What is an invoice and what should it include?

What is an invoice and what should it include.jpg

If you sell goods or services to customers, it’s likely that you’ll also have to invoice those customers for the work you’ve done. But what information are you actually required to include on your invoices?

  • You must clearly display the word ‘invoice’
  • A unique identification number
  • Your company name, address and contact information. If you are a limited company, this should be the full company name as it appears on the certificate of incorporation.
  • If you decide to put names of your directors on your invoices, you must include the names of all directors.
  • The company name and address of the customer you’re invoicing
  • A clear description of what you’re charging for
  • The date the goods or service were provided (supply date)
  • The date of the invoice
  • The amount(s) being charged
  • VAT amount if applicable
  • The total amount owed
  • VAT registration number (if applicable)

If both you and the customer are registered for VAT, invoicing is a legal requirement and copies should be kept with your books and records for at least 6 years if you’re a limited company or LLP, and 5 years if you’re a sole trader or partnership.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

5 Key Ways To Take Charge Of Your Bookkeeping

5 ways to take charge of your bookkeeping.jpg

Bookkeeping can be an overwhelming task but having a system in place can make it a lot less daunting! Here are five ways to take charge of your bookkeeping:

  1. Create a list of important tax-related dates and place it where it’s easily visible. If you have a permanent reminder of key dates you’ll have a better overall picture of what needs to be done by when.
  1. Implement a system that ensures you can maintain three sets of records:
  • Cash book: keep a record of all the transactions into and out of your business account.
  • Purchase invoices: keep a chronological record of how and when you pay your invoices.
  • Sales invoices: again, maintain a chronological record of when and who you have invoiced, and when you get paid.

This can be done either using a paper-based method, a more progressive approach such as a spreadsheet in Excel, or an accountancy based computer package like Sage or Xero. A good system will help you keep on top of all your income and outgoings.

  1. Keep your personal and business accounts entirely separate. If you use your business account to pay for private items of expenditure or vice versa with your personal account, your accounts will be much harder to reconcile.
  1. Set time aside to do your accounts regularly and try to do your books in the morning – It’s tempting to do them at the end of the day or week, but this is when you’re likely to be most tired and potentially make mistakes.
  1. Get help and advice whenever you feel things are going astray. It’s counter-productive to let your accounts get on top of you as you’re more likely to make mistakes. If you feel like it’s too much, approach your accountant – they may provide a bookkeeping service for a reasonable price which takes the stress away from you.

Green & Co have a dedicated bookkeeping department who are trained on a number of different bookkeeping packages including Sage and Xero. If you would like to discuss your situation with one of our team, contact us on 01633 871122.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Bookkeeping Tips for Small Businesses

Businessperson Calculating Tax

If you own your own business or are considering such a move, keeping accurate records not only benefits you for tax compliance, but it could also benefit your business.

Keeping accurate records may:

  • Reduce your accountancy fees
  • make filling in your tax return more straightforward
  • help you with budgeting and cashflow
  • help your business grow with the help of a business loan
  • help ensure you receive the correct Tax Credits

What you need to record:
Records should show all the money coming in and going out of your business, whether it’s cash, cheque or credit card transactions. It’s important to keep your business records entirely separate from your personal records, so it’s recommended that you set up a separate business bank account.

For money coming in, the records you should keep include:

  • payslips
  • invoices
  • till rolls
  • bank statements

For money going out, keep a record of all:

  • receipts
  • purchase invoices
  • cheque stubs
  • motoring expenses
  • credit card statements

Cash books:
All small businesses rely on cash books to help keep track of their business income and outgoings. Cash books can either be paper-based or take the form of computer software such as Excel, Sage, Xero etc. Your accountant will be able to advise you on the most appropriate type of cash book for your specific business.

If you decide to keep your records on the computer, you’ll need to keep a copy of all relevant documents and be able to provide these to HMRC if necessary, especially P45’s, P60’s and any paperwork showing tax has been deducted.

  • Use a ‘petty cash book’ to record all minor business-related cash transactions, and write a short description of each one.
  • Use a ‘cash book’ to record transactions made through your bank account as well as any cash transactions. A cash book will have columns for income and expenses and a separate column for miscellaneous. You may find it helpful to use the same expenses headings as those used on HMRC’s tax return form. You should also include a “drawings” column for any money taken out of the business for personal use.

VAT:
If your turnover of VAT taxable goods or services exceeds the VAT threshold (currently £83,000) you must register for VAT and keep the following records:

  • VAT account: This is a record of VAT charged on sales and VAT paid on purchases, noted under the headings VAT payable and VAT deductible. The VAT account aligns your business records with your VAT return.
  • VAT invoices: These show the VAT you’ve charged and the VAT that has been charged to you.

