Proactive

Approval of Formal Accounts

You can link directly to this article using the short URL http://bit.ly/aoPNsN

Approval of accounts

In the old days traditional paper accounts were sent out by post, for approval and signature. Nowadays, HM Revenue & Customs will accept authorisation electronically and that speeds things up. That means that we now prepare PDF files and email them to clients:

• 444600 report - full accounts
• 444610 report - abbreviated accounts (for Limited Companies only)

Please check the PDF files which you receive, because they are based on the records which you have provided.

The formal process of preparing accounts for all businesses, no matter how small or large, ensures that no steps are overlooked. That way, when tax returns are finalised, we can be sure that we have each and every business recorded correctly.

Any paper documents which you sent to us are batched up at this stage and are returned to you by regular post. These need to be kept safe for a period of 6 years after the end of the trading period.  If you have any queries on the accounts, then please let us know before they are approved. Thank you.

You should follow us on Twitter here

Posted on 6 Apr 2010 by The Proactive Accountant Dot Com

I have too much profit, what can I do about it?

You can link directly to this article using the short URL http://bit.ly/dacReo

A welcome dilemma indeed!

This is a fantastic question and we hear it quite often “I have too much profit, what can I do about it?”

It is however a coded version of something else, and it can mean either:

• I don’t have enough profit. I know that, because I have drawn all the money out of my business and I have nothing left to pay my tax bill.
• I have ridiculously large sums of money floating around, even after paying my tax bills, and I’m in danger of taking up a ludicrously expensive hobby!

Depending on which statement is the closest to your true circumstances, then the solution is either:

• Make more profit and manage your tax reserve on a weekly or monthly basis. In the short term, borrow some money so that you can pay your tax bill. See Zopa for more details of how you can borrow modest amounts of cash at reasonable rates.
• Become a business angel. Invest! There are entry level ways of doing this, even if the pool of cash is as low as £500. See Zopa for more details of how you can become an ultra cautious business angel.

If you need to make more profit, you need good business advice. Call us and we’ll put you in touch with an excellent business coach. Or start looking at Don’t Read My Blog.

If you have a quarter of a million to spare and want to invest, call us and we can put you in touch with the professionals in this field too!

Posted on 5 Mar 2010 by The Proactive Accountant Dot Com

Getting year end reports from Sage Line 50

You can link directly to this article using the short URL http://bit.ly/kGTvI

This article is a sub set of the Annual Accounts Checklist

Please read this article in conjunction with the annual accounts checklist. If you are a Sage user, then the steps you need to follow on your Menu are set out below. This summary was originally prepared in 2006. If you have a later release of Sage and we need to update this advice please let us know.

We prefer Adobe files with a PDF suffix from Sage.

Ensure that you are asking Sage to produce reports which cover only the specific trading period that we are working on. You should end up with 4 main reports and (if you are VAT registered) an extra 4 VAT reports. If your VAT quarters are not aligned with your trading year, then we shall need 5 VAT reports to ensure that the whole year is covered.

Bank account

Bank - Reports - Current Account – Bank Payments and Receipts

Profit and loss

Modules - Financials - Profit and Loss

Balance Sheet

Modules - Financials - Balance Sheet

Nominal Ledger

Modules – Nominal Ledger Reports – Nominal Activity Report

VAT

Modules - Financials - VAT - VAT100 (x 4 - for each individual quarter)

Please send all of the files together as attachments to a single e-mail. Thank you.

Posted on 7 Oct 2009 by The Proactive Accountant Dot Com

What can I do about a bad debt?

You can link directly to this article using the short URL http://bit.ly/2pZuX3

Can I claim tax relief and claim back my VAT?

Any business with a bad debt will naturally try to take steps to try to recover it. However, eventually you have to take a view on these things and perhaps write it off. If you go about this the right way you can claim bad debt relief and your tax bill may be reduced, and you could also claim back the VAT (assuming you’re registered for VAT).

Go about it the wrong way and there is a risk that you will lose out even more. I’ve seen that happen and I’ve seen the VAT office recover VAT which was reclaimed in good faith, but which was reclaimed incorrectly.

Firstly, be commercial! Make an effort to recover the debt. Send reminders to the client, or to the administrator or to the receiver. Be persistent. If after 6 months you are getting nowhere, then you can consider bad debt relief. No tax relief will be allowed until 6 months after the invoice date.

Assuming that writing off the debt is your only option, you then have to generate a document (a copy of the original invoice will do) and mark it “Bad Debt”. This “expense” is then shown in your books as though you had bought something. It is not a negative invoice, nor is it a credit note, it is simply an expense and there is a special “bad debt” category for this type of expense.

