It must be some six years ago I first met (virtually) Emily Coltman who was at the time working for a regional firm of accountants.

Emily was not long qualified but she was very interested in new technology and how this could help the smaller business, so no wonder that Emily has ended up as chief accountant FreeAgent.

I guess Emily felt she had more to offer because she has now published her first e-book – Finance for Small Business: A straight-talking guide to finance and accounting.

I have actually read it, cover to cover, before I decided to say anything about it.

It is another book worth reading if you are starting out on your own path towards self employment/small business.

There are a great many of these books, at Holden Associates we have our own £FREE New Business Kit.

So is it worth £10 (or £8 on Kindle), well actually Yes it is, and I have actually read the book rather than the promotional literature!

For the e-book click here.

For Kindle edition click here.

The practice of producing accounts is as old and ancient as man’s attempts to interact with their fellow human beings. With the predominance of money measurement in economically useful activities. Consequently accounting has become a vitally important tool in many different walks of life. At the centre of all accounting principles is the basic principle of accuracy and consistency. As such this takes the form of a double entry system of accounting. As early as in the 15th century the Italian mathematician, Frater Luca Pacioli, first extolled the virtues about the features of the system.

The double entry method offers a convenient and accurate format for recording transactions. To put it simply, all transactions have two aspects. Therefore, omissions or numerical errors automatically stand out. Thus, it acts as a self-correcting mechanism.

Basic concepts

The basic aspects of accounting relate to correct classification of transactions. There are four major aspects of accounting:

• Assets
• Liabilities
• Revenues
• Expenses

At any given point of time, the firm's assets should equal its liabilities. This is the accounting equation. If they do not match, there is an apparent error in the accounting process.

The enterprise's assets represent the productive resources used by it. Plant and machinery, building, stock of raw materials and stores, debtors or accounts receivables, cash and bank balances are some of the assets. Liabilities are the sources that finance the assets. Owner's capital, long-term loans, short-term bills, sundry creditors and other financing all fall within the liabilities category.

The lingo

When revenues exceed expenses, the business makes a profit and if the reverse happens it makes is a loss. Ultimately, profit or loss scenario will reflect the financial position or the values of assets and liabilities on the given date. An increase in assets or decrease in liabilities means profit and decrease in assets or increase in liabilities mean loss.

Profit is the key driver in any business enterprise. The main task and focus is always to seek to maximise the profits of the business. More critical than profit is the measure of profitability because the latter reveals the firm's efficiency in utilisation of financial resources. Return on Investment is the most common profitability ratio. The claim over profits of a business depends on the organisational type. In sole proprietor or partnership businesses, the owner or partners have total claim over the profit. In companies the shareholders are entitled only to the dividend as declared by the board of directors.

Conclusion

The work of an accountant is a crucial aspect within any business. Ultimately they report on the performance of the business to the management and the owners. Figures supplied by the accountant should form the basis of important decisions like capacity, ability to expand, make or buy new products, retaining or hiving off unprofitable lines of business and employee incentives are all decisions which should not be made without the aid of accounting data.

One of the best kept open secrets in business is the end of month report. You either love it or you loath it. Whatever side of the fence you are on there is no getting away from the fact that a monthly report can help to give your business direction and increase profits.

Small business owners may think that monthly reports, reviews, finance meetings all belong in the corporate world. In truth all of these pieces of information can be of great assistance to a small business. In essence they can be the difference between running a thriving and successful business or one that is chugging along at a snail’s pace in a failing business.

Why do you need one?

The very first question is usually ......why do you need one? Well the answer is fairly straight forward.........it helps the business to look back on the month and measure the successes and failures whilst offering the opportunity to adjust and reset goals for the coming month. Many entrepreneurs overlook the need to steer and guide their businesses as if they were driving a car. Initially the business owner MIGHT start off with a strong business plan. However, more than often the business will take on a life of its own.

When to do it

The first day of the following month is usually a good time to start to compile a report. The report needs to be done on the same date every month. Erratic timing may lead to adhoc data. It should be treated as a priority task and have time set aside to complete it. Normally the report will include data on sales, income, expenditure and prospective orders for the coming month. It may take a while to compile all the data needed to ensure that all the information is accurate and reflects real time information.

What data is needed?

Individual monthly reports may look completely different. Nevertheless there are generic items that will be on most if not all reports. The report may include:-

• An income goal for the last month
• A determination of how much over or under you were compared to your goal
• A new income goal for the coming month
• An income-per-customer to calculate how much is earned per customer
• A list of businesses in your sales pipeline
• The top 3 successes you are most proud of in the past month
• The top 3 things that you would probably change if you could relive the month

Once this data is analysed it will be an invaluable resource for the business. It is almost like a personal satellite navigation system for the business. The data acquired can be utilised to create customer profiles or predict spending habits. There is no end to what can be done with it. Without guidance and sufficient information the business may well spiral out of control. An end of month report should supply enough information to enable the business owner to stay on track.

