When starting a business or cutting costs you’ll probably ask yourself: do I need an accountant? We’ll explain some of the benefits of an accountant and why you might need one.
Do I need accounts?
Accounts show the financial performance over a year in a Profit and Loss Account. They also show the financial position of the business at the end of that year in a Balance Sheet. Accounts usually include other information such as notes to show the detail behind some amounts. Companies House and HMRC require accounts from every company every year. For sole traders and partnerships, HMRC may also request supporting documents for tax return, which accounts provide. Lenders such as mortgage companies also normally request to see accounts. Accounts are usually needed if you want to sell the business or attract investors. So yes, you normally do need accounts.
Some online accounting software provide reports that look like accounts. However, if you don’t use an accountant, how do you know that you’ve recorded all of your transactions correctly? That your bank account reconciles with bank statements? Whether the accounts comply with accounting and tax regulations? So do I need an accountant for accurate accounts? Yes, you usually do.
All of our accounts packages include annual accounts. Our quarterly package also includes quarterly management accounts and VAT returns. The monthly package gives you monthly management accounts and bookkeeping. Our Prices.
Do I need an accountant for a tax return?
All companies need to submit a corporation tax return to HMRC. All partners and sole traders have to submit a personal tax return to HMRC. Most directors and shareholders of companies also need to submit a personal tax return. So if you are in business, whether that’s through a company or not, you’ll almost certainly need a tax return.
An accountant, not only prepares and submits a tax return accurately for you, they can also save you tax. For example, do you know which allowances you can claim? How to use any losses to get a tax refund?
All of our accounts packages include a personal tax return and a corporation tax return (for companies).
Do I need an accountant for references?
If you are in business and you require a loan, a mortgage, or a tenancy agreement, you’ll usually be asked for an accountant’s reference. This provides information on how much money you earn so a decision can be made by your lender/landlord.
We don’t charge our clients for accountant’s references.
Do I need advice?
There are many important questions to consider when running a business and complying with various laws, accounting and tax regulations. Many of these appear from early on in a business’s lifetime. Such as whether it’s best to trade as a sole trader or limited company. Should your spouse be a shareholder or partner or employee? How much money should you take from the business and how? Do you know which taxes you need to register for and when? Which accounting software is best for your business, such as the best – Xero, or the free – Pandle? What do you need to do before the year end to save tax?
All of our clients receive tax-saving advice before every year end. All of our accounts packages include at least 1 hour of accounting and tax advice throughout each year. Our Prices.
Do I need software provided by an accountant?
No, you don’t. We recommend using software but you shouldn’t have to use the one your accountant prefers. It may even be unsuitable for your business. The smallest businesses could simply use a free spreadsheet to list and categorise all transactions. Free online accounting software such as Pandle may be suitable for small business that don’t have too many transactions. Contractors may prefer the simplicity of FreeAgent. Businesses with lots of transactions may be better suited to QuickBooks, or Xero.
Our clients can choose whichever software they prefer to do their own bookkeeping, or for us to do their bookkeeping for them. So you are in complete control of your accounts and costs. We can also get you a discount from some software such as 15% off of Xero, and 50% off of Pandle Pro.
Do I need other services from an accountant?
Accountants also provide other services, such as payroll, pension, VAT returns, bookkeeping, and finance director services. Many of these roles you could try to do yourself, especially with good accounting software and advice (see above). However, there are still technical aspects of each which could lead to errors. They are also quite time consuming especially if you’re not used to doing them. Using an accountant not only prevents errors, but frees up your time to concentrate on your business or leisure time.
Our clients can can add or remove extra services like these at any time, with our flexible accounts packages. So you can be in control of your time and costs throughout the year.
Do I need an accountant?
If you are in business, want to avoid costly mistakes with your accounts and taxes, want to pay less tax, want to have more time for business/leisure, then yes, you need an accountant. From just £20pcm you can have all of that and more with CloudBook Online Accountants.
The cost of living crisis is hitting businesses too. Wages, fuel, energy and material costs are all increasing affecting many businesses. However, there is one cost cutting exercise businesses could consider, and that’s to reduce accountants fees. Read on below to find out how to save on accountants fees.
