need to decide if it is time well spent for you to create these yourself. 
 
If you’ve never had management accounts before we’d be happy to discuss them with you to see if we feel they’d help you within your business, just get in touch to arrange an informal chat. 

A year since we moved!

I was chatting with my son about how we’d moved the office around and he said to me that it’s a shame we don’t have any before and after photos from when we first got the office, it was at that point I realised we’ve been in our current premises a year already!
 
The move was prompted by our merger to create PBATS but the increased space and more accessible location has helped us no end, especially having our own meeting & training room it’s allowed us to increase our training offering and made it much easier to deal with ‘walk in’ enquiries (not that we’ve had many over the last few months for the obvious reason!)
 
We’ve also just launched our fancy new website, including a nice new meet the team page, take a look and let us know what you think! 

COVID 19 – October Update

So last week we did a little message on our various social media accounts (Facebook, twitter & Instagram for those not following us) just giving a heads up that this weeks blog would be a copy of our analysis on the latest government support for businesses during the COVID-19 pandemic. However, I am going to back track a little! Let me explain….

So in the past week we’ve had a lot of feedback from our clients who we’ve emailed our advice out to, thankfully all positive! Everyone has found our analysis very useful as it’s allowed them to carry on running their business and have it all summarised by someone who knows what is relevant to them, a lot easier to read than sifting through the various statements that we did (Ok, another honesty moment, it was mainly Martin!). We covered the Self Employment Income Support Scheme (SEISS), Bounce Back Loans, VAT & Personal Tax payments.

But, we’ve decided to not just pop it on our blog, as we’d like to know who else finds it useful, so would like to know who else is reading it, so if you’d like a copy just send us an e-mail and we’ll send you a copy across.

VAT – The basics!

We’ve mentioned registering for VAT in a recent blog but as we didn’t go into detail we thought we’d add a bit more now.  VAT is essentially a tax on the sales of services & goods, that you as the seller collect on behalf of the government. There’s a few different rates but the main one you’ll come across is the standard rate, currently 20%.
 
You have to register for VAT when your turnover goes over the HMRC set threshold, currently £85,000. However, this isn’t based on a tax, financial or calendar year, it’s based on a 12 month rolling period so it’s another good reason for keeping your books in good shape and up to date, it’s up to you to monitor this and be ready for it (we of course keep an eye on things for you when we know you’re approaching and will help you prepare for this).
 
You can register voluntarily, so if you’re nearing the threshold you could join when you want to, rather than when you’re forced, which could help you prepare your customers.
 
A common concern for businesses nearing the threshold is if they can remain competitive when their customers are non VAT registered business customers or individuals, as ultimately the addition of VAT will just be an increase in cost for those customers.
 
For example, you’ve got an item you buy for £50 + VAT (£60) and sell for £100, so you currently make £40. You can obviously set your sales price to what you want, the below table shows a few options after registering for VAT, just adding VAT to your existing price which increases your profit, sell for the same but including VAT which lowers your profit to £33.33 or keep your profit the same by increasing your sales price. 
 
  Cost of item Sales price Profit Net VAT to pay to HMRC
Net VAT Net VAT
Before registering for VAT £50.00 £10.00  £100.00  – £40.00 – 
Registered – sell for same plus VAT £50.00 £10.00  £100.00  £20.00 £50.00 £10.00
Registered – sell for same inc VAT £50.00 £10.00  £83.33  £16.67 £33.33 £6.67
Registered – same profit as before £50.00 £10.00  £90.00 £18.00 £40.00  £8.00
The table also shows how much VAT you’d have to pay to HMRC on your VAT return. Looking at the line where we just add VAT, you receive £20 VAT for each sale, which is tax you collect on behalf of HMRC. You’ve also paid out some VAT of £10, which you’re allowed to reclaim but you need proof, a VAT receipt.
 
Think of it the same way you do if someone spends your money with expenses, you want some proof of what was spent, you’re spending HMRC’s VAT money you’ve collected so they want proof too! As a minimum the receipt must show the VAT number of the seller. 
 
To balance the VAT you’ve collected & spent, you do a VAT return (or we will for you!). These are most commonly done every quarter, you can choose when these occur when you register – most businesses will align with their year end to keep things tidy. Returns and payments are due a month and a week after the quarter ends.
 