Like any other expense, it goes through the books, leads to a reduced profit, and in turn to a reduced tax bill. And if there was VAT on the original document, then there is VAT relief on the corresponding bad debt. Treat it as you would any other expense from a VAT registered supplier.

Just be sure to try 6 times over 6 months to recover the debt. At the point where you write it off as a bad debt you must inform the client that you consider this to be a bad debt and, accordingly, you are claiming bad debt relief. That way, the tax man and the VAT man will be content that you have followed the rules.

Posted on 23 Sep 2009 by The Proactive Accountant Dot Com

A new company 2010/11

You can link directly to this article using the short URL http://bit.ly/288PB

Implementing some basic payments

In order to make the best use of all available tax reliefs, it is common practice to adopt this system of monthly payments:

• A small salary (below the tax and national insurance threshold)
• A large dividend (because companies reward the shareholders with dividends)

These payments must actually happen, and be identifiable as separate transactions on the company bank statement. The amounts may change depending on the tax year:

6 Apr 2009 to 5 Apr 2011

These amounts are valid for two tax years from 6 April 2009 to 5 April 2011

• Salary - £476.25 per month
• Drawings - a big round figure like £2,000 or £1,800 or whatever.

If that’s not enough to live on, make one off transfers of round sums and describe them as drawings. Always use multiples of £100.00. Then at the end of the quarter (or year) we can look at what the profit is, what the dividend could be and match that against drawings. You can think of drawings and dividends as being almost synonymous but not quite.

There are mixed reports about paying yourself rent. Owing to recent changes in legislation we do not recommend making payments of rent. It is an accepted practice for people who work from home to claim £3 per week for overheads like electricity. Anything more than this will require detailed record keeping and potentially a protracted debate with the tax office!

Posted on 20 Aug 2009 by The Proactive Accountant Dot Com

Getting year end reports from QuickBooks

You can link directly to this article using the short URL http://bit.ly/bjBCG

This article is a sub set of the Annual Accounts Checklist

Please read this article in conjunction with the annual accounts checklist. If you are a QuickBooks user, then the steps you need to follow on your Menu are set out below. This summary was originally prepared in mid 2008. If you have a later release of QuickBooks and we need to update this advice please let us know.

We prefer tab delimited files with a TXT suffix from QuickBooks. Each time a report is generated, it should be done by selecting:

PRINT - TO FILE - TAB DELIMITED - PRINT - and save as a TXT file

Ensure that you are asking QuickBooks to produce reports which cover only the specific trading period that we are working on. You should end up with 4 main reports and (if you are VAT registered) an extra 4 VAT reports. If your VAT quarters are not aligned with your trading year, then we shall need 5 VAT reports to ensure that the whole year is covered.

Bank account

Banking - Navigation - Bank Reg - Current Account

(that says Reg for Register, not Rec for Reconciliation)

Profit and loss

Reports - Financial - Profit and Loss (detailed)

Balance Sheet

Reports - Financial - UK Balance Sheet (standard)

Trial Balance

Reports - Accountant - Trial Balance

VAT

Reports - VAT - VAT100 (x 4 - for each individual quarter)

Please send all of the files together as attachments to a single e-mail. Thank you.

Posted on 19 Aug 2009 by The Proactive Accountant Dot Com

Example Payroll Report

Payroll Convention

In order to correctly show payroll costs in a profit and loss account we adopt the convention which requires Gross Pay and Employer’s National Insurance to be identified separately. Many software packages will allow this sort of summary to be printed and this particular example comes from IRIS:

Every month when the PAYE remittances report is prepared, please also prepare a Company Totals report and include it with the book keeping records.

You can link directly to this article using the short URL http://bit.ly/192LLR

Posted on 27 Jul 2009 by The Proactive Accountant Dot Com

Quarterly Accounts Checklist

You can link directly to this article using the short URL http://bit.ly/5T98a8

A checklist for quarterly cases

If you provide records to Proactive on an annual basis, then you need to use the annual accounts checklist. For quarterly cases, please help us with the following information which covers the whole three months as shown in our recent e-mail request:

Bank/Finance House items

• Copies of all business statements on current accounts, deposit accounts and loan accounts.

Income items

Records of all sales and sundry income. That could be any one of the following:

• Copies of all invoices issued.

• A full summary of all invoices issued, on a single schedule with separate columns for Date, Net, VAT and Gross

• A full set of duplicate pages in a traditional carbon copy invoice book.

• A photocopy of the income sections from your hard back analysis book.

• Other records which clearly show all monies received.

Expense items

Any combination of the following:

• All supplier invoices addressed to your business

• A photocopy of the expense section in a hard back analysis book

• Other receipts and expense vouchers which support your other business outgoings.

• Expense claim forms for directors and/or employees of limited companies, or partners personal expense claim forms in the case of a partnership.