Less Work Less Accountants Fees
The more accountancy work you do, the less your accountant has to do, so the less accountants fees you pay. What could you take over from your accountant?
Payroll & Pension
Most payroll software is fairly easy to use, come with a lot of guidance, and some of them are free for small employers. A basic knowledge of how to operate the payroll should be all you need for most scenarios. Some workplace pension providers, such as Smart Pension, are also easy to use and update every month. So you could do your own payroll to reduce accountants fees.
You could easily save accountants fees by doing your own VAT returns. Accountancy software makes submitting VAT returns easy. As long as the correct VAT rate is selected for every transaction, it should be a case of just running the VAT report, checking the detail for any mistakes, then click on submit.
Are you paying accountants fees for bookkeeping? Do you have spare time and want to save business costs? Then do your own bookkeeping. That is mainly, importing the bank transactions and categorising each one appropriately. Again, accountancy software makes this easy with automatic bank feeds, automation rules, and artificial intelligence to guess what to do with transactions. By using the software to help automate the bookkeeping as much as possible, it shouldn’t take as long as you think to do your own bookkeeping. It’s a great way to reduce your accountancy costs.
Flexible accountants fees
Here at CloudBook Online Accountants, our clients can add and remove individual services whenever they want. So if you have a quiet few months ahead, you can take over the bookkeeping and/or VAT returns and/or payroll to save accountants fees. Then when you get too busy again, just hand it back over. We only charge you for the services we actually provide.
Use Online Accounting Software
If you’re handing your accountant a box full of receipts and invoices to sort out, you’ll be paying way too much in accountants fees. If you’ve written down every transaction in a cashbook and totalled up every column, that’s better but you could still save accountants fees by a lot. Perhaps you’ve got everything on a spreadsheet, now we’re getting somewhere, but if that’s complicated or has errors, you could reduce accountants fees further. Online accounting software can help you do your bookkeeping perfectly, which makes accountants jobs easier, so you pay less accountants fees. Check out Xero, QuickBooks, FreeAgent, and Pandle to name just a few.
Use Two Accountants!
Wait, two accountants, double the accountants fees right?! Not necessarily. You could use one accounting firm as a consultancy service, to get specialist business advice and high end tax-planning advice, as and when required. Specialist accountancy firms that provide this consultancy service are usually quite expensive. So if they are also doing your accounts and tax returns, you will probably be paying too much for those services. Reduce your overall accountants fees by using a cheaper accountant for those compliance services, such as accounts and tax returns.
Find a Cheaper Accountant
An obvious one we know, but have you really considered it properly? Are you paying too much accountants fees because you’ve used the same one since you started and the fees creep up every year? Could you reduce your accountancy costs by choosing one that doesn’t need so many admin staff, a big expensive high street premises, and all the bills that come with that?
At CloudBook Online Accountants, we’ve worked hard to cut out all of the unnecessary costs of providing a good accountancy service. There are no support staff, so you’ll have one main contact who is a hands-on qualified accountant. We all work from home and do everything online. We’ve also automated admin tasks, so we have more time to take care of client work. We also only help clients that use accounting software or at least tidy spreadsheet. That’s how we’ve kept our fees so low and we can offer fixed fees to everyone. Our Client Testimonials and 5.0 Star Google Reviews show that we still provide a great service. You can get an instant quote and see our fees on our website. Or just get in touch and we’ll talk you through it.
Cutting costs to improve profits will not necessarily work if the quality of what you offer suffers. However a good financial information system will provide you with relevant information to help you make cost cutting decisions. Using an online accounting so your accountant can help with this and keep the information accurate throughout the year, will also help. The following are proven ways to cutting costs and reducing expenses…
General Ways of Cutting Costs
Sometimes, a high volume profitable business could make cost savings but the volume of their business actually hides that fact that there is room for further cost savings. You need to measure in detail, not globally in order to identify all areas you can save costs.
It is sometimes necessary to spend money in order to save money in the long term. For example, investment in machinery or redundancy payments.
Controls can help to reduce costs. For example, portion controls, stock controls, cash controls.
Measuring the efficiency of individuals or departments can identify where there is room for improvement.
