Common Accountancy Terms, Explained for New Start-ups

When starting a new business, you have a million different things on your mind. You might be new to the industry or have years of experience already behind you, but setting off on your own makes every step a big one. Things only get harder when those around you throw in industry jargon, so today we’re hoping to clear some up from the world of accounts and bookkeeping.

Accounts Payable

As with lots of things in our world, the names make things sound a lot more complicated than they necessarily are. Accounts payable is a reference to the money owed by a business to their suppliers. This could be for product or services which have been purchased using credit. On your balance sheet, this would be shown as a ‘current liability’ which you would expect to settle within 12 months.

Accounts Receivable

As with the above, ‘accounts receivable’ relates to products or services of yours which have been purchased on a credit basis. This value will only be considered a receivable once the customer has been invoiced. In some instances these will also be referred to as ‘trade debtors’.

Assets

An asset is any item of value, owned by the business. These items can fall into one of four categories; current (cash & liquid items), long-term (property, equipment etc), prepaid and deferred (insurance, rent, interest) and intangible (trademarks & patents). Assets also include items such as vehicles and inventory that all have potential value.

Balance Sheet

A balance sheet is a report outlining the financial position of a business. It shows all important contributing factors such as; liabilities and capital from the previous financial period. They are particularly useful for investors who need insight into what a business owes or owns, as well as contributions invested by other shareholders.

Cash Flow Statement

This is a summary of the actual or predicted cash incomings and outgoings for any given period. Generally, they are supplied on a monthly, quarterly, or annual basis. Cash flow statements allow the reader to have a more through understanding of where the money is coming from and where it is likely to go. This insight is a crucial part of building a business plan or setting a budget for your business.

Dividends

A dividend is a sum of money paid out to a shareholder in the business in exchange for investment into the business. In most scenario’s this figure is paid annually in the form of cash payments, although variations based on stock share and property are also available. This figure is deduced from the company profits in proportion to the number and type of shares held by the recipient.

Goodwill

‘Goodwill’ is known as an intangible asset, as its monetary value is unobtainable. It will often describe things like the value of your brand in the marketplace and could be worth a significant value to the right buyer.

Expenses

An expense is essentially a cost to the business. These come in many forms with the most common being fixed (rent, loans, wages etc), variable (utilities or suppliers) and operational (day-to-day outgoings).

Liabilities

A liability is a cost associated to a company that is legally bound to an outstanding debt or recurring payment, such as wages or loan repayments. These can be split into two main categories; current liabilities, due within 12 months and long-term due over a longer period.

Liquidity

This is often a negative term associated with companies folding, in the press. The term refers to the extent at which a company has assets that can be quickly converted to cash. Strong liquidity is created when a company has high levels of trading activity, where it’s easier to convert assets to cash quickly.

Revenue

This one is an easier one and represents the total sum of money received by the business through the sales of products and services over a specific time. It can also include net sales, asset exchange or interest payments and is calculated prior to expense deductions. Sometimes you’ll find it referred to as turnover.

ROI

ROI is an abbreviation that stands for ‘Return on Investment’ and is often found in relation to marketing. It is a notable tool for measuring performance of a spend. You can calculate this by dividing the net profit by the cost, with the result often expressed as a percentage.

If you are still stumped by the terminology relating to your accounts, maybe it’s time you got in touch. Our team will simplify everything, ensuring you understand all the facts and figures so you can best grow your business.

Contact us on info@fortunefinancials.co.uk or call 07468 759634.

When Should You Submit Your 2023/24 Self-Assessment Tax Return?

We are strong believers that being proactive is key to success in any business. Nobody wants any nasty surprises that operating reactively can provide, so we’re here to talk you through why submitting your self-assessment tax return sooner rather than later should be on your agenda.

What Deadlines Do I Need To Be Aware Of?

The UK tax year runs from the 6th April to the 5th April the following year. This means the 2023/24 tax year ended on April 5th 2024, with tax returns for that year being submitted at any time between April 6th 2024 and January 31st 2025.

That’s not all though, these are some of the other deadlines you may need to be aware of:

• October 5th is the deadline for registering for your self assessment. If this will be your first time submitting a self-employment tax return, you will need to have registered by this date.
• October 31st is the paper tax submission deadline. If you still use paper (please email us on info@fortunefinancials.co.uk to make tax digital), your submission for the tax year can be made no later than midnight on October 31st.
• January 31st at midnight is your last chance to submit your tax return online and to pay your bill in full and avoid any potential penalties that may occur.