Payroll Items

• Separate payroll summaries for Executive and Non-Executive staff

• The summaries should show separate totals for Gross Pay and for Employer’s National Insurance

VAT Items

• If you are VAT registered and do not yet operate through the on-line system, please also include the original, blank green VAT return for the period.

Please check the Paper or Paperless page if you need advice on how to send things.

Posted on 2 Jul 2009 by The Proactive Accountant Dot Com

Agreement at an end

You can link directly to this article using the short URL http://bit.ly/dr6cJ4

Things to think about now

If you have received an email from us which linked to this report, then these notes set out a number of things that you may need to consider as our agreement comes to an end. Some of them, if not all of them, may apply in your case.

Business Affairs

Companies House, the Tax Office and the VAT Office will be notified that Proactive is longer acting for the business. Where the role of company secretary is held by an individual or a company connected with Proactive, then that company secretary has resigned today and has submitted the appropriate form to Companies House.

Where your registered office is located at one of our premises, we shall continue to handle mail for a period of 21 days. After that time, any mail we receive addressed to your company will be marked “gone away” and will be returned to the sender.

The VAT office also needs to know where to send future correspondence and where the records of the business are to be kept.

All Cases – Business and Personal Affairs

Please ask your new accountant to notify the Tax Office that he is now acting. As soon as the new accountant approaches Proactive we will let him have the information he requires. It is customary for the new accountant immediately to take on responsibility for all work. No further work will be undertaken by Proactive.

If your business has a payroll account (a PAYE scheme) with the Tax Office, then you will need to arrange to carry out the payroll work yourself or to appoint a bureau to do it for you.

After responding to the new accountant’s “professional etiquette” letter we will archive our records and any correspondence and working papers that remain under our old paper based filing system (prior to 1 Jan 2008). These papers will be kept safely until the end of the sixth tax year following the most recent set of accounts. Any papers still held by Proactive at that date may then be destroyed and disposed of as confidential waste.

You should follow us on Twitter here

Posted on 30 Jun 2009 by The Proactive Accountant Dot Com

Annual Accounts Checklist

You can link directly to this article using the short URL http://bit.ly/15mGai

Collecting records for the year end accounts

This is a checklist for annual cases. The quarterly accounts checklist is here if you need it.

Whether your case is quarterly or annual, please help us with this information which covers the whole trading year. Even if the checklist looks familiar and replicates some quarterly items please work through it all, because the need to quantify things like stock, debtors and creditors arises only at the year end.

Bank/Finance House items

• Copies of all business statements on current accounts, deposit accounts and loan accounts.

• Loan agreements for any new loans taken out during the year, showing (a) a simple analysis between the loan capital and the interest due and (b) a schedule of payment dates including any variations in the first or the last payment.

Income items

Records of all sales and sundry income. That could be any one of the following:

• Copies of all invoices issued.

• A full summary of all invoices issued, on a single schedule with separate columns for Date, Net, VAT and Gross

• A full set of duplicate pages in a traditional carbon copy invoice book.

• A photocopy of the income sections from your hard back analysis book.

• Other records which clearly show all monies received.

Expense items

Any combination of the following:

• All supplier invoices addressed to your business

• A photocopy of the expense section in a hard back analysis book

• Other receipts and expense vouchers which support your other business outgoings.

• Expense claim forms for directors and/or employees of limited companies, or partners personal expense claim forms in the case of a partnership.

Payroll Items

• Separate payroll summaries for Executive and Non-Executive staff

• The summaries should show separate totals for Gross Pay and for Employer’s National Insurance

VAT Items

if you are VAT registered, please also include:

• Copies of all VAT returns for the quarters spanning that whole trading year (copies of either actual VAT100 forms or substitute VAT100 reports).

• If the VAT quarters are not aligned with the trading year end, then copies of returns for 5 quarters will be needed in order to cover the whole year.

Stock Record

• A simple analysis of stock on hand (at cost) on the year end date.

• Separate stock records may be required if you have (a) raw materials, (b) work in progress and (c) finished goods.

Debtors

• A list of trade debtors as at the year end . . . people who you had billed by the year end, but who hadn’t paid you.

• The list should show an analysis which includes the date of your invoice, the invoice number, the client, and the amount due.

• A list of any other debtors (eg a family loan) with a short analysis of the date, details and amounts involved.

Creditors

• A list of trade creditors as at the year end . . . people who had billed you by the year end, but who you hadn’t paid.

• The list should show an analysis which includes the date of your supplier’s invoice, the suppliers name and the amount due.

• A list of any other creditors (eg deposits) with a short analysis of the date, details and amounts involved.

Please check the Paper or Paperless page if you need advice on how to send things.

Posted on 22 Jun 2009 by The Proactive Accountant Dot Com