HMRC are going to target as many as 50,000 small businesses for failing to keep proper tax records in 2011.

Under the HMRC consultation, HMRC wants to delve into 50,000 of the two million SMEs it believes have poor record-keeping that has led to unpaid tax.

The Business Records Checks consultation could see fines of up to £3,000 for those HMRC finds have unpaid tax liabilities through poor book-keeping. This could prove expensive, as the fines relate to each tax, therefore VAT, Income Tax and PAYE are all different taxes and a fine of £3,000 could be applied to each tax … and the advert says ‘tax doesn’t have to be taxing’ … well it will certainly be expensive if you are found to have got it wrong in 2011.

It is the 2008 Finance Act that gave HMRC the powers to investigate up to 50,000 business records, beginning in the second half of 2011.

As much as I could moan about HMRC picking on the ‘little man’ I think it is worth pointing out that there is really no excuse anymore for not keeping proper records for your business, there are £FREE pieces of software from companies such as VT’s Cashbook, everyone has excel on their computer for which we can provide a £FREE simple excel based cashbook, although it is very simple it will do the job or as an alternative you could become a client of Holden Associates and we will provide you with online bookkeeping software for £FREE.

So rather than moan that the ‘taxman’ is out to get me, do something about it, start keeping proper records, after all if the ‘taxman’ thinks you are under declaring your income and avoiding tax then is it not possible that you are also not collecting everything that is owed to you through poor record keeping?

Tags: HMRC, The Business Records Checks Consultation, Bookkeeping, SME, Self Employed, Tax, VAT, PAYE

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Advance Notice of Major Upgrades (30th October – 1st November)

WinWeb would like to make our customers aware that due to major upgrades the WinWeb Login will not work from Saturday until Monday afternoon.

During this time our technical team will be hard at work preparing for the launch of the exciting new version of our software.

The new release is scheduled to go live at 12:00 GMT on the 1st November. For all of the latest news, please view our WinWebOps Twitter feed or contact us if you have any queries.

The above notice is very exciting for us here at Holden Associates, for those that don’t know, this winweb upgrade means we are finally getting version 6. I saw version 6 in the summer this year while in London and have been waiting for its roll out ever since.

If asked about why they choose to start their own business I am sure there are very few people who would say “to do administration tasks or bookkeeping”. Or that they enjoy spending their spare time adding up receipts and invoices. Whilst the administration or financial side of your business may not be the part you enjoy most is not the most it certainly is an important aspect of your business.

Procrastination or disorganisation are not good options or choices for the running of your business. There are certain legal compliances and deadlines which a business must adhere to. Failure to do so may well lead to fines or penalties being levelled against your business. Generally the longer you leave it the worst the problem becomes and the less enthusiasm there is towards completing the task. Being on top of your bookkeeping will assist you to maintain a healthy cash flow.

Here is a quick guide to the book-keeping basics to assist you.

You should have an accountant that will advise about your own specific business needs. Nevertheless there are things you should do on a regular basis that will make your life easier.

• Keep a cash book: Record the payments into and out of your bank account. You will need to make sure that entries made tally with your bank statements.
• Sales invoice file: Whether you raise your invoices using an accounting package or do them manually you will need to keep a record of them on file. Invoices should be stored in chronological order with those which have not yet been paid at the top of the file to assist your credit control.
• Ask for an invoice or receipt for everything you buy: statistically, the longer you are in business, the more likely that you will undergo a VAT or tax investigation. As long as you have a good accountant and appropriate paperwork you will have nothing to worry about.
• Keep your accounts clean: as good practice you should separate business and personal expenses. If you run a limited company, the business’s money is not your own even if you own it 100%. As a self-employed person you can take money from your business, however, you should still maintain a separate bank account.
• Check bank statements: You should spend time regularly checking your bank statements on a monthly basis. You will need to be aware of where your money is being spent as well as being able to spot bank errors or fraudulent activities.
• Make the time to regularly do book-keeping tasks: It’s tempting to leave bookkeeping until the evenings or to do it at home. If you are tired simple tasks will take longer, and you’re more likely to make mistakes.
• Hire a book-keeper or accountant: If there’s one area you shouldn’t skimp on professional help, it’s with your finances. A good accountant will save you more money than they cost.

NB: WinWeb V.6 launches soon. WinWeb is a leading online bookkeeping software that we provide to all our clients £FREE of charge.