Having budgets helps to identify when costs are out of control of something is going wrong. The best way to budget is not “what did we spend last year and add 5%” but by starting from zero and deciding what you should be spending in each area.
The lowest price isn’t always the best price when quality suffers.
Changing the sales mix, for example in a restaurant can reduce wastage of products with a limited lifespan. A limited menu will help sell more of those items.
Consider joining a buying group in order to take advantage of consolidated buying power.
Review all your standing orders and direct debits. Unless these are reviewed on a periodic basis, some can continue that you no longer want.
When making capital expenditure are all sources of finance considered including grants.
Never sign up at the first meeting. Take time to consider however good the deal looks.
Always ask for a free trial.
Do research to make sure you buy the right product.
Always read the small print on order forms.
Try to reduce frequency of purchases.
See if any items can be outsourced or a subcontractor used to save costs.
Weigh up the costs and benefits of all items.
Take advantage of free consultations from professional advisors.
Offer to settle bills early in exchange for a discount when you buy.
There are hundreds of grants available for businesses to offset against expenditure. Check you’re not missing any. Business Links are a good source of information on grants.
Many government agencies offer free or low cost business advice when you are starting out.
Are the advantages and disadvantages of buying outright, HP or leasing capital equipment reviewed before each decision?
Specific Examples of Cost Cutting
And For Some Specific Expenses For Cutting Costs…
Labour costs can be controlled by controlling overtime with planning and scheduling, labour saving equipment and improved layouts (e.g. drive through windows). Improved employee retention reduces recruitment costs.
Move employees onto yearly hour contracts to improve productivity. For example, rather than 48 weeks, 5 days a week, 7 hours a day, change the contract to 1680 hours a year. Then you can use staff more in busy periods rather than paying overtime. It gives staff blocks of time off and they don’t have to sit around doing nothing and being bored.
Can any of your staff be moved onto a self-employed basis to save employers national insurance costs as well as holiday pay, sick pay and maternity pay costs?
Phone costs – least cost routing can reduce phone bills by as much as 40%.
A small business could do away with a separate fax line and use a fax to email facility whereby faxes appear in your email. Type “fax to email” into a search engine and many providers will come up.
Advertising – send camera-ready artwork with a cheque for 20% of the rate card price and a letter authorizing them to cash the cheque and run the advert whenever they have space. Many publications have space left they need to fill and something is better than nothing.
Consider an appeal against your rates assessment. Many are higher than they need be.
Rents can be negotiated in times of property crashes. You could ask for a lower rent in exchange for a longer lease.
Are bank charges and interest payments reviewed for accuracy? There are software programs that will do this and consultants who offer a checking service?
Leasing and interest costs should be reviewed regularly to see if better terms can be obtained.
Always negotiate the charges with your bank.
Use BACS – charges will be cheaper than paying by cheque.
Don’t have more accounts than you need.
Most banks offer free banking for at least a year and maybe 18 months to small businesses. Have you considered a change of bank?
Finally, the largest expense is often tax so use a great accountant who will slash your tax bills, will advise you on cutting costs, and one who uses online accounting such as the free Pandle to save you accountancy fees! See Our Prices or get an Instant Quote.
Whilst fiscal responsibility is OK don’t waste all your time looking for ways of cutting costs.
Stock Controls The costs of holding stock are…
The money spent on it that is tied up and could be used elsewhere.
The risk of the stock reducing in value if it becomes obsolete or is perishable.
The risk of theft or damage.
The cost of storage.
Having to manage and organise it.
Stock levels need to be minimized without running out of items so that you can’t supply what the customer needs. You therefore need a stock control system to get the balance right.
As such, the best stock level to hold is normally one that keeps the level of stock necessary to support your normal level of trade. By doing this you will be able to supply what your customers want most of the time while cutting costs.
Also, the following tips will help with stock control…
Produce sales forecasts so that you know what stock levels to hold to meet that demand.
Speed up your production process as much as possible by developing good supplier relationships.
If you never run out of stock, you’re probably holding too much.
Form reciprocal relationships with non-geographically competing businesses to supply each other if you run out of stock.
Monitor your re-order levels.
