I am bringing up the balance sheet again as we have been seeing some sets of accounts coming into our business with insufficient information to be a credible balance sheet.

I am seeing far too many prepared using the cash accounting system. I know this is not the easiest of documents to understand when you’re reading a set of accounts so I wanted to tell you some of the differences between a good balance sheet, and one that has been thrown together as a last resort.

I have been preparing and reading this document for a number of years and have seen all shapes and sizes. Part of my training was to read ones prepared by the FTSE 100 companies, not recommended. The financial statements can be complex and lengthy.         But micro and small companies are done fairly simply so you don’t have to read 50 pages of detailed technical language.

Be sure that not only does the balance sheet contain information about the profit or loss you’ve just made during your trading year but has a number of components.

I would expect you to receive a detailed set of pages describing the different figures in the balance sheet. This doesn’t need to go to Companies House as small and micro businesses are abbreviated, but you should have a full copy that you can use for your business going forward, if you don’t you need to question this.

If you are going to sell your business or go to the bank to borrow money, you are going to need this important document. This is an accumulation of your whole trading history whether you’ve been trading for a year, or 50 years. A company that is 50 years old balance sheet will look different and may have complexities that a new business will not.

Components to expect.

Fixed Asset Register

There should be a summarisation of the fixed asset register detailing accumulative costs and deprecation and changes happening during the financial year. There should be a net book value at the end so you know the value of your assets.  Fixed assets are your machinery, vehicles, refurbishment, furniture etc.

Intangible assets

These can be patents, trademarks, goodwill. This needs to be highlighted in detail, with amortisation or not.

Debtors

This can be money in the bank Trade debtors, customers that owe you money Other debtors can be prepayments, accrued income, if the company has loaned money to a member of staff etc.

Creditors

Overdraft facility at the bank Trade Creditors, Suppliers you owe money to Taxation HMRC any of the taxes, Corporation tax, VAT, PAYE Other Creditors Accruals, invoices you havent received from a supplier, but paid, directors loan etc.

Long term liabilities

Can be bank loans, lease agreements, hire purchase. If these components are known to you and are not in your accounts, you must question this.

The balance sheet is a financial document that tells the reader the financial position of your business it is vital to be correct. It is even more important than a profit and loss, that only tells you one year timeframe.

Make your business a strong one, a weak set of information will not help you move forward, it can have the opposite affect and hold you back.

Its in your hands!

We covered looking at your balance sheet some time ago, and wanted to refresh you on why it is so important.

Building up your balance sheet can help you with your future with the business, if you were ever to sell your company on to a potential buyer, this is an important area that the buyer will be looking at.

Its not just about profitability and turnover, the balance sheet is an indication that you are growing your branding, a business that has thought about strengthing and building up the balance sheet is worth considerably more than one that focuses just in the present.  ie turnover and profit.

The example we have below, is fine for a small business and will probably have a good credit score as its positive in both the net current assets (Working Capital) and the overal value.

But if youre talking about a business thats worth selling you are going to need a plan, this could be a 5-10 year plan, its certainly not short term.

Will need to be assets in both the fixed assets sections and current assets, this could be by buying equipment or machinery to make yourself more efficient and do a higher volume, buying a company with skills or equipment that brings Goodwill into the assets section, quite a lot of larger companies do this, they purchase mailing lists, and client lists, from smaller companies, to rapidly increase their net worth, and increase turnover.  

Current assets would be building up your turnover, and therefore your debtors increasing. Keeping an all important eye on the costs, and keeping the creditors to a reasonable level.

Long term liabilities are usually loans that are paid more than one year ahead, and maybe the director loans, if the owner hasnt taken back all of their investment.

The balance sheet value needs to increase tenfold, and self sacrifice for the owner is a must for this kind of exercise.  Its not all about your current year anymore, but your long term future, and future sales opportunity.  Think of it as a potential pension plan?  Investment for the house by the sea, whatever your dream future this is your opportunity to make it a reality.

This blog is intended for information purposes only and is only advice from past experience, you may have other suggestions of your own. It is not intended to be used to make all of your business decisions but as a guide only.

How Graphs Can Be Used For Your Business

Graphs can be used by Financial and Non Financial managers in a variety of ways.

Sales

Sales Managers have targets that are set for them by the company they work for.  They can track their sales in a variety of ways.

Our example shows Sales split by category/or segment and shown against budget. Targets that were set at the beginning of the year.

This graph also tells you the most popular and productive products on sale.
You can take this further and look at the margins of each product category, you might not sell a lot of something but if it returns a higher margin/profit rate, you don’t have to sell as many to get the same profit figures. There may also be seasonality in that product line.

Ie in hot weather a newsagent may sell a lot more drinks than bars of chocolate.
In cold weather the icecream freezer might go untouched. Easter, Half Term, Christmas. You would tailor your sales targets to match demand.

Apply this method to your particular product line.

 

Cashflow

You might want to set yourself a target bank balance for you to meet your overheads and make a profit.

The graph will show against budget whether you are meeting that goal.

