6 Reasons your bookkeeper is harming your business

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Whether your bookkeeper is someone you have employed years ago, maybe it’s the admin assistant, or even your wife or mother in law, you need to be confident that they are doing a good job and looking after your business’ bottom line. A competent bookkeeper could be the difference between helping your business grow or letting it spiral out of control with mounting costs and decreasing margins.

As a busy business owner, you have plenty of other responsibilities that come with running your business and you might not know if your bookkeeper is taking you to the cleaners. The stories we year about bookkeepers defrauding hundreds of thousands of pounds from the businesses they work for and spend it on nice cars, expensive holiday and designer clothes. And these are the ones that got caught and were sent to prison!

How do you know what good bookkeeping actually looks like, let alone spot the warning signs that your bookkeeper is bad at their job and hurting your business?

To help, we’ve put together this list of tell-tale signs to help you determine if you’ve hired a bad bookkeeper who is harming your business or one worth keeping.

  1. They’re not qualified and not backed by professional body

Anyone can say that they are a bookkeeper just because they can enter invoices into your accounting system. However, bookkeeping is much more than just data entry. Someone without formal training can create chaos and confusion with the figures in your accounts, make VAT or PAYE errors and give you wrong information which you then use to make business decisions. To avoid hiring a bookkeeper that can’t do the job and do it well always check whether they have bookkeeping qualifications such as The Institute of Certified Bookkeepers (ICB) or Association of Accounting Technicians (AAT). A qualified bookkeeper would have certification and backing of their professional body and would have to adhere to professional standards set by them too.

What you can do: Before hiring the bookkeeper ask to see their training certificates or practice licence. If they do not have formal qualifications, you would have to assess if their experience is extensive enough to support your business appropriately.

 

  1. They don’t understand basic bookkeeping terminology

Your bookkeeper should know standard bookkeeping terms, including double-entry bookkeeping, cash and accrual basis, aged debtors/creditors, assets, liabilities, journals and so on. This relates to point 1 above too. Worryingly, we have spoken to other ‘bookkeepers’ who didn’t know what ‘reconciliation’ meant and also some have never seen or entered a journal. Lack of understanding of these terms will reflect in the basic bookkeeping entries and in turn the overall picture of the business’ financial position. One of the major jobs we do when taking over clients books from other bookkeepers is untangling their accounts by correcting wrong postings of payroll costs, VAT and PAYE liabilities, fixed assets and simple duplication of costs.

What you can do: Speak to your bookkeeper using the terms you want them to use. If they don’t use the correct terminology and it remains an issue, consider replacing them. A competent bookkeeper must be able to talk the talk.

 

  1. They are always behind on the books

Your business can’t grow if your books are always behind and you are forever catching up. You need to have correct and up-to-date information when you are making business decisions, such as how much can you spend on marketing, can you hire another person, can you find savings if you moved office – to name a few. Things can come up to cause delays, just as they do with any job, but a good bookkeeper looks for opportunities to get caught up and maintaining deadlines.

What you can do: Set clear deadlines at the outset of your relationship with the bookkeeper and hold them to these. Check in regularly to make sure they are on track and have everything they need to complete their tasks.

  1. They don’t let you see the books

A bad bookkeeper will want to keep you out of the know and will be unwilling to let you see the books. This is a major sign that they are hiding something, like mismanagement of your books, or worse – they could be stealing from you. If they become defensive or overly protective when you ask to see the books that is the time you must step in and seek transparency. Remember, with cloud accounting software like Xero transparency is always there and all parties can see the same live date using their own access. It becomes more difficult to hide bad work or blame someone else.

What you can do: Demand control of the books and take ownership of account login. If your bookkeeper puts up a fight or denies you access, seek an alternative bookkeeping solution. Such behaviour is not part of professional conduct of a certified bookkeeper.

 

  1. They don’t ask questions

You might think that bookkeeping is a repetitive, mundane chore that doesn’t require any sort of inquisitive thinking. But that’s wrong. A good bookkeeper is not afraid to ask questions and dig deep to find answers. This helps them identify problems and suggest costs cutting opportunities, find areas to improve on, which helps drive your overall goals of growing your business. If your bookkeeper never asks questions, do they care about your books or your business? Indifference will lead to missed opportunities to help your business.

What you can do: Ask your bookkeeper questions, challenge them, and request suggestions on how to cut costs.

 

  1. You question their work

Trust your gut – deep down you know when things are not right. If you don’t know what your bookkeeper is up to because you only hear from them after you’ve chased and chased again and you have no idea where your business is financially, then it’s time to take action right away. Similarly, you have that feeling that your bookkeeper is doing it wrong, or you’ve seen the same mistakes over and over again, then it’s time to find a new solution.

What you can do: Trust is important when working with your bookkeeper! After all you are sharing your business’ (and personal) most sensitive information with them. If you can’t trust them, you need to find someone you do.

 

In the end it all comes down to your bottom line. Are you happy with your current bookkeeping solution? Or do you need to review your approach and find a better solution?

 

Talk to our experienced team to find a trusted bookkeeper for your business, have less stress and gain clarity for yourself and your business.

