Understand Your Own Business Accounts

Posted: Monday June 29 2020

By: Guest Bloggers

Understand Your Own Business Accounts

 By Solve IT

Do you understand your own business accounts or do you leave all of that to your accountant?  Do you see it all as a dark art and monitor the basics, what is in the bank, who you owe and what you are owed?  Worst still, is everything in boxes and folders that get dusted off when your annual accounts are due?  You are not alone, research shows that around 57% of SME business managers/owners do not understand their own numbers.

The hard message is that you should.

I know that is not why you went into business, you did it to do the thing you enjoy, the thing that will make you financially successful but, if you do not have ownership and control of your figures, how will you ever know where you are and if you could improve?

A client of mine recently spent, spent, spent because it was coming up to year end and their figures were showing a profit so they wanted to (legally) reduce their corporation tax liability.  What they did not factor in was depreciation – this meant they were actually in a loss situation meaning all of that extra spend was pushing them further away from profit and showing a result on their final accounts which they did not want.  Don’t let this be you.

Additionally, the plans from HMRC are that all taxes are made digital and this is happening sooner rather than later meaning all businesses and self-employed individuals will have to make regular returns to HMRC reporting their financial status throughout the financial year and they won’t accept paper submissions.  For many this will be a huge undertaking so taking the time to get ready for this now will be an excellent investment.

Software, excel, notebook – it doesn’t really matter how you do it, let 2018 be the year that you take control of the numbers to make them work for you and remove any doubt as to how your business is performing and when you finally understand what your accountant is talking about.  They are YOUR numbers after all.

Moving to a good accounting software system can release time back to do the things you want to do.  If you already have software, does it work for you?  Do you understand how to use it properly?

My personal favourites are:

  • Sage 50

    – classic accounting functions along with other useful modules such as projects, which help you track larger jobs in terms of their financial performance against budget along with all the traditional tools you would expect in an accounting package.

  • Xero

    is a much more modern in appearance but, and it is not marketed in this way, to get it to perform correctly you need some book keeping knowledge.  

If you set up any software solution incorrectly you will only ever get inaccurate information out in return, so guidance is needed.  The old saying “rubbish in, rubbish out” is very true for any accountancy software, regardless of how it is marketed.

With some training and support your confidence and understanding of your numbers will improve and you will be armed to make any financial decisions with conviction.  Is it about time you took ownership of your financial information for yourself and your business? 

Will 2018 be the year the numbers finally become your friend?