Welcome
We pride ourselves on being a leading independent firm of Chartered Accountants and Tax Advisors, providing clients with practical and realistic business advice. Not only are we committed to a high standard of service in accounting and taxation matters, we aim to provide our clients with information that may be important to the running and development of their businesses through advice on a wider basis, helping them to achieve greater efficiency, profitability and cost reductions.
With specialised consultants and professional staff, our clients are located in and around the Leicester area. Our aim is to provide comprehensive, Fixed Fee accounts and taxation services to small and medium sized businesses; this includes family owned companies, contractors, partnerships and sole traders.
Bookkeeping – Credit Sales and Cash Sales
Bookkeeping is the process of recording the financial transactions for a business. These transactions will ultimately provide the core information to construct the profit and loss account and balance sheet for a business. As part of this bookkeeping, the bookkeeper will need to record all the revenue and expenditure for the business, whether they are in cash or on credit. The revenue for any business is generated from the sales of its products or services. Sales records for most businesses can be maintained easily with the help of a simple sale daybook, which is basically a list of all the sales invoices issued in a particular period or year. However, with larger businesses, a variety of accounting records are involved when recording and tracking sales; these can include the sales daybook (as already mentioned), sales ledger, debtors or accounts receivable account and bank/cash ledger.
Sales transactions can generally be divided into two types; credit sales and cash sales.
Credit sales
If your customer has credit terms with your business, where products or services are sold without immediately receiving payment, then these are called credit sales. When dealing with credit sales there needs to be proper accounting procedures in place. Indeed, when customers order goods or services on credit there are several bookkeeping consequences that need to be accounted for.
A sale invoice is raised in the name of the customer when goods are dispatched from the inventory or a service is provided. You make an entry in the name of the customer in the accounts receivable/debtors ledger and also an entry into the sales ledger. The inventory records should also reflect the movement of any physical stock. The invoice is sent to the customer to keep their accounts updated as regards the transaction. When cash is received from the customer for the invoice, then this should be offset against the original entry in the accounts receivable ledger. The sales ledger and bank/cash ledger should reflect the payment as well at the same time.
Cash sales
Keeping track of cash sales through the books and records is simpler when compared to accounting for credit sales. Cash sales are those where goods or services are purchased and paid for at the same time by a customer. As a consequence, there are only two accounts which are affected for this kind of sale and they are the sales ledger and the bank/ cash ledger. Of course just like credit sales, the inventory and stock records will need to reflect the dispatch of any physical goods to the customer. Any sale made for cash is recorded in the sales ledger and the cheque or cash received is recorded as an entry in the bank/cash ledger. An invoice and/or receipt should be issued to the customer which details the goods or services sold and also to acknowledge the payment.
Recording credit sales and cash sales properly are a very important part of bookkeeping. The main thing to bear in mind is that by accurately recording these transactions in the books and records of the business you are able to create a sound audit-trail. This audit trail will allow you to manage your business transactions more efficiently and effectively, and also give you greater financial control over the business.
Bookkeeping Basics – An Introduction to Debits and Credits
Accountants in Leicester – Keeping Business Records
Bookkeeping is the process of recording financial transactions for a business. It comes in many guises including manual record keeping, spreadsheets, accounting software and online bookkeeping software, to name but a few. Double entry bookkeeping consists of two main entries, debits and credits. Each transaction has double effect like Newton’s third law, where every action has an opposite reaction; similarly every financial transaction in double entry bookkeeping has a debit side and credit side. There are always two accounts involved in double entry bookkeeping. One is where a debit entry is recorded and the other where credit entry is recorded.
Bookkeeping defines debits as those transactions that are recorded on the left hand side and credits are those which are recorded on the right hand side. It is crucial that the debits should always be equal to the credits.
There are fundamentally five accounts groups which need to be considered when assigning debits or credits. These are assets, liabilities, owner’s equity, income and expenditure. We can briefly see how debits and credits are applied to these accounts:
- Assets: When there is an increase in any asset you debit the asset account and when there is a decrease you credit the same account.