 

Covid-19 Government Support Update September 2020

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On 25th September the government announced further Covid-19 support for employees and businesses. Below is our summary of the support schemes coming up.

Talk to us if you need help with claiming the support or making a plan for the future of your business – our team is here to support you in any way we can.

Job Support Scheme

A new Job Support Scheme will be introduced from 1‌‌ November to protect jobs where businesses are facing lower demand over the winter months due to coronavirus (COVID-19). The scheme will run for six months.

Employers will continue to pay the wages for the hours staff work. For the hours not worked, the government and the employer will each pay one third of their usual wages (capped at £697.92 per month). Employers will need to meet their share of the pay for unworked hours, and all employer National Insurance contributions and statutory pension contributions, from their own funds. This means that employees will receive at least two thirds of their usual wages for the hours not worked.
To be eligible, employees must:  

  • be registered on PAYE payroll on or before 23 September 2020. This means a Real Time Information (RTI) submission notifying payment in respect of that employee must have been made to HMRC on or before 23 September 2020

  • work at least 33% of their usual hours. The government will consider whether to increase this minimum hours threshold after the first three months of the scheme.

Full details are available here: Job Support Scheme factsheet.

The Job Support Scheme will be open to employers across the UK even if they have not previously applied under the Coronavirus Job Retention Scheme (CJRS) which ends on 3‌1‌‌ ‌‌October. The Job Support Scheme will start from 1‌‌ November and employers will be able to claim in December. Grants will be paid on a monthly basis.

The scheme will operate in addition to the Job Retention Bonus. Businesses can benefit from both schemes in order to help protect viable jobs.

Job Retention Bonus

The Job Retention Bonus is a one-off payment to employers of £1,000 for every employee who they previously claimed for under the Coronavirus Job Retention Scheme, and who remains continuously employed through to 31 January 2021. Eligible employees must earn at least £520 a month on average between the 1 November 2020 and 31 January 2021. Employers will be able to claim the Job Retention Bonus after they have filed PAYE for January and payments will be made to employers from February 2021.

More details on Job Retention Bonus can be found here.

SEISS Grant Extension

The government is continuing its support for millions of self-employed individuals by extending the Self-Employment Income Support Scheme (SEISS) grant. Self-employed individuals and members of partnerships who are eligible for the SEISS and are actively continuing trading but are experiencing reduced demand due to coronavirus (COVID-19), will be eligible for a further SEISS grant to provide support over the winter months.

The first grant will cover a three-month period from the start of November 2020 until the end of January 2021. It will be a taxable grant to cover 20% of average monthly trading profits, paid out in a single instalment covering three months’ worth of profits, and capped at £1,875 in total.

An additional second grant, which may be adjusted to respond to changing circumstances, will be available for self-employed individuals to cover the period from February to the end of April – ensuring our support continues right through to next year.

More information will be published in due course but in the meantime the current fact sheet has all the details.

VAT Deferral New Payment Scheme

If you deferred payments that were due between 20 March and 30 June 2020, then these payments need to be made to HMRC by 3‌1‌‌ ‌‌March 2021. Employers can use the New Payment Scheme to spread these payments over equal instalments up to 3‌1‌‌ ‌‌March 2022. Alternatively, they can make payments as normal by 3‌1‌‌ ‌‌March 2021 or make Time To Pay arrangements with HMRC if they need more tailored support.

New Self Assessment Self-Serve Time To Pay Scheme

If you deferred paying your July 2020 Payment on Account, you will need to pay the deferred amount, in addition to any balancing payment and first 2020/21 Payment on Account, by 3‌1‌‌ ‌‌January 2021. This may be a larger payment than you usually pay in January.

If you are unable to pay your Self-Assessment (SA) bill in full by 31‌‌ January 2021, you can set up a Time to Pay payment plan of up to 12 months online without speaking to us. If employers have SA tax debts of up to £30,000, they will be able to access this Time to Pay facility through GOV‌.UK and will get automatic and immediate approval. If their SA debts are over £30,000, or they need longer than 12 months to repay their debt in full, they will still be able to use our Time to Pay arrangement by calling HMRC.

Other business support schemes:

Changes to CJRS – what you need to do from 1‌‌ October.

From 1‌‌ October, HMRC will pay 60% of usual wages up to a cap of £1,875 per month for the hours furloughed employees do not work. Employers will continue to pay furloughed employees 80% of their usual wages for the hours they do not work, up to a cap of £2,500 per month. Employers will need to fund the difference between this and the CJRS grant themselves.

The caps are proportional to the hours not worked. For example, if an employee is furloughed for half their usual hours in October, employers are entitled to claim 60% of their usual wages for the hours they do not work, up to £937.50 (half of £1,875 cap). Employers must still pay their employees at least 80% of their usual wages for the hours they don’t work, so for someone only working half their usual hours they’d need to pay them up to £1,250 (half of £2,500 cap), funding the remaining portion themselves.

You will also continue to pay furloughed employees’ National Insurance and pension contributions from your own funds.

What is Xero Business Snapshot?

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Business Snapshot is a dashboard-style report displaying business performance measures to help you better understand the financial position of your business at any given time.