Should I Wait To Submit My Tax Return?

This is a personal preference, although we can supply plenty of reasons as to why waiting until deadline is not a great idea. Be it avoiding the mad panic when certain documents can’t be located to the potential of receiving any tax refunds earlier – we recommend submitting sooner rather than later to aid in financial planning for the year ahead.

Here’s a load of other reasons, why submitting your assessment earlier may benefit you:

Claim Back ALL Of Your Allowable Expenses

With all the additional time on your side, you have time to go over and review your submission properly, reducing the risk of any mistakes. Looking to minimise your tax bill? Submitting early will give you time to claim for all the allowable expenses before hitting submit on the year. If you’re not sure about what qualifies as “allowable expenses” call 07468 759634 to find out more.

Give Yourself More Time To Prepare

Submitting your return early means you’ll know exactly what you owe and give yourself more time to put that money aside – which helps with planning your cash flow. If you though tax returns were stressful, wait until you’re running around to get the money together to pay it! Getting your self-assessment completed early will help alleviate some of the worry and help you prepare, especially for those with higher tax bills who need to make payments on account.

Things Aren’t Instant

If you’re yet to register for self-assessment, please note this service isn’t instant. After completing your paperwork, you will need to wait a few days for confirmation letters in order to complete your registration. Yet another good reason to get in early!

If I Submit Early, Are My Payments Needed Sooner?

Absolutely not. The payment deadline doesn’t change based on your submission, but is always on the 31st January. This means, you give yourself longer to find the required funds if required by submitting early. That said, you are more than welcome to pay it early if you wanted.

For more advice on completing and filing your self-assessment tax return, why not speak to our team by emailing info@fortunefinancials.co.uk and see how we can support you.

What is Cloud Accounting?

With “Making Tax Digital” more companies have made the switch to cloud accounting, whilst many remaining business owners have delayed the switch either through fear of the unknown or disruption to their day-to-day service.

Truth is it is often easier than expected to transition and a team like Fortune Financials are on hand to handle the entire process for you. Whereas typical accounting has been executed locally on a PC’s hard drive, cloud accounting involves all the data being stored online and accessible from more than one machine. It’s entirely safe to do it and gives you the opportunity to make use of our outsourcing service (as an example) to save you money and time on your accounts.

To give a better understanding of the term “cloud”, see PCMag’s definition below:

“In the simplest terms, cloud computing means storing and accessing data and programs over the Internet instead of your computer's hard drive. The cloud is just a metaphor for the Internet. It goes back to the days of flowcharts and presentations that would represent the gigantic server-farm infrastructure of the Internet as nothing but a puffy, white cumulus cloud, accepting connections and doling out information as it floats.”

In essence, the conversion to cloud accounting has allowed many businesses to cut costs, run more efficiently, and amplify their results.

What Are The Benefits?

There are a number of ways to approach cloud accounting, and some will be more suited to a business than others. Generally speaking, the key benefits are as follows:

• The ability to automate many manual accounting and bookkeeping processes, saves many business owners hours in time and increases their efficiency.
• The ability to access information remotely, means that no matter where you are, you’ll be able to access your finances anytime, anywhere – even out on the road.
• The ability for data to be updated in real time means you can find the information you need quickly, allowing you to make key decision faster and more accurately.
• The ability to scale your business with ease. As your business grows, you’ll need solutions that grow with you and cloud accountancy can provide just that.
• The ability to facilitate a paperless environment, eliminating the need to store and manage physical documentation.
• The ability to reduce costs as maintenance, upgrades and administration is included in your monthly membership.
• The ability to integrate with other cloud solutions, bringing everything you need into one easily accessible location.

Is Cloud Accounting Secure?

As you can probably imagine, cloud accounting has some of the tightest security on the planet; in part due to the sensitive nature, it needs to protect. In fact, we would go as far as to say it is more secure than its traditional counterpart which could be accessed if the machine is lost, stolen or hacked – with hacking less likely in the cloud due to constant software updates and 2 factor authentication.

What Software Do I Need?

Quickbooks and Xero are two of the most popular providers in this space. That said, one of the key benefits of cloud applications is they stack better to meet your needs and match your workflows. As an example, HubDoc is an application that fetches financial documents and extracts key data, which when combined with one of the applications above increases the performance of your platform.