It also gives indication of the business behaviour, see our example the graph shows above the line at first, then dips over February to April then comes back up.  Back into the target position and above.

If the graph had shown erratic it would give an indication of how well the manager is managing the business. In a planned approach, or finger in the air approach.

Gross Profit

This is a key figure in your accounts, it indicates whether you have made enough sales to now cover your overheads and make a profit.

Our graph shows a rise and then a sharp dip in May, this could be down to several factors.  The Sales themselves were generally low that month, an error in charging the right selling price for a new product line, an operational issue.

If you see a dip in any of these things, look for the reason, if easily explained, you could be putting action in to put yourself back on track.  Also look out for high peaks, these should be explainable.  ie a new contract, timing issues, seasonality, or it could be an error.

This blog is intended for information purposes only and is only advice from past experience, you may have other suggestions of your own.  It is not intended to be used to make all of your business decisions but as a guide only.

Filing your tax return as early as possible comes with several advantages. It removes the stress of last-minute submissions, allowing you to focus entirely on running your business. The self-assessment deadline of 31st January remains unchanged every year, yet HMRC reported that 2.6 million people had not filed their tax returns just two days before the deadline last year.

Missing the deadline results in an automatic £100 fine, with additional penalties for further delays. If your return is more than three months late, daily fines of £10 start accumulating—leading to significant penalties you’ll want to avoid.

You can submit your tax return as soon as April 6th, and filing early comes with a major advantage: you don’t have to pay your tax bill immediately. The payment deadline remains in January, giving you plenty of time to budget for what you owe. Plus, if you’re due a tax refund, filing early ensures you receive it much sooner—unlike those who file in January, when HMRC experiences delays due to high demand.

With a little organisation, you can get your paperwork sorted and your tax return submitted well in advance—leaving you free to enjoy the festive season stress-free. Filing correctly is crucial, as you don’t want to risk overpaying or underpaying your taxes. Seeking professional advice can help ensure accuracy and peace of mind.

Contact us on www.crossaccountingservice.co.uk if you have any concerns regarding your tax return as we are always here to help.

As the spring of 2024 unfolds, the Government have unveiled their budget, setting the stage for economic policies, social initiatives, and infrastructure development for the upcoming fiscal year. This pivotal moment not only reflects current priorities but also shapes the nation in the months and years to come. In this blog, we delve into some of the top topics emerging from the spring 2024 budget and their potential implications.

National Insurance

The main topic for the budget was the cut in national insurance again. The chancellor reduced the amount of national insurance employees would pay by 2%. The rate going from 10% to 8% in April 2024. It is estimated that the cut would be worth about £450 a year for someone on a £35,000 full-time salary.

It is estimated that around 29 million workers are set to benefit from the change. The rate of 'class 4' national insurance contributions, which is the main rate paid on self-employed profits of between £12,570 and £50,270, will be cut from 9% to 6% from 6 April. This rate had been due to fall to 8% from 6 April, but the chancellor has taken it one step further today. The self-employed will benefit too as the rate is slashed from 9% to 6%.

Housing

The chancellor confirms plans to scrap the furnished holiday lets regime. The initiative gives tax reliefs on properties being rented out to holidaymakers and make renting out to holidaymakers more profitable than to long-term tenants. The move is expected to raise £300m a year for the Treasury, however a blow to furnished holiday lets owners.

The chancellor also announced the government will reduce the higher rate of property capital gains tax. This is a tax paid on the amount of gain when selling a property. Currently the rate is 28% for higher rate earners, but this is being reduced to 24%

Business and Investment

The VAT registration threshold will be increased from £85,000 to £90,000 from the start of April. This change is estimated to help tens of thousands of businesses.

Benefits and Income Support

The Household Support Fund, which helps people struggling with cost-of-living pressures and was due to close in four weeks' time, will continue for another six months.

Full child benefits to be paid to households where highest-earning parent earns up to £60,000 - the current limit is £50,000. The top of a taper to withdraw the benefit will be raised to £80,000 from £60,000 at the moment.

The chancellor also announces a consultation on child benefit rules, to apply it to collective household incomes rather than for individuals from April 2026.

If there is something you want to know more about, you can call us on 02920 653995 or

01656 530063 to discuss.

As the clock ticks towards 01 April 2024, businesses across the nation are bracing themselves for the significant minimum wage increase set to come into effect. With no accompanying support from governments in these challenging times, the burden falls on the shoulders of businesses to adapt and plan effectively.

The Rise of Minimum Wage

As with every year, April 1st marks a pivotal moment as the minimum wage sees a substantial increase. Workers aged 21 and over will be entitled to the National Living Wage where currently it was workers aged 23 and over. While the intention behind such adjustments is to uplift low-wage workers and tackle income inequality, the reality for businesses is starkly different. For many, this hike presents a formidable challenge, with limited government assistance.

We are seeing a lot of restrictions being eased and it is the closest to normality for a very long time. The bonus of the sunshine is something to make the most out of. While we enjoy ourselves and plan for an entertaining summer, we should not forget about business. We should take steps in to planning on how to bounce back stronger.