Reduce duplication of stock holding that occurs with multiple stock holding locations. So try to keep stock in one place as much as possible.
Try to buy stock on sale or return, which will allow you to hold more stock without any risk or cost. Having a preferred supplier may make this more possible.
Apply Pateto’s 80/20 law to stock – concentrate on the 20% of stock lines that probably make 80% of your sales.
Only go for bulk discounts if they are beneficial after considering the cost of holding the extra stock.
Regular stock takes on the same day each week can help to determine usage levels.
Delving into taxes when it concerns your business can always be a daunting time, and it is not always the most exciting part. However, it always needs to be dealt with at some point. To help you get started, we have gathered a few little tips to guide you on your way.
In this day and age, dealing with taxes can be complex. And whether your business is just starting out, or has been around for a few years, it can always be tricky to establish what is available to you, what you are entitled to, and your financial affairs. Before we get started if you are looking for some in-depth tax-saving tips from online accountants, then have a look at our range of free resources from special tax reports, tax calculators, and tax helpsheets. We can even email these directly to you (promise we won’t spam you).
1. Meet Deadlines and Stay Organised
One of the first and most important tips we can give you is to always meet your deadlines. Organisation is essential to any workplace. Any delayed filing with Companies House paperwork (confirmation statement), HMRC, FCA, and other regulatory accounts, can result in fines and other consequences. For a business, this can have devastating impacts as can affect your credit rating and banking commitments.
There are many documents you need to keep organised when you are running a business and keeping organised will reduce any hassle. It is also a great idea to map out future dates you need to be aware of. For instance:
Tax year dates – including any potential changes
Self assessment tax return deadlines
Tax registration deadlines
Tax payment and filing deadlines
Aware of any penalties for late payments
Any COVID extensions
Furthermore, make sure you always keep a copy of your documents, such as invoices and receipts in a safe place. According to HMRC, these business records need to be kept for six years, so keep them secure and protected. Also, records and receipts are needed from HMRC to expense claims or input VAT amounts, so make sure your business keeps proper supporting records.
2. Claim Anything You Are Entitled To
Make sure you claim anything you are entitled to such as ‘Capital Allowances’ to help with your business rates. Our friendly group of online accountants can talk you through this. Capital allowances can be claimed against taxable profit, meaning you can receive a reduction in capital expenditure such as business equipment. For example, there are:
Annual Investment Allowance (AIA)
AIA is available for British businesses, and is a form of tax relief designated for the purchase of business equipment. AIA applies to businesses of any size, and allows an immediate deduction against profits for capital expenditure up to a certain limit. Most businesses can claim on a portion of expenditure to most types of plant and machinery (except cars).
Enhanced Capital Allowances (ECAs)
ECAs encourage business to invest in efficient and environmentally friendly equipment. This scheme allows you to claim 100% first-year allowances such as tax relief in efficient technologies. This will not only reduce investment costs, but your environmental impact. All in all, this will improve your cash flow and the time it takes to pay back your investment. However keep in mind, this can only be claimed for new plant and machinery, not second-hand or used.
Make sure you do some research to find out exactly what you are entitled to. There are multiple options out there that will benefit you and your business, to which you are 100% entitled to.
3. Working From Home?
If you are working from home, or a self-employed business owner you may be able to claim tax relief for:
Gas and electricity
Business phone call and dial-up internet access
Furthermore, you can claim a fixed nominal sum of £6 a week with no evidence of your extra costs. There can be many generous tax savings for those of you who work from home. So make sure you research and are aware of them.
4. Be Aware of Illegal Dividends
Dividends are payments for shareholders, directors, or investors for buying the company’s shares or stocks. Any company can pay dividends from retained profits after paying corporation tax and have met all liabilities. However, be aware of illegal dividends, or ‘Ultra Vires’. This can occur after declaring expenses based on bank balance rather than profits, yet dividends should only be paid from profits. Unfortunately, this is not unusual and can result in an overpayment and is costly to sort out at a later date.
5. Talk To Us
Of course there is a lot of information out there which is time consuming, as well as being tricky to navigate. Here at CloudBook Online Accountants, we want to make your life easier. We will work with you from the start to the very end of the year and will assist and support you every step of the way. Whether you are a UK based sole trader, small or medium business owner or property investor. We will help get your finances on track and help you stay organised with an easily reachable, friendly and qualified online accountant.