Cloud solutions are available on a subscription model with additional charges for access to more features.

Do You Need Help Making the Switch?

If the answer is yes, why not reach out to our team on info@fortunefinalcials.co.uk. We’ve helped hundreds of clients make the switch already and it’s often easier and cheaper than you might expect.

From there, our team are ready to take on either the day-to-day management of your books, your tax and VAT returns or cashflow reporting. Why not speak to the team today and see how, along with the switch to cloud, we can help you get the most from your business.

How To Keep on Top of Your Bookkeeping

Most of us start a new business from a passion or a skill we excel in. Maybe we got fed up with being bossed around and decided to take control of our own future. Whatever the reason, running a business requires the owner to become a jack of all trades, particularly in the first few years of trading when budgets are significantly tighter.

On top of creating your product or providing a service, you’ve got books to keep, marketing to manage and HR to handle (just to name a few). Whilst to many these become background tasks; finances can have a huge impact on your business; and provide penalties should they be filled late or incorrectly.

Imagine there had been a step-by-step guide when you first set up, do you think that would have helped? The reality is probably not. Knowing what to do and acting on it are two very different stories, especially when you’re living sale to sale in your first few months.

That said, we’re assuming your business is now settling down and by finding this you are trying to find a cost and time effective way to manage your accounts moving forwards. Look at some of our tips below and if you have any questions, don’t hesitate to reach out on info@fortunefinancials.co.uk.

Set Up A Good System

This will vary from owner to owner. Some of you are comfortable with spreadsheets, whilst others prefer to snap photos of their receipts and save themselves the hassle of finding them later.

For those who struggle to keep control of their receipts, Dext is a must. It allows you to photograph and upload receipts directly from your mobile phone and integrates with several of the UK’s top bookkeeping software programs.

In terms of bookkeeping software, there are plenty out there, but we generally lean towards QuickBooks and Xero, who provide the best value packages in our professional opinion.

Create A Schedule

We all fall guilty of pushing back tasks we are less fond of, but by completing your books monthly, not only do you need to store documents longer, but you may forget where and why certain transactions were made.

For most small business owners, we would recommend doing your accounts once a week. We find a Monday or Friday are generally more manageable, but providing you choose a day and stick to it – everything should be ok.

Budget As You Go

Many of our clients approach us after bad experiences with the tax man. On most occasions, the issues arise from poor planning. We all know the bill is coming each year, so run your accounts and put some money aside each month to save you searching for large sums of money at the end of the year.

Get A Business Bank Account

It may sound like a given, but sole traders aren’t legally required to have a separate bank account for business transactions. Whilst many like to have all their money in one place, we strongly advise opening a separate account for your company.

Doing so avoids any potential mix up between your personal and work funds, whilst also allowing you to reconcile the bank on a regular basis and keep yourself on track.

If all the above still sounds like too much effort, there is one easier way to keep on top of everything. Fortune Financials are on hand to manage as much or as little of your bookkeeping as you require. Our expert accountants can manage your finances, guide you towards budgets and file your tax returns whilst they’re at it.

To find out more, visit www.fortunefinancials.co.uk, email info@fortunefinancials.co.uk or call 07468 759 634.

Why Outsourcing is A Great Way to Grow Your Business

Are you looking to grow your business but fighting against a lack of hours in the day? Outsourcing can be a great route to growth, removing the mundane parts of business ownership, leaving you to focus on what you do best.

As a business owner time is critical. No matter how hard we try, we can’t manufacture more. As such, it is important we maximise the hours we have available, and outsourcing is often an easy way to do this.

It’s not a decision that should be taken lightly, as certain elements of your business are often best kept in-house. Finding the ideal company and elements of your business to outsource will be key to your success. Look below and see exactly why outsourcing your accounts to Fortune Financials can help you grow.

Cost Savings

Believe it or not, outsourcing to Fortune Financials can save you money. Hiring someone to do your accounts will often mean hiring a full-time position, sick pay, equipment, holiday, and pensions. Here at Fortune Financials, we charge a set fee per account saving you hundreds of pounds each month in finding an employed solution.

This means you also gain access to qualified individuals for a fraction of the cost of hiring them too, just for that added peace of mind.

Speed

By gaining access to experienced bookkeepers, your accounts can be turned around faster and are less prone to error. With the option for proof and fact checking, you can be sure your accounts are completed efficiently and timely for any approaching VAT or Tax deadlines.

