Loss can be a major problem for businesses, though there are times when there is no avoiding it.  Small businesses especially can be hurt by uncontrolled loss since they generally have fewer resources and a smaller overall revenue stream than larger businesses and corporations.  Realizing a loss isn’t necessarily a reason to panic, but it should be monitored to make sure that your business doesn’t continue to lose money unnecessarily.

When dealing with loss it’s important to look at the overall situation so that you can determine whether the loss is a short-term loss that will be corrected naturally or if the loss is a sign of problems with your business that you need to correct as quickly as possible.  To do this you first have to determine exactly where the loss is coming from, which will tell you whether or not you’re going to have to make major changes to prevent future losses.

Review recent expenses, especially one-time purchases that were made to expand your business or replace aging equipment.  Calculate the cost of sales to determine how much of a profit you’re actually making on your products or services, making price adjustments or cutting costs if necessary.  Check your accounts receivable to see if you still have any unrealized assets or other income that you haven’t yet received that will make up the difference.  Once you’ve determined the cause of the loss you can begin developing a plan to recover from the loss and show a profit once again.

This is probably the only time a Bookkeeper was the centre of attention in a Hollywood blockbuster. Anyone who has seen The Untouchables (1987) will remember the most memorable scene of all times.. the Odessa steps sequence.
This was a great scene in a great movie so I just wanted to post it here for all my fellow Accountants & Bookkeepers in case they ever feel that Hollywood has ignored them and have only made movies about lawyers and doctors etc. If you ever feel left out then just remember this scene.
It’s one of my favourite scenes in any movie and in a way I feel proud that there’s a bookkeeper involved. Shame he wasn’t the Hero in the movie. Perhaps an idea for the future blockbusters?! I am sure the day will come when the movies will be called.. Gone with the Accountant, The good- the bad-and-the-ugly Bookkeeper, The Lord of the Ledger, The Accountant of Arabia, Indiana Jones and the receipts of the lost Accounts, Beauty and the bookkeeper, V for VAT, No country for old Accountants, Slumdog Finance-Director, Profit Wars: The Tax-man strikes back …
enjoy:

There are many small businesses and self-employed freelancers using MS Word or Excel to raise their sales invoices. Now that’s just last century!

Online accounting packages could include features like tailored invoices with your company logo, option to set up recurring invoices to automatically create invoices, view invoices as html to print or save invoices as pdf to send electronically, Keep customers up to date with what they owe by sending customer email statements. Your customers will get access to a full list of their unpaid and paid invoices.

The next thing is allocating payments to invoices. Online packages provide a great feature of bank import tools which helps to quickly process your bank transactions.

You also keep customers and suppliers Contacts in one place, process VAT return calculations as well as file online VAT direct to HMRC .

However, the best feature is that it merely cost £10-15 per month! No more extra costs for up grading every year either.

Internet has achieved enormous success in terms of changing our lives with Google, e-bay, Amazon, online-banking, online-stock trading, paper-less billings from every utility supplier etc. The more we are using websites the comfortable we are with them.  I have seen entrepreneurs getting scared of traditional accounting softwares but when they see online packages they find it easy to use. That is probably one of the reasons why online accounting is getting popular now a days.

In past few years Online-Accounting industry has grown rapidly. There are number of online accounting softwares available now which are cheaper than conventional packages like Sage 50 and provide advance tools that make the processing much efficient and effective.

Here are some videos from my favourite software Clear Books.

Clear Books intro:

How to import Bank Statement into Clear Books:

Creating Sales Invoices:

How to Create a Paypal Account in Clear Books and Receive Paypal Payments:

Most people usually do standard VAT accounting, which means collecting 20% VAT on top of your net sales and sending it to the vat-man after deducting any vat paid out on purchases. The only problem with this is the need to make sure each and every purchase receipt is recorded properly so you don’t lose out on reclaiming vat on purchases.

With a Flat-rate scheme, we only have to make sure the sales are recorded properly and then apply our dedicated flat-rate on the gross turnover (Net+VAT) to calculate the VAT liability.