If you feel like this is too much, or your time would be more valuable spent elsewhere, your accountant may offer a bookkeeping service that deals with this for you. Here at Green & Co our staff are trained on a number of different bookkeeping packages including Sage and Xero. If you would like to speak to one of team regarding this service, please contact us on 01633 871122.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Don’t Put Off Until January What You Can Do In July…

Files.

It’s February again, and many an accountant and tax advisor is heaving a sigh of relief that another self-assessment deadline has passed. The month of January often puts extra pressure on accounting professionals as they endeavour to submit eleventh-hour returns before the end of the month to help their clients avoid penalties and interest on tax paid late.

Of course, you don’t have to wait until the end of January to complete your accounts or file your self assessment return.  It can be done any time after the start of the new tax year and your accountant would undoubtedly prefer to receive your books sooner rather than later.

Most businesses should be in a position to provide the information to prepare accounts after 3-4 months following their year-end, and there are advantages to completing your accounts and self-assessment return early in the tax year:

  1. You can keep a closer eye on how your business is doing and take steps to rectify any issues which crop up. This could include chasing aged debtors, resolving disputes or even deciding when to purchase fixed assets to maximise tax allowances.
  2. If there are any queries on your books, you will have a better chance of answering them if transactions for that year are still fairly fresh in your mind.
  3. You will know how much your tax liability will be that much earlier. so that you can budget better for payment. If your profits are less than in the previous year, you can also make a claim to reduce your payments on account to a level which is more in line with your liability.
  4. HMRC have a time window during which they can question anything on your return. This window is twelve months following the date of submission – so the earlier you get your return filed the sooner the window is closed.

Don’t worry – submitting your return earlier in the year doesn’t mean you also have to pay your tax earlier.  You still don’t have to settle your liability until 31st January following the end of the tax year.

So why not make a New Tax-Year resolution to get your bookwork done, your accounts prepared and your return filed as early as possible.  You will make your accountant so happy!

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Balancing the Books: Bank vs. Cashbook

Balancing

You will often find that, at any given date, the bank balance according to your cashbook is different to the balance on your bank statement. This is primarily due to the time delay between entering the transaction in the cashbook and the time taken to clear the bank – usually 2-3 days depending on the nature of the transaction, i.e. cheque, direct debit, etc. It could also be down to the date on which a supplier banks your cheque, as this may not be immediate (if at all!).

It would be beneficial for your business to carry out a quick reconciliation of your cashbook and bank account, at the end of each month or quarter (for example), to determine if they agree. If any discrepancies have arisen, you may need to investigate these further. This will ensure that your cashbooks are always accurate, making account preparation easier and less time consuming.

Please see the example below:

Cashbook Reconciliation                                                                                                                                                                                 

Balance at beginning of period

2011.00

Add: Total cashbook bankings

2100.00

Less: Total cashbook payments

(1800.00)

 

Balance at end of period

2311.00

Bank Reconciliation                                                                                                                 

Balance on bank statement at end of period

2000.00

Add: Outstanding bankings

500.00

Less: Outstanding cheques (Issued before the end of the month, but not yet presented to bank)
Cheque No:                   Amount
   002012                      60.00
   002014                      38.00
   002015                      12.00
   002018                      79.00

(189.00)

Balance at end of period

2311.00

If the above reconciliations have been completed and there is a discrepancy between the two balances, you may need to examine the following:

  1. Addition errors
  2. Incorrect figures entered, e.g. reversal of numbers
  3. Direct debits or standing order payments not recorded
  4. Bankings or giro credits not recorded
  5. Any outstanding cheques from the previous period
  6. Cheques not recorded
  7. Duplicate bankings or payments

Here at Green and Co we offer assistance in all aspects of bookkeeping. For further help or guidance please contact us.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Image courtesy of Salvatore Vuono at FreeDigitalPhotos.net

Moving With The Times

evolution

The earliest known existence of the classic ‘double entry’ bookkeeping system can be dated back to 1211 in Florence, Italy. First published in Luca Paciolo’s book “Summa” in 1495, it is a system that has been used, and will, indeed, be used for many years to come. However, things have a come a long way since then.

Since the early 1980s, computer-based accounting systems have been in use. Whilst programs such as Sorcim SuperCalc provided a very basic spreadsheet, today’s packages allow you to perform a wide variety of tasks with ease.