If you are looking to bring a new member of staff into the fold, the hiring process can be long and eat up even more hours of your time. By outsourcing, to a company like ours, you could have access to a team of professionals within hours of your first call. Why not give it a try…

Efficiency

Ensuring your accounts are up to date and accurate should be a core part of growing your business be it managing cash flow, ensuring invoices are covered or ensuring tax deadlines are met. Each element will help you gain a better understanding of your business.

This information can allow you to understand where investment is required, where savings are needed or if outgoings are not being met. Our team at Fortune Financials have helped companies of all shapes and sizes get to grips with their accounts, so contact us today if you are looking for growth.

Focus

Most business owners start their company due to a passion in what they do. Therefore, it is understandable that certain elements of day-to-day running aren’t always met with such enthusiasm. Finances and bookkeeping quite often fall into this category, so why not outsource to Fortune Financials, and take back several hours a week to do what you love most, whether that’s growing the business or taking back some precious free time?

Flexibility

By keeping everything in-house, not only do the costs rise through equipment purchase and staff costs, but you can also shoehorn your business into running in a certain way. Whilst this may be great for the industry giants of the world, smaller businesses and start-ups need the flexibility that outsourcing can provide. Whether your business model changes, your products evolve, or you change direction completely, Fortune Financials have the experience to guide you through.

37% of small businesses turn to outsourcing for support, streamlining operations, and freeing up resources for growth.

Ask Yourself…

• Do you still know what a weekend is?
• Do you feel like you’re banging your head against a wall?
• Does hiring someone feel impractical?
• Is there an urgent need to get your accounts completed?
• Do you feel like you’re ready to learn something new?

If you answered yes to any of the above, we would suggest getting in touch with us today.

Why Fortune Financials…

With many years of combined accountancy and bookkeeping experience across a variety of industries, we are confident that we can help you manage the finances for your business. Our aim is to act as Partners in Growth using the expertise from our small business to support the growth of yours.

5 ways bookkeeping can help your small business grow

Running a small business can be tough - there are many challenges that small business owners face daily. However, maintaining accurate and consistent financial records doesn’t need to be one of them - and it’s a great way to help your business grow. Bookkeeping is the area of accounting that deals with recording financial transactions, and it can play a vital role in the success of your business. In this blog post, we will discuss five ways bookkeeping can help your small business grow.

Track your finances

One of the primary reasons to keep accurate financial records is to track your finances. With bookkeeping, you can see how much money is coming in and where it's going. This will help you make informed decisions about your business's future. You can look at your financial statements and easily identify trends, such as increasing expenses or declining profits. This information will enable you to adjust your business strategy accordingly.

Manage cash flow

Cash flow management is an essential aspect of running a successful business. Without sufficient cash flow, your business may not survive. Bookkeeping enables you to track your receivables, payables, and all other financial transactions. You can also forecast your cash flow based on your current financial position, helping you to avoid shortfalls in the future.

Make informed decisions

With accurate financial records in place, you can make informed decisions about your business. You can analyse your financial statements, identify areas that need improvement, and implement changes that will help your business grow. For example, if you identify that your expenses are increasing, you can explore ways to cut costs. Alternatively, if you notice that your sales are declining, you can develop new marketing strategies to attract more customers.

Prepare for tax season

As a small business owner, preparing for tax season can be stressful. However, with bookkeeping, you can simplify the process. By keeping accurate and organized financial records, you can file your taxes quickly and accurately. This will save you time and reduce your stress levels. Additionally, you can take advantage of tax deductions and credits that you may be eligible for, reducing your tax liability.

Plan for growth

Finally, bookkeeping can help you plan for the growth of your business. By tracking your finances, you can identify areas that are performing well and invest in them further. Additionally, you can analyze your financial statements to identify areas of your business that need improvement. By doing so, you can make adjustments to your plans and strategies to ensure your business grows in a sustainable and profitable way.

Conclusion

In conclusion, bookkeeping is essential for small business owners who want to grow their businesses. By tracking your finances, managing cash flow, making informed decisions, preparing for tax season, and planning for growth, you can build a successful and profitable business. Accurate financial records can help you identify opportunities, avoid risks, and make strategic decisions that will benefit your business in the long run. If you haven't already invested in bookkeeping, now is the time to do so. Your business's success may depend on it.

Are you ready to take your bookkeeping to the next level? Book a free call with us by emailing info@fortunefinancials.co.uk