So, we hope you have discovered some new information about tax and your business. Get in contact with us if you have any questions, or are interested in any services from our online accountants.
Here are a few examples of some more off the wall, out of the box type thinking marketing ideas. Try to use them as a basis for your own ideas or as inspiration to come up with your own. Being unusual or eccentric will often pay dividends…
A restaurant owner could get in a taxi, talks to the driver all about his restaurant and end up back at his restaurant without going anywhere. He gets the undivided attention of the Taxi Driver for just a few pounds. He can then offer him a free meal. Taxi drivers are an excellent source of referrals for restaurants.
On a wine list, have humorous description such as “What To Drink When Lost In A Desert”.
Hire assistants for the day to make your office look busy when you’re a new business without customers.
Send your own label wine as gifts.
Send a DVD or CD with your sales message on. When you use digital media to send a sales message they can’t be skim read like sales letters and they have to listen to them in the order you’ve recorded them.
Create your own holidays or special days and you can even enter them into Chases Calendar Of Events.
Put signs advertising your business up in front of your house and ask all your friends if you can do the same. You can probably get away with doing this for a short period and end up with signs all around town. They should at least let people know what you do and have your phone number on.
Ring all of the competitors in Yellow Pages looking for any phone lines that are now disconnected. Then ring BT and ask for the number to be allocated to you, which you then put on divert to your normal line. You’ll then pick up any prospects looking for your type of service.
We accept Burger King Coupons and give double value.
Offer to take over certain segments of a business not fitting in with a competitors client profile such as small clients and vice versa. You don’t want trouble clients so look to lose them and even better if you can lose them to competitors.
And finally “My Accountant Thinks I’m Crazy Sale”
This is a tongue in cheek sales letter that talks about your annoyance at your nagging, domineering, penny pinching, scrooge-ish accountant. How he bullies you, pushes you around and watches you like a hawk…but now he’s out of town on vacation for the week and you’re going to have some fun… with the wildest, most generous offers in the history of your business.
How We Can Help You
We’ll happily listen to any of your own mad marketing ideas and give you feedback.
The tax treatment of travel expenses can be surprisingly complicated. Here we explain what can you claim for travel expenses.
The starting point is that employees are entitled to tax free payments for a business journey. The employer can either pay the employee tax free for the cost incurred or the employee can claim for tax relief on any shortfall through their tax return.
The fact that an employee may have made a saving is irrelevant. So if the employee normally drives 10 miles from home to the office but is then required to drive 50 miles from home to a business client, the full 50 miles are claimable, not just the excess 40 miles. The rate of approved mileage allowance by HMRC for employees using their own cars for business travel is 45p per mile for the first 10,000 miles per year and 25p per mile thereafter. It should be noted that this mileage allowance rate includes a certain amount for fuel on which VAT can be reclaimed by the employer when backed with appropriate records.
If colleagues are in the same car for the same journey, you can claim an additional 5p per business mile per colleague.
Qualifying travel expenses
You can claim the cost of travel expenses incurred in the performance of your duties or travelling to or from a place you have to attend in the performance of your duties as long as your journey is not ordinary commuting between your home and your permanent workplace or private travel.
Therefore site based employees can claim the cost of travelling from home to site, although this is not allowed if the job at the site is EXPECTED to last for more than 24 months. If the position at site actually lasts longer than 24 months then they fail to qualify from the point at which they knew the 24 months would be exceeded. This should be distinguished from a permanent place of work which does not qualify at any time.
The subsistence expenses such as meals and accommodation in connection with this travel are also allowable. Car parking, toll fees and congestion charges are also allowable.
The fact that an employee may divert for a private purpose such as to do some shopping on the way home does not prevent it being a business journey if the primary purpose was business.
A permanent workplace is usually the normal place where the employee goes to work although is actually defined as any place where an employee regularly attends in the course of their duties and which is not deemed to be of limited duration or for some other temporary purpose. It is possible to have two permanent workplaces and as a guide if more than 40% of your time is spent at the second workplace this can become a permanent workplace as well, although it is always necessary to look at the facts of the case. In some cases, spending less than this can also make it a permanent workplace.