VAT was never going to be the most exciting blog subject but hopefully if you’ve made it this far it’s helped! 

Mythbusting

My (not so) little boy has recently got into watching Mythbusters on TV and it got me thinking about some accounting and bookkeeping myths that I thought I’d tackle (not in the same way as the TV program if you’ve seen it!).

Myth – You can put all your food & drink through as an expense
HMRC disagree with this, as they see food and drink as something you need to live (understandably!) so you can’t claim it as an expense. What is allowed is the cost of basic food & drink for your staff, including free meals at a canteen, as long as they’re available to all – this doesn’t apply if you are the only employee/director. When you’re travelling for work you can claim for food & drink, including overnight stays. If you’re travelling to a temporary workplace then you can claim, such as a temporary work site or a meeting.

Myth – You can claim for your clothes you where for work
This one isn’t as clear to bust, as you can claim for a uniform you purchase and any clothing that features the company logo. PPE is also an allowable expense, but that nice pair of shoes you’ve brought yourself are not going to be justifiable!

Myth – Having your books done by a bookkeeper/accountant is expensive
I’d love to say that this myth is busted but it’s actually down to personal opinion – we certainly don’t believe it’s expensive, especially if it’s freeing up your time to expand your business and do what you do best (or just to give you your weekend back to spend with your family) – it’s essentially the same as any business expense, if you feel the service is worth the cost then it’s worth it!

Myth – Dividends are classed as an expense
A lot of people seem to think that dividends are taken out of the profit before corporation tax is paid like an expense would be but this is incorrect, they are drawn on the profit after it has been taxed.

Myth – VAT should only be registered for when you have to
The final myth is a bit of a trickier one, as it varies from business to business, there’s no one size fits all answer. One major concern will be the effect it will have on your customers – if they are other businesses already registered for VAT then although they’d physically (well probably not actually in this day & age) give you more money they’d be claiming the VAT back so it won’t change for them. If you’ve non VAT registered companies or the general public then they would feel the effect of the increase if you just add VAT to your prices so it would then be up to you to decide if you were going to swallow some or all of that increase. So the myth isn’t busted but isn’t confirmed either!  

Is there any you’d like to add? Email us and let us know and we’d be happy to do a second myth busting!

Team Update

Over the last few months we’ve had a few changes within the team at PBATS, here’s a quick round up of all the changes! 

James joined the team at the start of June, working on the accounts side of the business. He’s MAAT qualified with a background in Not for Profit accounts and will be working with Martin day to day. 

Charlotte has changed roles, now in the role of Accounts Junior. She’s working towards her AAT level 2 qualification while developing her bookkeeping knowledge.

Finally we’ve had Becky join the team as an Admin Assistant – yes, this could cause some confusion having a Becky & a Rebecca but we’re coping so far! 

Martin, Susan and myself are all still here in the same roles as before. 

The most important thing for our clients is that these changes will result in a better service for you, with more knowledge in the team and increased capacity to ensure we’re always here to support you and your business, your points of contact are remaining the same so no changes there!

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! 

Can’t pay your creditors? Don’t panic!

*Note – Although we’ve written this during the COVID-19 pandemic the advice is relevant for other times too*
 
Everyone can have cash flow problems and these can cause a lot of worry for you, distracting you from running your business, so it’s important to ensure you get a plan in place to ease the worry. Speaking to your creditors is the first port of call, communication is key in a situation like this, many will have been there themselves and this is where those personal relationships you’ve built up will help lots, being honest with people and giving them an estimate for when you can pay will let them know where they stand and they can then decide if they’re happy with your plan, this could be the difference between them putting you on stop or letting you have another order of parts to complete a big project that brings in those much needed funds.
 
HMRC are likely to be one of those creditors and they shouldn’t be ignored, they too like communication and they’ll work with you to ensure you can pay you bill and get yourself back on track – they want you to stay in business so you’ll earn them more taxes! As soon as you know you’re not going to be able to pay your bill call HMRC to arrange your payment plan with them, don’t wait until it’s due or overdue, showing them you’re aware its going to be a problem and you want to sort a plan before will help a lot, they will be happier knowing what’s going on and it will remove a lot of stress from you too! 
 