Examining your key business metrics regularly will help you keep on track with your growth. The dashboard gives you a snapshot of your income and spend and highlights if there are any issues with payment collection from your customers. If you don’t look at your balance sheet regularly, this gives you a summary of your liabilities to have in mind when planning your cashflow.

Xero Business Snapshot

Dashboard features:

  • Profit and Loss – you can view your profit before tax for last month, last quarter, last year or year to date with instant comparison to previous period. Instantly see if your profit has increased or decreased as a percentage against previous period.
  • Income and Expenses – see a summary of your income, cost of goods sold plus operating costs as a figure and a chart. You also see the percentage comparison against the prior period.
  • Gross Profit Margin – monitor your gross profit margin and how it changes compared to prior period.
  • Latest Operating Expenses – instantly see the highest costs and comparison to previous spend. You can pick up areas where the spend has gone up or reduced significantly.
  • Financial Position and Cash – this gives you a snapshot of your balance sheet which is vital for understanding your liabilities at any given time.
  • Overall Cash Balance – see the total of all your cash across all bank accounts.
  • Average Time to Get Paid – the average number of days it takes your customers to pay you.  Identify in an instance if you need to address how you collect your payments or if you have bad paying customers.
  • Average Time to Pay Suppliers – how long do you take to pay your suppliers. If it is outside your credit terms, do you need to address this to improve your relationships with your suppliers?

Xero Business Snapshot 1

To benefit from using Business Snapshot dashboard you need to have at least a couple of months’ worth of transactions in Xero. Keep your bank reconciliation up to date too to see the correct cash balance.

Use the dashboard to discuss your organisation’s financial health with us or your accountant.

 

 

We do Xero bookkeeping

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Xero Bookkeeping on Biteable.

Coronavirus Job Retention Scheme – how to claim

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Here are the links on what and how to claim for Coronavirus Job Retention Scheme.

1. Check if you can claim for your employees’ wages through the Coronavirus Job Retention Scheme

2. Work out 80% of your employees’ wages to claim through the Coronavirus Job Retention Scheme

3. Claim for wages through the Coronavirus Job Retention Scheme

 

Record Keeping Under MTD

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Making Tax Digital for VAT requires VAT registered businesses with taxable turnover above the VAT registration threshold to keep records in digital form and file their VAT Returns using software.

It is increasingly common for business records and accounts to be kept digitally, in a software program on a computer or tablet, or in a smartphone application, or maintained through such a device and stored using a cloud-based application.

The difference under Making Tax Digital is that the software which businesses use must be capable of keeping and maintaining the records specified in the regulations, preparing their VAT Returns using the information maintained in those digital records and communicating with HMRC digitally through the Application Programming Interface (API) platform.

If your digital records are up to date, software will be able to collate and prepare your return for you. It will then show the return to you and ask you to declare that it is correct and confirm that you want to submit it to HMRC. Once you have submitted your return you will receive confirmation through your software that it has been received.

What records you must keep and how to keep them if you’re registered for VAT

Records you must keep

The basic rule is that you must create and keep normal business records. You do not have to keep records in a set way and most bookkeeping and computer systems will meet this requirement.

Apart from keeping business records and the special requirements, HMRC asks that records are complete, up to date, and allow you to calculate correctly the amount of VAT that you have to pay or can claim from them.

Special records for VAT

There are 2 records that are specifically required for VAT. These are:

  • the VAT account, in many cases this will be based on a routine business record of VAT you owe or can claim
  • a VAT invoice for supplies to other VAT-registered businesses, a ‘VAT invoice’ is just the term for an invoice which contains some information required by the VAT rules, most commercial invoices will already hold the right information

Business records

VAT law requires you to keep all your business records. The view of business records is wide and will include:

  • annual accounts, including profit and loss accounts
  • bank statements and paying-in slips
  • cash books and other account books
  • credit or debit notes you issue or receive
  • documentation relating to dispatches and acquisitions of goods to or from EU member states
  • documents or certificates supporting special VAT treatment such as relief on supplies to visiting forces or zero rating by certificate
  • import and export documents
  • orders and delivery notes
  • purchase and sales books
  • purchase invoices and copy sales invoices
  • records of daily takings such as till rolls
  • relevant business correspondence
  • VAT account

What a business record is will depend on the type of business you run. You’ll always have to keep a VAT account and copies of invoices, but some of the other records may not be a normal record in your business. If that’s the case, you do not have to keep such a record just for VAT. But equally, some businesses will create additional business records, and these must be kept and produced to HMRC when you’re asked.

Keeping records

Generally, you must keep all your business records for VAT purposes for at least 6 years. Records that you use for other tax purposes may need to be kept for longer periods.

If the 6-year rule causes you serious storage problems or undue expense, or you need advice on records for other types of tax, then you should consult VAT general enquiries in HMRC portal. HMRC may be able to allow you to keep some records for a shorter period.

Additional records you might have to keep

HMRC may direct some businesses to keep additional records. This is where they have reasonable grounds to believe that such records might help them identifying supplies on which VAT is at particular risk of going unpaid. This will most commonly arise with supplies of mobile phones and computer chips but is not limited to these types of supplies. Failure to comply with one of these directions can result in a financial penalty.