The Microsoft giant in November 2007 jumped into the UK bookkeeping software market. 16 November 2009 they will jump out.

So again we see a case of the larger software company trying something and failing. That’s all well and good, but what about those using this product?

Well, the news in my opinion, is not all bad, personally I liked some of the features, a lot, what I didn’t like was the power hungry way it used my office computers.

I have one question for Microsoft, why did you not make this hosted software?

Let’s be honest, if you are a client of Holden Associates then you are probably already using our hosted bookkeeping software which is powered by winweb and all this is totally irrelevant to you.

If you are not a client of Holden Associates, and you have been told to use, or even worse, buy this product by your accountant, oh dear.

Although, all is not lost, we are still offering all our clients Online Office 5 for £FREE, that’s right, no charges, no catches, and for *most small business no cost for training either, that’s right become a client of Holden Associates and we will show you how to use the software for *£FREE.

The demise of the Microsoft attempt to gain market share is a shame for those who have bought the product, as from 16 November it looks like what you have is all you will ever get! Don’t panic, for some what it does will be enough for you for years to come, but for others it maybe worth considering at your year end dropping Microsoft’s product and looking to another.

* Restricted to a maximum of 3 hours at our offices or over the telephone

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Should I or shouldn’t I use a bookkeeper? From the perspective of Holden Associates it really looks like a no brainer. Even so we speak to a number of businesses who do not see why it is important for businesses to have a bookkeeper or the importance of sound financial record keeping systems.

First and foremost the reason to implement a bookkeeping process into your business is to help you to manage your business tasks more effectively. It is difficult to have an accurate financial picture of your business without bookkeeping records. In essence financial records answer questions such as: Is my business making money? Are my sales increasing? How does business expenditure compare to sales?

REASON 1: MAKING DECSIONS

Evaluating the financial consequences of all your business decisions should always be part of your decision making process. Without the aid of accurate records and financial information forecasting the results of any given course of action will be difficult. Presumably you are in business to make money. Hence forecasting the profitability of sales will give you an indication of whether or not you will need to hire or fire staff; sell more of one product or to stop selling another.

REASON 2: APPLYING FOR FINANCE

Making the decision to apply for finance for your business is fairly straight forward. However it is not so simple to prepare the supporting documentation if you do not already have it. Both banks and financial institutions will want to see proof of income, balance sheets, tax statements and projected returns before they make a decision about whether or not to loan you money. Preparing such information when it is required is never a good idea. Ideally this information should all be at your finger tips.

REASON 3: SEEKING INVESTORS

Once your business has developed to a stage where you would like to attract investors or a partner you will require financial information to demonstrate that you business is still a ‘going concern’. The source of this information usually emanates from day-to-day bookkeeping. It is possible that suppliers and creditors may want to see this information before permitting your business to have credit.

REASON 4: PREPARING A BUDGET

All businesses should use budgets for planning purposes. Budgets enable businesses to remain on track by forecasting cash needs and controlling expenditures. When reviewing what your business does and what it will be doing in the future it is always good practice to have a budget to prevent overspending and to control costs.

In short bookkeeping is an integral part of every healthy business.

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Stefan and the winweb team are in the national press again, this time Alison Coleman of the Daily Express writes in their franchise section about WinWeb’s OnlineOffice 5 and remarks that you ‘can’t help but win with WinWeb.’

Alison makes the valid statement that most small businesses lack the financial resources to get good business support. Alison goes on to write a great piece about how OnlineOffice is the right tool at the right price for micro and small businesses, which includes franchisees.

This is just more exposure for the winweb winning formula. It also goes to show just how far ‘cloud computing’ has come in recent years, but winweb are the only operation out there that I can find offering this level of support to small business, and this is why Holden Associates chose to partner with winweb.

Go read the article here.

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Well it happened on Monday 6th October 2008, Winweb launched Version 5 of their powerful online office.

Online Office Version 5 is by far the most powerful version to date of the Online Office, there are over 100 new features, yes over 100!!

I am very excited about this launch, it is through collaboration that winweb are maturing, they ask their users what they want to see and then develop it and Version 5 is the latest development along this road.

Version 5 see’s winweb’s commitment to the smaller business with the launch of the new Academy section, described as an ideas and educational framework for entrepreneurs.

It all adds up to a very impressive offering, winweb is one of the early entrants into the Software as a Service ‘SaaS’ market, but unlike the competition, Stefan the founder of winweb is always keen to point out winweb is not about accounting software, winweb is about giving the small business a greater chance of survival by being a complete small business infrastructure.

If you have never looked at winweb or heard of winweb before and you run a small business don’t you think it is time you visited their website?

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