- Liabilities: When there is an increase in a liability then you credit the account and when there is a decrease you debit the account.
- Owner’s Equity: When there is an increase in owner’s equity you credit the account and when there is a decrease you debit the account.
- Income: When there is an increase in income you credit the account and when there is a decrease in income you debit the account.
- Expenses: When there is an increase in expenditure you debit the account and when there is a decrease in you credit the account.
Once all the debit and credit transactions for a business have been recorded for the year, they can be summarised under the various account headings they relate to. This summary is known as a trial balance. A trial balance basically shows each account heading (e.g. each type of expense, income etc…) with the corresponding total debits or credits for the period relating to each heading. Indeed, the totals for the debits on are recorded on the left hand side of the trial balance and all the total credits are recorded on the right hand side. Both the sides of trial balance should be equal after all the items have been entered. Therefore the trial balance acts as a check that the double entry has been applied correctly throughout the year.
Lastly, a profit and loss account and balance sheet can be prepared from the trial balance, after any relevant journal adjustments. Again, when these two financial statements have been completed they should also balance in terms of the debit amounts and credit amounts.
In summary double entry bookkeeping underpins every aspect of making sure that the financial transactions of a business are complete, from the initial recording of individual transactions to presenting the year end information in the year end financial statements.
How to Reduce Your Expenditure Without Cheapening Your Business
The world seems to have run out of cash; we are all scrambling around, desperately trying to make ends meet, tightening our belts, cancelling our luxuries and keeping our heads down hoping that we can ride it all out.
For those of us in business, it is a very trying time; making money is obviously harder, because very few have any to spend and those that do are either hanging on to it for the day of downpours or being very discriminating about where and how they part with it, and so it has never been more important for us to find ways to cut our business costs.
Even if you think that you are good at business thrift, there are always things to consider or reconsider that could help:
1. Bulk up. Although you may be tempted to cut back on how much stock you buy in, buying smaller amounts, as you need them, will over all add to your expenditure; you are more likely to be able to negotiate low prices from your suppliers if you buy in bulk.
2. Tech up. Living in the 21st century might give us plenty of stress-filled sleepless nights, but it does also give us access to some incredible technology. It is worth investigating what’s out there as a small investment could save a lot down the line. Consider switching to Voice over IP systems rather than using the telephone for instance.
3. Get help. Making use of those who may be offering cut-price services because they are still developing, is not as callus as it may sound; there are plenty of students who are still training who would hugely benefit from a chance to get some real hands on business experience and most will not expect to be paid that of qualified individuals.
4. Get more help. On a larger scale, developing countries that have budding businesses prepared to take on outsourcing projects are likely to be able to provide their help at a lower cost that you could find domestically; even as a temporary solution this could help with your overheads.
5. Get Green. As well as saving the planet, there are extremely good business reasons to consider ways to be a little more eco-friendly. Reducing energy consumption, will obviously save your business some money, so investigate the best ways to make this happen; look at replacing out-dated electronic equipment that could be eating up energy and cutting back on travel side of your carbon foot print; if, for instance you often meet with colleagues in different parts of the country or world, think about switching to a teleconference. Cutting back on the wasted resources your business uses, like paper, will be good for the trees and your pocket, so rather than simply recycling it, use less in the first place. Finally think before printing things out, this will save, ink, paper and energy, it is often the tiny details that save the most over time.
Saving money where you can in business is really only about recessing how you are currently doing things and thinking about how you could be doing them more cheaply; making things cost effective does not have to mean a drop in the quality of what you do, it simply means that an area you’d perhaps previously taken for granted can be looked at from a fresh perspective.
Benefits of Staff Appraisal Systems For Your Small Business
Accountants in Leicester – Small Business Management
A staff appraisal system is one of the most effective tools for managing and developing employee skills. A good appraisal system is one that gives management a clear picture of the staffing areas that need more attention and improvement.