You have a right of appeal against the issue of a direction and against the imposition of any penalty for non-compliance.

Keeping records on your computer

It’s common for business records and accounts to be kept on a computer and there are no special VAT rules about using a computer.

Failing to keep or produce records

There’s a financial penalty for failure to keep or produce the records required by law.

You can request a review of any penalty or appeal to an independent tax tribunal.

 

Digital record-keeping

All VAT registered businesses must keep and preserve certain records and accounts. Under Making Tax Digital, some of these records must be kept digitally within functional compatible software. Records that are not specified in this notice, or that are not required to complete your VAT Return, do not need to be kept in functional compatible software.

Some software will record all your VAT records and accounts information. However, there are some records that by law must be kept and preserved in their original form either for VAT purposes or other tax purposes.

Example

A business receives an invoice and types selected data contained in the invoice into functional compatible software. They must still keep the invoice in its original form as the data in the functional compatible software is not a copy of the invoice.

If you deregister from VAT you will no longer need to keep digital records in functional compatible software, but you must retain your VAT records for the required period.

Functional compatible software

Functional compatible software is a software program, or set of software programs, products or applications, that must be able to:

  • Record and preserve digital records.
  • Provide to HMRC information and returns from data held in those digital records by using the API platform.
  • Receive information from HMRC using the API platform.

Digital links:

Data transfer or exchange within and between software programs, applications or products that make up functional compatible software must be digital where the information continues to form part of the digital records. Once data has been entered into software used to keep and maintain digital records, any further transfer, recapture or modification of that data must be done using digital links. Each piece of software must be digitally linked to other pieces of software to create the digital journey.

A ‘digital link’ is one where a transfer or exchange of data is made, or can be made, electronically between software programs, products or applications. That is without the involvement or need for manual intervention such as the copying over of information by hand or the manual transposition of data between 2 or more pieces of software.

HMRC also accepts that the following are digital links:

  • Emailing a spreadsheet containing digital records so the information can be imported into another software product
  • Transferring a set of digital records onto a portable device (for example, a pen drive, memory stick, flash drive) and physically giving this to someone else who then imports that data into their software
  • XML, CSV import and export, and download and upload of files
  • Automated data transfer
  • API transfer

Soft landing regarding digital links requirements

HMRC will allow a period of time, the “soft landing period”, for businesses to have in place digital links between all parts of their functional compatible software.

For the first year of mandation businesses will not be required to have digital links between software programs.

This means that if Making Tax Digital rules first apply to you from a:

  • VAT period starting on or after 1 April 2019 – you will have until your first VAT return period starting on or after 1 April 2020 to put digital links in place
  • VAT period starting on or after 1 October 2019 – you will have until your first VAT return period starting on or after 1 October 2020 to put digital links in place

During the soft landing period only, where a digital link has not been established between software programs, HMRC will accept the use of ‘cut and paste’ or ‘copy and paste’ as being a digital link for these VAT periods

Submission of information to HMRC

The submission of information to HMRC must always be through an API. While HMRC expects most businesses to use API-enabled commercial software packages both to keep digital records and file their VAT Returns, the following alternatives may be available.

Bridging software

This is a digital tool incorporating relevant Making Tax Digital APIs that is used to connect accounting software to HMRC systems. It allows the required VAT information to be reported digitally to HMRC, and for information to be sent digitally back to the business from HMRC.

API-enabled spreadsheets:

These are spreadsheets that incorporate relevant Making Tax Digital APIs. They can either:

  • combine with accounting software to submit the required VAT information digitally to HMRC, and allow information to be sent back to the business digitally from HMRC
  • be used to keep digital records and then directly submit the required VAT information digitally to HMRC.

Errors found in records

Where you find that your VAT records contain errors, you will need to correct them. This guidance only applies to declarations of UK VAT and doesn’t apply to VAT MOSS returns, as these contain declarations of VAT due in other EU member states. To correct errors in declarations of VAT due in other member states, you will need to follow the rules of the relevant EU member state.

If that advice does not fit your particular circumstances, you may need further help from HMRC VAT Helpline, or you may wish to consult your own tax adviser.

Where an error has led to a misdeclaration on a VAT return you’ve already sent to HMRC, you can always correct the error at a later point of time using HMRC links. If you deliberately fail to correct an under declaration of VAT, you may be liable to a penalty or even criminal prosecution.

 

The records listed must be kept, maintained and preserved in digital form. The exact way you must enter the information will depend on the software package. The API enabled spreadsheets can be used to keep digital records and then directly submit the required VAT information digitally to HMRC. Contact us at Cloudit Bookkeeping if you are unsure about how and what the records should be maintained and filed to HMRC and how to manage accounts digitally.

 

App of the Week – AutoEntry

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With every task we do, we always ask the question “Is there a better way?” And with day to day bookkeeping – YES, there is! That’s why AutoEntry is our choice of The App of The Week.

AutoEntry simplifies your business’ bookkeeping. It eliminates manual data entry for accountants, bookkeepers and small businesses. It automates the extraction and processing of bills, invoices, expenses and receipts and inputs them directly into your accounting solution.