For example, a photographer on a flat-rate scheme will only have to send 11% of his Gross Sales to HMRC. If he made a turnover of £10k + VAT = £12k in the quarter Apr-Jun 2011 his VAT liability for that quarter will be 11% of £12k i.e. £1,320.
If your turnover is less than £150k it will be worthwhile considering going for a Flat-rate VAT scheme, especially if you are in a service sector. The best feature is the time you can save on recordkeeping. The rates are different for different professions e.g. from 4 Jan 2011 Accountancy is at 14.5%, Advertising is at 11% and so on. To learn more please visit http://www.hmrc.gov.uk/vat/start/schemes/flat-rate.htm

A colleague at a business networking group asked me recently, ‘I have received a vat return form but I have not started trading yet, what shall I do?’

Usually, once you have registered for VAT, doing nothing is not an option anymore. The forms need to be submitted even if with the zero values. Here is a link to HMRC website on the issue: http://bit.ly/iaBUzy

Most businessmen first start trading in some capacity and then think about registering themselves for VAT. However, there is nothing wrong in getting VAT registered early especially if you think you will be spending money on buying equipment and other materials. In fact thinking about VAT early could be really useful as rules are very complicated and depending on the nature of your client and your supplies VAT can have a significant effect on your business. For example, if you provide services to charity organisations it may be best not to get VAT registered if your turnover is below the threshold. Most charities cannot reclaim VAT so it’s cheaper for them to buy services from non-VAT suppliers.

There is no right or wrong answer to this question. Some small businesses will only be spending few hundred pounds and obtain services like Annual Accounts and Corporation tax returns. Others will spend thousands of pounds a year on hiring bookkeeping staff internally and also having external Accountants for compliance related work e.g. vat, payroll, statutory accounts, corporation tax returns and audit etc.

It all depends on the size of the business, the volume of transactions, the complexity of the operations, and most of all on how much the business owner values the Finance & Administration side of his business.

Many small and young businesses don’t prioritise their back office and find the cheapest solutions in terms of maintaining bookkeeping records.  Needless to say the result is often unsatisfactory. First of all records usually have more than acceptable errors and secondly regular & reliable management reports are simply unavailable.

No matter how small your business, it needs an accounting & admin ‘department’. Deciding on how well you want to develop that department is similar to a decision of buying a house. When getting a house we look for comfort, we want it to be suitably renovated; nothing should be broken or missing. It should be big enough to suite our family needs. We will want to live in a peaceful neighbourhood. Now based on our affordability we will do our best to find a house that will make life easy and living joyous.

When I see a messy accounting system in a company with incomplete records, wrong entries, threatening letters from HMRC and suppliers, stressful staff and management, it is like going into a house in a dangerous neighbourhood with a leaking roof, broken pipes, no gas or electricity, smell …well you get the picture!

Hence, whenever I am talking to new clients I stress that spending money in your back office is not just another expense, it’s an investment. Of course you don’t need to overspend and your budget should justify the size of the business. As a rough guide you should be thinking of spending 3-5% of your turnover on Accounting / bookkeeping needs but it can vary from business to business.

It is understandable that we don’t want to buy a six bed house for 2 people but it’s also important that we get a good location and a fully functional house so we know we will be happy there.

This, being my first blog-post, is really about the blog itself.

You must be wondering why I have named it ‘a Walk in the park’. Yes, I am an accountant based near Battersea park, Wandsworth and go for regular walks in the park but this blog is not about parks. This is about business accounting. The idea is to write about accounting issues for non-accountants and make it as easy as a walk in the park – fuss free.

Imagine how different it can be from talking to your accountant in a formal environment, usual quick phone calls or emails full of accounting jargons to just having a walk with your accountant in the park. It is relaxed, it is away from all the chaos and commotion, it’s in a simple language and it is just as interesting as storytelling.

So dear small business owners struggling with bookkeeping and annual returns, take a walk in the park with a local Accountant once a week, and get your business accounts fitter and healthier!