Many of the appraisal systems adopted by businesses fail miserably due to one major reason; the systems tend to be used more as comparison tools rather than as evaluation tools. Therefore, this tends to create an unhealthy competitive environment within a business and can in turn have a damaging effect on staff morale.
Performance appraisals should be conducted to help identify an employee’s strengths and weaknesses in the current role they carry out for a business. They should not be used as a platform to blame an employee for any departmental or overall business failures that have occurred during the year. A good appraisal system, following a thorough review of performance, should provide an employee with a set of objectives and individual targets for him or her to focus on over the following year. This should be a good way of motivating and inspiring them.
When undertaking a staff appraisal it may be a good time to cover any training or developmental requirements of an employee. For instance, whilst conducting a review you may have identified that a particular employee needs further training for them to carry out new duties or responsibilities you would like to assign to them.
If staff appraisals are undertaken properly, there are a couple of other important benefits. Firstly, a staff appraisal is a great opportunity for an employee to share their ideas as regards how they can improve their role in the business. They may also be able to give you some valuable insight as to how to improve the performance of their department as a whole. Staff appraisals also give employees the opportunity to ask any questions or go through any job queries they may have. This is important as again you can address their concerns and this will hopefully allow them to undertake their duties more efficiently and effectively. In addition, good staff appraisals will identify talented staff members and they can be rewarded or promoted accordingly.
It is not necessary that an appraisal system has to follow a yearly cycle. It can also be done on a quarterly, monthly or half yearly basis. This increased frequency can help you identify areas, at a far earlier stage, where improvement is needed or changes need to be made. Thus this can save a lot of wasted time and money in the long- run.
In essence, staff appraisals are a great business tool if used properly. They should be used to identify the strengths and weaknesses of your workforce, update their targets and duties based on that evaluation, gain feedback from staff members and consider any promotion or further training issues.
A Basic Introduction to Cash Accounting Scheme for VAT
Accountants in Leicester – Tax Tips
The Cash Accounting Scheme for VAT is a very popular method of accounting for VAT for many small businesses in the UK. If you do not expect your turnover to exceed £1,350,000 in the next 12 months, then you have the option to use this VAT accounting method. The VAT payable is calculated by fist calculating the VAT on amounts actually received from customers; then from this figure you deduct the VAT on actual payments to suppliers and the resulting figure is the amount that is payable to HMRC. The difference between cash accounting and ‘invoice accounting’ for VAT, is that with invoice accounting the VAT payable is the difference between the VAT on sales invoices issued to customers and VAT on purchase invoices received from suppliers.
One of the key benefits of using cash accounting for VAT is that it simplifies the record keeping for a business. For instance, if you are using a spreadsheet or a manual columnar cashbook, the VAT can simply be recorded alongside the sales receipts or expense payments for any period. The VAT entries will generally follow the bank account and cash movements for the business and this makes any VAT reconciliation at the end of a month or quarter far simpler.
In deciding whether to use cash accounting for VAT or not, you will need to consider the time lag between issuing invoices to customers and receiving money for those invoices. Therefore, if your customers are slow payers this scheme could benefit you, as you will not have to pay the sales VAT until the customers pay. It follows that if a customer never pays, then you will never have to pay VAT on that bad debt, assuming you stay with the cash accounting scheme. If your customers pay you as soon as you make a sale, for instance if you own a retail shop, then you will probably be worse off under cash accounting, as you cannot reclaim the VAT on the purchase invoices until you have paid them.
If you run a business where you regularly supply zero- rated goods then under cash accounting you will be worse off. Indeed, in this situation, invoice accounting will allow you to claim monthly repayments of VAT on your purchase invoices that exceed your non zero-rated sales VAT.
Deciding whether to use cash accounting or another VAT scheme is a decision that should be made carefully. If you are going to be in a regular repayment situation and/or you operate in the retail industry then cash accounting will probably not be suited to your business. However, if you are going to be making standard ‘vatable sales’ and have regular purchases and suppliers to pay, then it may make things simpler for you, reduce the risk of VAT being paid on bad debts and give you a general cash flow advantage.