It is perfect for small and medium businesses across all industries where volume of invoices and receipts is high. No more manual data entry of invoices, receipts, bills or statements. Simply email, scan and upload, or snap with your mobile app.

Features

  • Submit Documents – No more manually inputting invoices, receipts or invoices. AutoEntry extracts the data you need and publishes to your accountancy package.
  • Data Security – AutoEntry employs best practice security policies including encryption across the platform.
  • Full Line Item Capture – AutoEntry captures full line items, including the description, unit price and quantity for each line, with verified accuracy.
  • Item line settings – Apply rules to allow AutoEntry to ‘remember’ specific line item descriptions, or certain words within a description.
  • Purchase Order Matching – AutoEntry syncs captured invoices to matching open purchase orders.
  • Document Storage – Once AutoEntry has posted your data, it creates digital records, so users no longer needs to hang on to large quantities of paper documents, with client data stored securely in the cloud.
  • Integrate seamlessly – It integrates with your accounts software including Xero, QuickBooks Online, Kashflow, Sage 50, Sage One, Reckon, Freeagent and others.

 Additional Features

  • Data extracted & verified – Remove manual errors and rely on quickly searching secured stored, digital copies.
  • Smart analysis – Easily submit invoices, expenses and receipts as you get them, on the go.
  • Auto-publish – Seamless automatic publishing of verified data into your account software.

 How it works

  • Capture and submit documents – Forward emails from suppliers, snap receipts on the mobile app, or scan and upload to the website.
  • Accurate, automated data extraction – Data is processed and verifies before applying remembered Supplier, Tax Code and Category rules.
  • Seamless integrations – The add-ons ensure the seamless automatic publishing of verified data in your account software

Benefits

  • Save time – No more manually inputting invoices, receipts, expenses or statements. AutoEntry extracts the data you need and publishes to your accountancy package.
  • Paperless – With data stored securely in the cloud, there’s no need to store, file, print and copy paper documents anymore.
  • Integrations – Seamless automatic publishing of verified data into your accounting software.
  • Mobile app – Submit invoices, receipts and expenses on-the-go via the mobile app for iOS and Android devices.                                                                                                                       

Pricing

Powered by AI, AutoEntry is becoming increasingly sought after, due to its accuracy, speed and impressive range of in-built features. And, as well as being the smartest solution out there, with its flexible, pay-as-you-use pricing plans, AutoEntry also offers the best value for money. Users only pay for the documents they upload onto the platform, as needed month by month. Adding more companies or employees incurs no extra fees, meaning the whole team can make use of the solution without any fuss or extra expense. Advanced pricing plans available for firms with a large volume of documents.

By using AutoEntry, your businesses gain the following benefits:

  • Reduce the time and cost spent on manual data entry
  • Eliminate human error
  • Improve service turnaround times
  • Submit receipts and invoices on-the-go with its mobile app
  • Drive employee engagement
  • Store data more securely in the cloud

 AutoEntry + Xero

AutoEntry works by capturing and analyzing details from paper documents, before posting this information into a user’s Xero account. By leveraging the solution’s in-built intelligence, the data is entered into the correct fields every time, so there’s no fuss or room for error. 

 

Getting started

  1. Log into your AutoEntry account and go to ‘Company Setting’
  2. Click on the ‘Integrations’ tab and select Xero

Link your Xero with AutoEntry so that when you Publish your receipts or statements, they will directly be uploaded into Xero.

 With AutoEntry, you can say goodbye to piles of paperwork and hours spent typing up data, and get back to what really matters, serving their customers and growing their business. If you need help with setting up AutoEntry or integrating it with Xero we, at Cloudit Bookkeeping, will be happy to assist you.

What does Balance Sheet tell you about your business?

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Balance sheets are used internally to guide management decisions. Externally, they can be used to report the financial status of your business to lenders, investors and other stakeholders.

The balance sheet gives you a snapshot of how much your business owns (its assets) and how much it owes (its liabilities) as at a given point in time. That might be today, or it might be at the end of your business’s accounting year.

It summarizes the financial health of a company, showing how it is funded and what it has done with that funding. This is why a balance sheet is also recorded as a ‘Statement of Financial Position’ in accounting terms.

What is on the Balance Sheet?

The balance sheet is presented in three sections:
• Assets such as properties, furniture and fittings, equipment, stock for sale, cash and money owed to you.
• Liabilities such as your bank overdraft, loans and other money you owe.
• Equity such as share capital and Retained Earning.

What does Balance Sheet tell you about your business?

The balance sheet presents a company’s financial position at the end of a specified date. If your business owns more than it owes, then the balance sheet total will be a positive figure. If your business owes more than it owns, the balance sheet total will be negative- and that’s not good news, because it means your business doesn’t have enough money available to pay all its debts.

As well as this quick check, you can also use your balance sheet to calculate some useful ratios.

Tracking your company’s finance can help you identify potential issues before they turn into major problems. Ultimately, a balance sheet provides the information you need to sustain and grow your business over time.

Components of the balance sheet

A balance sheet has three sections: assets (what the business owns), liabilities (what the business owes both now and, in the future,) and owners’ equity (assets + liabilities). Let’s take a closer look at each.