As the country opens slowly and the opportunity arises to mingle with other business owners, you should make time to try and attend where businesses are likely to be. Nearer the end of 2021, we are likely to see trade fairs taking place, with all businesses on the same boat, getting the business name out there.  

If you do not have the budget or time to be a part of the trade show, then you should try and attend as a visitor. It will be a great way to connect and being a visitor will give you the freedom on your timing as you can leave when you feel like you have made the most out of the day. Who knows, you may even bump into some familiar faces, for a long-awaited catchup.

Our usual go to for these types of events are The Welsh Business Show, Zokit and Introbiz. Some may have updated dates for the events, some may be posting later. Keep an eye out on social media as we are sure there will be a buzz. Click here to look at what is out there with trade fairs https://10times.com/cardiff-uk/business-consultancy/tradeshows

To get your company to achieve the highest levels, you may need a hand by employing staff. This may seem a scary step to take, especially if this will be your first time employing someone. There are many things to consider. Due to the disruption of jobs during the pandemic, the government have introduced a Kickstart scheme. This scheme is to provide funding to create new jobs for 16- to 24-year-olds on Universal Credit.

It does not matter on the size of your business, everyone can apply. The funding will cover:

·        100% of the National Minimum Wage (or the National Living Wage depending on the age of the participant) for 25 hours per week for a total of 6 months

·        Associated employer National Insurance contributions

·        Minimum automatic enrolment pension contributions

Further funding is available for training and support so that young people on the scheme can get a job in the future.

More info on how to apply, please click here https://www.gov.uk/guidance/apply-for-a-kickstart-scheme-grant

If you already have staff, and are bringing them back in to work, remember the furlough scheme is flexible and available until 30 September 2021. You will have to contribute for any hours worked by your employees. From 1 July 2021, the level of grant will be reduced, and you will be asked to contribute towards the cost of your furloughed employees’ wages. To be eligible for the grant you must continue to pay your furloughed employees 80% of their wages.

You can continue to choose to top up your employees’ wages above the 80% for the hours not worked at your own expense. This is completely up to you and not a requirement.

Let us try and finish 2021 strong and push past this pandemic. It has been tough for everyone, but with planning and preparing, we can start looking ahead.

It has been several weeks now since the whole country has come to a standstill. We still have strict restrictions in place, however there is still a lot we can do to ensure our businesses does not just fade away. We have all put endless efforts into our business and now is not the time to just give up. You should still be on social media, promoting your business, so once all this is over, and it will all be over, your business is in the front of everyone’s minds.

Our previous Coronavirus Blog detailed how you could get support from the Government Retention Scheme to the grants that are available. To read our previous blog, please click here https://bit.ly/Covid19interruptionCrossAcc

Bounce Back Loan

There will be support in the form of a bounce back loan which will help you to borrow between £2,000 and up to 25% of their turnover. The maximum loan is capped at £50,000. The government has guaranteed 100% of the loan and there will not be any fees or interest to pay for the first 12 months. After 12 months the interest rate will be 2.5% a year.

To be able to apply for the loan you will have to be based in the UK, have been in business before 1^st March 2020 and your success or development have been impacted by the coronavirus.

You cannot apply if you are already claiming under Coronavirus Business Interruption Loan Scheme or COVID-19 Corporate Financing Facility. If you have already received a loan of up to £50,000 under one of these schemes you can transfer it into the Bounce Back Loan scheme. A deadline of 4 November 2020 has been set to arrange with your lender.

The length of the loan is 6 years, but you can repay early without paying a fee. No repayments will be due during the first 12 months and any charges for the loan will be covered by the governments guarantee.

There are several lenders participating in the scheme including many of the main retail banks. You should approach a suitable lender yourself via the bank’s website. The lender will ask you to fill in a short online application form and self-declare that you are eligible. The lender will decide whether to offer you a loan or another type of finance and you will be responsible for repaying 100% of the amount borrowed.

Self-Employment Income Support Scheme

In line with the Chancellors commitment to help businesses who have been affected by the coronavirus, HMRC have launched the self-employment scheme. You should receive a letter through the post stating that you may be eligible. You will have to go to the HMRC website and complete an eligibility checker to see if you are eligible. You will need your National Insurance number and Self-Assessment Unique Taxpayer Reference (UTR) number.

If HMRC confirm you are eligible, then you will need your Government gateway and user ID and password, if you have not created this yet, you will have to, to commence with the claim. You will have to enter your correct contact details as HMRC will contact you, using these details to tell you when the claim system is available for use.

HMRC will automatically calculate the income support you are entitled to, based on the information submitted from previous tax returns. After HMRC have received and checked your claim, they will pay the money directly in to your bank account in six working days.

You will need to make the claim yourself, although you can seek advice from an accountant. The grant is also not for limited companies or anyone operating a trade through a trust. HMRC will check claims and take action to withhold or recover payments found to be dishonest or inaccurate.

We are still available on the phone and by email, so if you do want to talk through what may be your best option, please feel free to contact us. We are always happy to help.