Archive for the ‘Good Accounting Practices’ Category
The Fixed Asset Register: A Beginners Guide
Within the wider framework of keeping a company’s books there sits a plethora of different accounting methods and record keeping processes that have to be used. Some because there is a statutory requirement, others by virtue of good common sense. Into the first category falls the FAR or ‘Fixed Asset Register’, the Companies Act of 1956 means that it is mandatory for companies to maintain a Fixed Asset Register as part of their general business bookkeeping.
The Fixed Asset Register is quite simply a record of the chunk of a company’s assets that constitute its ‘fixed’ assets; fixed is the term used to describe assets which cannot easily be converted into cash and are not held for the purpose of selling them on; assets that are owned to enable a business to function, either to provide a service or produce a product; in the case of manufacturers it is usually machinery, land, property etc. and for service providers, equipment and premises; it can also include less tangible assets such as copyrights, patents and trademarks.
The reasons for the existence of an individual register of this kind are many; the Government’s interest lies mainly in always knowing the value of a company’s fixed assets for taxation purposes, hence the legislation, but there are other benefits to knowing the separate costs of such assets not least for the purposes of a company’s insurance.
However this record is not a simple list, it collects very specific data in a precise and detailed way and the way that it is recorded can tell those who understand FAR a lot at a glance. In addition to detailing the nature of a company’s fixed assets, the bookkeeper must account for loss or impairment of assets as well as logging the ongoing condition and changing value.
Keeping track of the exact origins of large assets can be problematic for the person keeping the records, as it can involve physical verification, which, as the name suggests would mean physically finding and visiting each piece of equipment or building to confirm its existence and location; most bookkeepers therefore ‘tag’ each asset in the register with an engraved alpha-numeric identification number to make tracking simpler; of course in the case of land and vehicles there will conveniently already be independent registration numbers.
Part of the recording process includes logging the assets’ value in the form of an assigned ‘carrying cost’, in order to do this a valuation has to take place; the carrying cost is usually set at either the current market value, the potential sale or realisable value or the distress sale value, which basically refers to an asset’s scrappage value.
Most bookkeepers and accountants who have the task of maintaining the Fixed Asset Register do so nowadays with the help of specially designed computer software; these programs can produce reports on demand and collate large amounts of information. Although they do not necessarily make the job of keeping the FAR up to date a simpler one, they certainly can make it less time consuming, which in turn helps with the accuracy of these important and required records.
Bookkeeping Services for Your Business
Bookkeeping is one of the most important parts of making a business successful. It is of course possible to run a business which has substantial costs, but if these costs are left to spiral out of control and exceed the revenues, then you will probably make a loss and at the same time be ‘out of pocket’ in cash flow terms. A majority of business owners are not sure how to select a suitable bookkeeper or bookkeeping service for their businesses. Detailed below are a few helpful hints to bear in mind when choosing a bookkeeping service for your business.
Choosing the best bookkeeping service depends on the size and the type of the business and there are a number of options that are available. Some business owners may be willing to input the basic information into a computer by making use of bookkeeping programs such as Quick Books or Sage and others may just collect the receipts and the bills and take them for processing to their accountant.
Therefore, choosing the best bookkeeping service greatly depends on how much you are willing to do yourself for the business and on the level of service you need. There are business owners who use a full service bookkeeping service, while others prefer to use such a service only for taxes and payroll.
When you choose the bookkeeping service for your business, you should try to get one which suits your particular type of business or industry. For instance, there are specific accounts packages for doctors and letting agents. Therefore, if you are looking for a full bookkeeping service for these types of businesses, it would be a good idea to find a bookkeeper or accountant who specialises in these industries. Furthermore, it would be sensible to also check whether the bookkeeper or accountant have adequate personnel to help you whenever you have questions. You will have to establish from the beginning if they will come to your location or if they will be downloading all the information from your computer and processing it back at their office. Indeed, where you prefer them to undertake the bookkeeping will depend on the space and resources you have available, as well as practicalities of being available to answer any immediate questions any service provider has.
Recommendations are a great way to find a reliable bookkeeper and bookkeeping service. Ask friends and family or business colleagues who they use, as they will hopefully be able to give you an honest opinion. Any bookkeeper you choose should have a good grounding in accounting standards and basic tax laws. Most importantly you will need to feel completely comfortable when discussing the finances of your business with them. There is nothing worse that ‘frozen communication’ between a bookkeeper or an accountant and a client.
The best bookkeeping service for you and your business is one where the bookkeeper is honest, dependable, understands your business or industry, understands the fundamental accounting and tax treatments for transactions, and is able to communicate efficiently and effectively with you in a comfortable manner.
How Management Accounting Can Be Used to Help Your Business
Management accounting is the technique of gathering and recording information which aids the decision-making capability of management. Indeed, management accounts can help management and business owners make better operating and strategic decisions. Furthermore, banks and other financial institutes sometimes require management accounts on a regular basis to assess their continuing lending terms and conditions.
A good management accounting process is one that helps to tackle four key aspects of a business:
- Planning
- Directing
- Decision Making
- Controlling
The following are ways in which management accounting can help a business:
- It provides accurate information related to the budgeted and actual figures, thus enabling the managers and business owners to take proper cost controlling measures.
- Provides timely feedback related to current operational activities, therefore helping in reassessing the operational decisions and gaining better control over the activities of the business.