Assets

Assets include current assets, fixed assets and other assets. Current assets include:

  • Cash
  • Accounts Receivable
  • Inventory
  • Assets that can quickly be converted to cash such as certificates of deposit

Fixed assets are long-term assets that your business will have for more than 12 months. They include:

  • Equipment
  • Buildings
  • Land
  • Vehicles
    You may also have intangible assets, such as trademarks or patents.

Liabilities

Current liabilities are those that need to be paid within the next 12 months, such as:

  • Accounts payable
  • Taxes
  • Payroll
  • Debt service
  • Credit card payments

Long-term liabilities will not be paid within the next 12 months. These include:

  • Outstanding loans (minus the current portion of these debts)
  • Mortgages

Owners’ or shareholders’ equity

Add together assets and liabilities to arrive at your owners’ equity or shareholders’ equity. Ideally, this should be a positive figure, but if things aren’t going well, it could be a negative number.

If your owners’ equity remains negative, it will affect not only your profitability, but also your ability to get capital from lenders or investors. Financing sources want to see that a business is doing well enough financially to service its debt or make a profit for investors before they will put any money into your business.

What does the Balance Sheet say?

It Determines Risk and Return
A Balance sheet briefly lists your assets and liabilities in one place. Current and long- term assets reflect your ability to generate cash and sustain operations. In comparison, short and long-term debts prioritize your business’s financial obligations. Ideally, you have more assets on your balance sheet than liabilities, indicating positive net worth.

Comparing your current assets to current liabilities determines whether your business can cover its short-term obligations. If your current liabilities exceed your cash balance, your business may require additional working capital from outside sources. However, a balance sheet can also show you when your debt levels are unsustainable. If you have too much debt on your balance sheet, you may default on debt payments or declare bankruptcy.

It can be used to Secure Loans and Other Capital
Your balance sheet allows people outside of your company to quickly understand its financial condition. Most lenders require a balance sheet to determine a business’s financial health and creditworthiness. Additionally, potential investors may use it to understand where their funding will go and when they can expect to be repaid.

When updated over time, your balance sheet effectively shows your ability to collect payments and repay debts. Plus, it shows lenders that you have a track record of managing assets and liabilities responsibly. If you apply for a loan, it will also show lenders that you’ll likely repay your debts in a timely manner.

It Provides Helpful Ratios
Ratios are often used in financial statement analysis to indicate a company’s operational efficiency, liquidity, profitability, and solvency. These financial ratios are particularly helpful when assessing the long-term sustainability of a business. They can be determined by a company’s balance sheet accounts.

For example, your balance sheet is a snapshot that reveals your company’s overall capital structure. It can also tell you how long it takes to sell inventory and the length of your accounts receivable process. This information can help you identify trends and see how your company’s finances and operations compare to competitors.

What’s your business worth
Ultimately, a balance sheet calculates the value of your business. Even if you are not planning to sell your business in the near future, think of it as a way to keep score.

You may find out your business is less successful — or more successful — than you thought it was. Most people greatly overestimate the value of their businesses, so getting a reality check can be helpful. By pinpointing shortfalls in your business’s finances, a balance sheet can help you make long-term changes that will improve your company’s chance of success.

  • Balance Sheet helps in knowing past and present position of an enterprise.
  • You can use it to obtain a very thorough summary of the company’s financial health by analyzing its working capital and liquidity
  • It provides an insight into the company’s likelihood of defaulting on its credit obligations or even its bankruptcy risk

A Balance sheet is actually a valuable tool for businesses of all sizes to monitor their progress and see how they’re doing. It can help you make long-term changes that will improve your company’s chance of success. Collectively a Balance Sheet is a mirror of a business.

If you need any help with understanding your Balance Sheet we, at Cloudit Bookkeeping, will be happy to assist you.

Are you wasting time processing expenses?

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Expense claims are an administrative burden for all businesses. From taxis, flights, meals, supplies, and everything in between – there are countless expenses that need to be reimbursed to the people who work at the company. But it’s amazing how the simple task of reimbursing employees turns into a paper-filled back-office nightmare.

With many apps now available, the task of tracking and recording expenses is becoming easier and more efficient, saving business owners and their accounting team hours in administrative time.

We love Xero and their new Expenses function where employees can capture receipts and submit claims for their work expenses with their mobile device. Let’s have a look at how it works and how it can save you hours in dealing with paperwork.

Xero Expenses:

Xero Expenses works seamlessly with Xero accounting package, and has all the tools and insights small businesses need to efficiently track and manage expense claims. You can now Capture expenses on the go and keep everyone up to date with push notifications.

A better way to manage expense claims in Xero

The Xero Expenses offers small businesses a more efficient way to manage expense claims with:

Expenses Mobile

  • Faster expense captureto reduce data entry through automatic scanning of receipts and eliminating the need to store paper versions.
  • iOS and Android appspush notifications to let businesses, employees and advisors capture, submit and keep up to date on the status of expense claims from anywhere.
  • More flexible user permissionsto give complete control of whocan view, submit, and approve or pay an expense claim for or on behalf of someone else.
  • Simple and intuitive workflowsto make it easy to see where an expense is at, review and approve all unpaid expenses, and create batch payments to get employees paid promptly.
  • Greater insights and powerful analyticsto empower businesses and their advisors with a detailed and real-time understanding of spending habits and patterns.
  • And with multi-currency, relevant notificationsand seamless Xero accounting integration, the new Xero Expenses is smarter, easy to use, and designed to benefit both the small business and their employees.