Filing your return late won’t help, that just creates fines for late filing on top of the problem you have with not being able to pay, so keep on top of your filing. This will also mean when you call everyone is working from up to date figures.
 
Make sure when you call them you’ve got your reference number to hand and details of what it is you can’t pay. If you’ve an idea of what you can pay now and what you’d like your payment plan to be that will help, they will usually push for a payment of some kind to start the ball rolling while you’re on the phone so be ready for that! Again, having all this planned out shows you’re trying your best so helps with the situation. 
 
You will usually be asked why you can’t pay, as they’ll see it as you’ve had the money in so should have put it aside for them, although few businesses actually do this as using it to pay other bills is what everyone does! They may well ask about known future income, expenditure and savings & assets, they’re not just trying to squeeze every penny from you, they’ll be trying to make sure that the payment plan balances being realistic as well clearing your balance – neither of you want to be going through this again when you’re next payment is due and it will only cause you more stress! 
 
Right, now you’ve got it all planned it’s time to give them a call. You can contact the Payment Support Service on 0300 200 3835, Monday to Friday 8am – 8pm & Saturday 8am – 4pm (obviously at time of writing). If you’ve missed your Self Assessment payment date you’ll need to call 0300 200 3822. More information on the Payment Support Service can be found here.
 
Obviously if you’re a client of ours then we’re here to help you, we can help with all of the above, you don’t need to worry alone! Please do get in touch and please do not be embarrassed, it’s such a common problem for many companies so you shouldn’t feel ashamed! We know so many people delay asking for help and talking to creditors because of how they feel, we won’t judge you!
 
*During the COVID-19 pandemic they’ve temporarily changed the hours to Monday to Friday 8am to 4pm – They’ve also setup another number during this time, 0800 0159 559, again Monday to Friday 8am to 4pm*

You don’t have to wait until January!

April signifies the start of the new year (financial year obviously!), although we doubt this is news to any of you! (If you want to know why it’s April then have a looksie here). And what better way to start a new year than to tidy up last year?
 
Unsurprisingly, a lot of people don’t finalise their books from the previous year in April, with a large amount of people not getting around to their tax return until December & January, leaving them little to no time to prepare for the bill due 31st Jan – so why wait?
 
With so many people waiting until the last minute to file their returns, help may not always be available. So why not just do your return now? Getting it done early will mean it’s a weight off your mind, knowing what you’ll have to pay in January and gives you plenty of time to ensure you’ve got the money available, you won’t have to pay anything early just because you’ve put your return in early!
 
It also means that if there’s any questions raised that you stand more chance of remembering the answer as it won’t have been so long ago, if it’s about a transaction in April at the start of the FY and you wait until January it’s 21 months between them so the chances of remembering is slim! 
 
Of course, we’re not expecting an influx of people wanting to get their tax return done early, but if we manage to convince one person to do it sooner rather than later then it was worth the time it’s taken to write this blog! 

COVID-19 – Small Business Grant Scheme

Many small businesses are under the impression they need to be paying rates to received this grant – the opposite is actually true! 
 
The Small Business Grant Scheme is for businesses who pay little or no rates due to them being in receipt of either SBRR (small business rate relief) or RRR (rural rate relief). There is a government help page here that tells you the official wording.
 
Being a rate payer just means that you or your company are registered for business rates – you don’t actually have to pay anything! So if you get Small Business Rates Relief in full or partially, if you pay some rates or none at all, this grant is for you! It’s all done by your local council via their rates records to ensure only the right people receive it, it’s designed to help you cover rent and premises expenses during this uncertain period.
 
So in short, if you have a rate demand for your premises (even if it is credited in full for rates relief) you can definitely apply!
 
Most councils have online forms to complete, others are sending application forms via post, a few of the one’s we know are relevant to our clients are below:
 
 
 
At time of writing, Chelmsford are aiming to have their online form up by the end of 3rd April, Castle Point haven’t indicated any dates as to when their application system will be ready and Braintree were saying they will post applications forms which can be scanned and e-mailed back to them.
 
Please note this information is correct as of 2nd April.