Where the employee travels from home to say a client and then to the office then the whole journey will qualify as business travel, which can be beneficial. However, it is important that the primary purpose of this is business and the work related diversion is not done just to claim the business journey.
Use of Home as Office
Aside from making claims for use of home of office, if the employees home can be classified as a permanent workplace on the facts then journeys to the head office should qualify as business journeys.
Employers should keep records in support of all business travel expenses and subsistence expenses and where possible try to get dispensations for the amount of travel expenses paid agreed with HMRC.
How We Can Help You
We can advise you on the tax treatment of your travel expenses and subsistence expenses. Advice is included in our low monthly fixed fees.
The procedure of ‘self-billing’ is frequently used in the publishing and construction sectors, where a large business customer engages lots of smaller businesses as suppliers (eg authors or subcontractors). The customer issues self-billed invoices on behalf of the small suppliers, usually with the payment to each supplier.
If you are operating self-billing you must comply with the conditions set out in the VAT Notice 700/62: Self Billing. These conditions have recently changed, so make sure you download the latest version of the VAT notice from the HMRC website. In particular there is a new legal requirement to mark all self-billed invoices as ‘SELF BILLING’.
The key requirement of self-billing is that the suppliers must actively agree to self-billing, and provide the customer with their VAT details (registration number and address). Those that do not sign a self-billing agreement must issue their own invoices to the customer.
When you operate self-billing you should review your self-billing agreements at least once a year. This involves checking with the supplier that their billing details are still correct, and whether their business is VAT registered or not. In the recent recession many businesses have deregistered for VAT but have carried on trading.
It is important to get the supplier’s VAT details right. If you issue a self-billing invoice on behalf of a supplier, that includes VAT, when the supplier is not VAT registered, your business will over-claim VAT. This will result in penalties and interest for your business.
Your annual review of self-billing agreements does not have to be conducted all at the same time; the agreements can be reviewed on a rolling basis.
Newsletter issue – August 2013. Sign up to Save Tax!
Costly mistakes Convictions for tax evasion by HM Revenue & Customs (HMRC) are expected to continue on an upward trend due to increased targets, the creation of new HMRC taskforces and the increased use of technology to tackle tax evasion.
Prison sentences for acts of dishonestly defrauding HMRC are likely to become more prevalent, and few people will feel any sympathy for those who deliberately evade tax.
Honest mistakes can also be penalised, and with increased targets and pressure on HMRC to increase its tax collection, we are unlikely to see much leniency given to the taxpayer. Inaccuracy penalties apply to errors which understate or misrepresent a tax liability. The penalties charged depend on the severity, starting from up to 30% of the additional tax due for a lack of reasonable care, going up to 70% for deliberate errors.
So with penalties at nearly a third of the error, the lack of reasonable care when dealing with tax can be very costly. A lot of trust is placed in the hands of accountants to deal with tax correctly, but how do you know they are getting it right?
Would you use a Quack (unqualified doctor)? Surprisingly the term Accountant, unlike Doctor, Dentist or Solicitor, is not a legally protected name. Even those without any background, experience or training can trade as an accountant. All they generally need to do is put up a sign above the door saying “Accountant”, and they are in business. In my experience most people would not use the services of an unqualified Doctor, Dentist or Solicitor and similarly would be uncomfortable using the services of an unqualified accountant.
Benefits of a qualified accountant A qualified accountant is regulated by his or her professional body and is of course required to pass rigorous exams before admission to membership. Once admitted he is required to demonstrate that he has kept himself up to date with legislative changes, carries professional indemnity insurance and adheres to ethical rules of conduct. His work may also be independently inspected at regular intervals to ensure standards are being maintained.
How to tell if one is qualified A qualified accountant will be evident by their own name being followed usually by the letters ACA, FCA, ACCA or FCCA and their firm’s name usually includes Chartered Accountants or Chartered Certified Accountants.
All accountants at CloudBook are qualified and carry one of the 4 qualifications above. Contact us today for a service you can trust.