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Advantages

  • Easily capture and submit expenses

You’ll find automatic receipt processing in the Xero Expenses. Small business owners can easily capture and submit expense claims through their mobile device on both iOS and Android. Simply take a quick picture of the receipt and let Xero submit the expense claim. The design and workflow improvements make it easy to capture and submit an expense claim without the paper chase or endless follow up.

  • Eliminate Hidden costs

With reduced data entry and by streamlining everything from submitting expenses through to reconciling transactions, you can eliminate the hidden costs.

  • Better visibility

You can see all the most important information at a glance, so you always know where your expenses and cash flow stand.Expenses chart

  • Enables Growth

Access valuable real-time reporting and powerful analytics to monitor patterns, plan ahead and make fast, informed decisions.

  • Flexible controls and permissions

The user permissions model gives more flexibility and control to the right people at the right time during the expense claims process. This significantly simplifies the workflow and boosts efficiency. That’s because only appropriate people in the business can view, submit, approve or decline, and pay an expense claim.

You can also find a highly-requested feature – the ability for a user (typically an accountant or owner) to submit an expense claim on behalf of other people in the organization. The relevant people will receive real-time push notifications on their mobile phones, which makes it easy for accountants, business owners and employees to keep each other up to date.

  • Easy review and payment

Xero expenses provide you list views and expense drill-down views, which can save you time and let you enjoy better functionality:

  1. The expense claim list immediately gives you a high-level view of your own or your employees’ expense claims in easy-to-consume groupings, such as by status or by employee. The most important information required for review, approval and payment are available at a quick glance. These include status, amount, expense account, description, vendor and date. From the list, just one click will let you drill down into the details of the expense – and provide a view of the receipt, tax details, tracking categories and associated label.
  2. You can view approved expenses claims that are awaiting payment within bills. Xero provide links to and from bills, so you can conveniently view bills associated to expense claim reimbursement side by side with vendor and supplier bills. This allows you to more easily make a decision around who and what gets paid in one simple view.
  • Expense analytics

Quite simply you have to know how your staff spends money and if they follow established rules and policies. An exciting new feature gives small businesses and their accounting partners deeper insights into spending and expense claims that will provide actionable findings. Accountants and business owners have access to a real-time and accurate view of their expenses.

With Xero Expenses function, expense claims are no more a burden. It makes create, review, approve and paying an expense claim not only easy but also quick. It saves a lot of time and provides you the opportunity to enjoy better functionality. If you need any help exploring Xero Expenses or any other Xero features, talk to one of our trained bookkeepers and we will be happy to assist you.

National Minimum Wage from April 2019

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The new National Minimum Wage and National Living Wage rates coming into effect in April 2019. Here are the details of the new rates which are available on HMRC website.

NMW 2019-2020

App of the week – GoCardless

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GoCardless is the easy way to collect Direct Debit Payments.

GoCardless allows you to take control of your payments, ensuring your invoices get paid on time, every time via Direct Debit. With automatic reconciliation in Xero, GoCardless improves your cash flow and reduces your admin.

Once your business has connected its Xero and GoCardless accounts, and has obtained direct debit authorities from its customers, payments are automatically collected by GoCardless and the transactions marked as paid within Xero.

Why we love GoCardless:

  • Improved cash flow – automatically collect payment for any Xero invoice on the due date, whether recurring or ad hoc.
  • Reduced admin – be more productive. Spend less time chasing unpaid bills and manually reconciling payments.
  • Happier customers – make payment hassle-free. Set up once to pre-authorize future payment collection so you can focus on business.
  • Integrated with Xero – fully synchronized with Xero to collect payments and automatically reconcile against your invoices.
  • Quick and simple set-up – get started in minutes with a simple set-up.
  • Low, transparent fees – no set up costs, hidden fees or charges for failed payments. GoCardless charges a 1% transaction fee, with a minimum of 20p and a maximum of £2. This makes it cheaper than credit card transactions, which typically cost around 2% with no ceiling.
  • Currency options – collect payments in British Pounds, Euros, Australian and New Zealand Dollars, Canadian Dollars.

How it works with Xero

The GoCardless payment service lets you set up direct debit with your customers to automatically collect payments for your Xero invoices.

Getting started with GoCardless for Xero in 5 steps

Connect your account

Get started in minutes by connecting your GoCardless and Xero accounts to the GoCardless for Xero app. See and manage all your GoCardless payments in one place.

Set up your customers

Your Xero customer data will be automatically synced so you can send out Direct Debit mandate requests via email. If you prefer, you can manually select customer records to send mandate requests to. The online mandates take seconds for your customers to complete. You can even add a link to your website or engagement letter.