- Assists in measuring the performance of various departments and sub- units within an organisation. This information can then be used to identify and reward the better performing departments and employees. For example, a certain employee may be responsible for higher sales figures than expected and as a result you may choose to promote him or her to oversee the other sales staff.
- Helps management or owners do a complete 360-degree analysis of the organisation. In this sense the management accounts can provide very useful information when looking at the business plans of an organisation and when carrying out any SWOT analysis (the Strengths, Weaknesses, Opportunities and Threats facing a business).
- Identifies profitable and non-profitable products or services. For instance, this can help speed up process of discontinuing a certain product that is making a loss and this in turn will can save money.
Management accounting not only covers financial records but can be applied all over an organisation’s activities to identify areas where things may be going wrong and need improvement. It is a vital tool in helping businesses achieve their goals and for streamlining any processes which are inefficient.
Management accounting should not be seen as something just larger businesses need to do. Any business, no matter how big or small should prepare some form of management accounting information, even if it is just written down on one piece of A4 paper. Management accounting can give you a “snap shot” of how your business is performing throughout the year. It will allow you to compare your actual performance with the expected performance, help you make improvements to your business and streamline your future plans.
Keeping it in the Family – How to Help a Family Business Succeed
Accountants in Birmingham – Family Business Advice
All businesses have a life span, and all move from their inception through various phases until they either end or are converted into different entities entirely.
For most business owners, their relationship with their business will also have a natural duration, from the time that they acquire or start the business to the time that they close or sell it, but for a family run firm there is often something else going on that puts a whole new spin on things. Sometimes the business has been handed down through many generations, from parent to child perhaps, and often the expectation is that this legacy continue in the same vein for further generations to come; because of this emotions often run higher in a family run business than they ordinarily would, as far more than simple time and money is invested in the venture’s success.
To add to the emotional mix, we quite often see family members working along side each other, day in and day out, spending their entire working lives in very close proximity to their nearest and dearest; this, of course is sometimes the strength of family run firms, but it can also be a volatile cocktail.
However hard it may be, it is therefore, quite sensible to attempt to emphasise the ‘business’ part of the family business and try for a more professional work environment.
There are a few things that can be very effective when endeavouring to run your family business with less domesticity:
Work/Home Divide
Even business owners who don’t work with their families can have trouble with this one, but, if you are employing relatives or working alongside a partner or child, having a time and place for domestic matters and a separate one for professional can be a life saver. No matter how easy it is to carry on the row from breakfast during your working day, it is incredibly important to save it for after your working hours, and conversely don’t expect to sit around the dinner table and have an informal staff meeting, a family life that is kept just that will provide a refuge from the stresses of work.
Formalise It
Just because your manager is your sister or your payroll clerk is your cousin, it does not mean that they should be working without the protection and benefits that other staff usually enjoy. Having contracts in place will give you all a professional document to act as an inanimate intermediary should problems arise.
Outside Assistance
Although it is tempting for many reasons to staff every role in a family business using family members, it can be a useful tool to employ specialist help for roles requiring particular know-how; not only will it mean that you don’t end-up with an unqualified relative struggling with a job that they are not fit for, but it will also bring in non-family members to redress any bias the business could be suffering from.
There is obviously a certain strength in family firms that allows so many to thrive for generations, but this type of working is not for everyone and for every family business success story, there is a tale of the child who went his own way and upset the apple cart. It is therefore worth remembering that just because Grandma made the firm a success does not mean you automatically can; just as with any other business, the family business will only succeed with plenty of hard work.
Important Items to Include on Your VAT Sales Invoices
A sales invoice is an essential document, which is issued to the customer as a record for the goods or services provided to them. These days they can either be issued on paper and sent in the post or issued in an electronic form. An invoice is normally issued to the customer after the completion of a service or after the delivery of goods. An invoice typically consists of two copies, one of which is given to the customer and the seller keeps the other copy (copy invoice).
VAT (Value Added Tax) is a consumption tax levied by the government on most goods and services and is normally calculated as a percentage of sale price charged by the seller to the customer. It is mandatory for a VAT registered supplier to issue a VAT invoice their customers.
A ‘typical VAT invoice’ can be broken down in to three separate sections. The first section should include the following,
- A unique invoice number.
- Business name and address.
- Business VAT registration number.
- Date of sale (will usually become tax-point date of transaction)
- Name of the customer or client.
The second section should contain,
- Name of the goods/services purchased and description where appropriate.
- Quantity purchased.
- Unit price.
- Discount given (if any)
- VAT rate charged
And finally the third section should comprise of,
- Net amount, Vat amount and Gross Amount of the Invoice
- Payment terms/Due date for payment
The backside of an invoice can also be used to detail the ‘terms and conditions’ of the sale and can normally include clauses like ‘goods once sold cannot be returned’ etc. Alternatively, you can use the backside to advertise new products and services, promotions or any other information that may be useful to the seller.
As an invoice is a legal document, the ‘copy invoice’ should be stored safely. The seller should also maintain an invoice daybook in order to record the details of all the invoices issued. Indeed, tax officials or auditors may require the copy invoices and daybooks.
Since the VAT is ultimately passed on to the customer from the manufacturer or distributor, it is the right of every customer to demand for a vat invoice if not provided by the seller. A VAT invoice holds legal value and so the seller should also be very careful when issuing it and ensure it contains correct and accurate information.