Add a pay now button to your invoices

Get paid on time by enabling your customers to set up a Direct Debit mandate with you straight from the invoice. Add a pay now button to your invoices so customers can pay for recurring and one-off payments by direct debit.

Start collecting payments

Each time you create an invoice in Xero you can collect the payment automatically by Direct Debit on the invoice due date. Alternatively, you can manually collect payments for specific customers or by Xero branding themes.

Automatically reconcile invoices

Once you’ve received a payment, the relevant invoice(s) will be marked as paid. Xero records the GoCardless fee posted as an expense automatically.

We enjoy automation and making life easier is every way possible. And GoCardless adds to the smooth sales and payment collection process. For more specialist advice –  talk to our expert bookkeepers.

 

 

 

Making Tax Digital for VAT made easy with Xero

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If you are already using Xero or looking for software to help you file your VAT returns Xero is now ready for MTD.

Here is their short flyer for more information: Making Tax Digital for VAT made easy

How does Making Tax Digital for VAT affect you

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HMRC have release this short video regarding Making Tax Digital for VAT (MTD) and how it will affect businesses with taxable turnover over £85,000.

To ensure you are ready to keep and file your VAT returns electornically starting from April 2019, we advise to set up your systems in advance. We are huge fans of Xero online accounting package which is MTD ready. Start this January and you will have enough time to get used to software and test it.

GDPR explained for small business

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What is GDPR?

The GDPR comes into force in May 2018. It’s a wide-ranging regulation designed to protect the privacy of individuals in the European Union (EU) and give them control over how their personal data is processed, including how it’s collected, stored and used. It affects every company in the world that processes personal data about people in the EU.

What does GDPR mean?

Although GDPR might seem scary at first, many see it as a positive step forward for data protection. Some of the key areas GDPR covers are:

  • personal data about EU-based people (absolutely all of it)
    This includes your customers, employees, suppliers and any other individual you collect personal data from. Personal data includes names, contacts, medical information, credit card or bank account details and more
  • how you collect personal data
    You can only collect personal data if you have a legal reason to do so. You might need it for a sales contract, for example. Or your customer may have asked you to send them some information on your product or service. In all cases, you must make it clear what the personal data will be used for – and only use it for that purpose.
  • user contracts and terms and conditions (on websites, for example)
    These need to be simple, clear and easy to understand – with no complicated legal text.
  • the right to know
    Individuals can ask a business what information is being held about them. This isn’t a new right, but organisations must now respond within one month and can’t charge a fee (which they used to be able to do).
  • the right to erasure
    Customers can ask a company to delete all stored personal data about them, unless the company needs to keep that information for legal reasons, such as tax.
  • data portability
    Individuals can request a digital copy of their personal data to use however they like, including transitioning to a new service provider.
  • data breach
    You’re obliged to report certain types of data breach to the relevant supervisory authority.

The UK government will be replicating GDPR into UK law prior to Brexit, so if you’re a UK company, Brexit won’t impact your obligation to comply.

GDPR and data protection

It’s important to understand the spirit of GDPR. The legislation came into existence because of the way personal data has been treated in the past. Many companies treated personal data as a resource they could utilise without regard to the rights of individuals.

For example, some companies sold customers’ email addresses, allowed sensitive data to be seen by unauthorised people, and failed to adequately protect data against hackers.

GDPR gives control of personal data back to the people who own it and requires organisations to make data protection a core part of their operations and processes. This is likely to affect big, data-driven organisations first. But small businesses aren’t exempt. We’ve set out some steps below that you can take to make sure you’re prepared.

Goes GDPR affect data security?

Data security is a big part of GDPR. If you process personal data of people in the EU you have a duty to keep it safe so it’s important to ensure that any personal data held by you is securely stored.

GDPR also governs where companies store personal data, and what safeguards you must have in place in order to store and process that personal data outside of the EU. For example, if you’re transferring personal data to a US-based company (that will store and process it in the US), you should check that they’re certified with Privacy Shield, which is a mechanism designed to allow data transfers from the EU to the US.

Summary of GDPR for small business

There are many aspects to GDPR, but it really boils down to being clear and ethical with the personal data you process – that means treating it as you’d treat something valuable of your own. Some initial practical steps you can take to get GDPR compliant are:

Check products and services

  • Check which of your products or services collect and process personal data.
  • Ensure you have a legal basis for the processing of personal data.
  • Ensure you can comply with the obligations to your customers as set out in the GDPR (such as the right of access and the right of erasure).

Review notices and contracts

  • Update your internal and external notices for GDPR compliance.
  • Ensure your customer contracts are GDPR compliant.

Assign responsibility

  • Make someone in your organisation responsible for data protection and privacy.
  • Consider whether you need to appoint a Data Protection Officer – check out the ICO’s guidance for more info.
  • Provide data protection training for staff.

Take care over security

  • Ensure systems that collect, process and store personal data are secure.

GDPR resources for small businesses

You can get useful information on GDPR from:

The UK Information Commissioner’s Office (ICO) – 12 steps to prepare for GDPR.
The Federation of Small Business (FSB) – How to prepare for GDPR.

You should also talk to your legal advisers to ensure you are compliant before May 2018.

source: Xero.com