So why not consider updating your current system, or indeed making that first step onto the computerised accounting ladder? This would bring many benefits, including:

  • Increased speed for data recording
  • Improved accuracy and detailed analysis
  • Real-time monitoring of income and expenditure
  • Saving time and money for your business 

On top of which, the ability to access your business’s accounts-based information would provide you with a better understanding of how your business is performing and more control over your business.

Inevitably, there will be concerns, for example:

  • The cost of systems
  • Training on those systems
  • Monitoring data entry
  • Ensuring efficiency in using these systems
  • Data theft

However, in the long run there are possible savings to be made in terms of time and money that need to be taken into consideration, such as reduced office costs due to all your accounting data being recorded and reconciled electronically.

There are many different options out there which are specifically designed for every size and variety of business, programs such as Microsoft Excel, Farm Plan and Sage to name but a few. Look into updating now to regain control of your costs and realise your business’s potential.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

HMRC Business Record Checks

Record check

HMRC have recently announced they are exploring new ways of conducting their business record checks to target those who are likely to have inadequate business records.

According to HMRC, it is important for businesses to keep records in order to complete their tax returns correctly, and to ensure they pay the correct amount of tax at the right time to avoid any interest or penalties.

Good record keeping could also:

  • help bids to obtain finance (eg. loans, mortgages)
  • give you the information you need to manage your business and plan for the future
  • help you budget for future plans and tax payments
  • reduce accountancy fees if you provide your accountants with well organised information
  • support your claims to some reliefs or capital allowances
  • help you keep track of amounts you owe to suppliers, or that customers owe you.

Three simple steps to bookkeeping:

1.    Set up a system – whether it be a manual book or computerised package. It helps to have all the information kept together.

2.    Keep records throughout the year – only keeping some of your records is as bad as keeping none at all. Keep your records updated regularly, rather that letting it pile up

3.    Keep your records for as long as required – certain records must be kept for a minimum period, for example 6 years for VAT or 5 years for Self Assessment.

Failure to keep proper records could result in penalties from HMRC if you are subject to a business record check, and could prove detrimental if you are subject to an investigation from them.

If you would like any help with your bookkeeping, Green & Co has a dedicated VAT and bookkeeping department, who specialise in Sage. If you would like any further information, please contact Green & Co.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Image courtesy of lekkyjustdoit at FreeDigitalPhotos.net

How do you choose your accounting year end?

Calendar

This is often a question that many organisations are faced with before trading can commence, however it is not a decision that needs to be permanent throughout the life of a business.

Without much thought, many will simply choose their accounting year end date as the end of their first 12 months of trading. Whilst you can choose any year end date you want, it is important to consider the tax implications of this decision.

HMRC created ‘Opening year rules’ in order to collect tax from new businesses in their first year of trade. Choosing a year end other than the 31 March/5 April can result in an overlap of profits and you may find yourself having to pay tax on the same profits in two different tax years – an additional cost to your business you may not have expected or budgeted for.

It is possible to claim relief for these overlap profits, but most often this will not be allowable until cessation of trade. However, there may be an alternative option for claiming this relief earlier: by changing your year end date, providing it takes place within 3 years of commencement. It is important to carefully consider the new year end, as some changes can create further overlap, whilst others relieve it.

There are 4 possible outcomes:

  1. Create a set of accounts for less than 12 months. In this case, you need to tax 12 months to the new date – this will create an overlap.
  2. Create a set of accounts for longer than 12 months. In this case, you tax it but relieve overlap to bring it down to a 12 month period.
  3. Create two periods ending in the year of change – tax both and relieve overlap as in outcome 2.
  4. Create no year ending in the year of change. Here you will have to work back 12 months from the new date and tax 12 months to this date (and then you have effectively created another year end) – this creates overlap.

Only options 2 and 3 will allow you to relieve overlap.

Unable to decide on your year end or thinking of a change? Please contact Green and Co for further advice and guidance.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

Keeping Accounting Records

www.greenandco.com

One of the requirements for all businesses is that appropriate accounting records are kept for at least six years from the end of the accounting period in case of an inspection request from HMRC. Dependent upon the number of business transactions, there are various methods for keeping these records.

For very small businesses, manual records, such as a written or Excel cash book, may be sufficient. There should be separate sections showing a breakdown of the income and expenditure for the accounting period.

For businesses that have large volumes of transactions, however, the above method is likely to be impractical and time-consuming. This is where it may be useful to consider using one of the many computer-based accounting packages available. Currently, one of the most popular is Sage. This software allows users to input sales and purchase invoices, and to keep track of whether these have been paid. It also has an area for the preparation of VAT returns, which can then be submitted online.

There are various other packages available, including Quicken, QuickBooks and Farmplan. These can be purchased online and should be selected depending on the needs of the business and the preferences of the user. The packages include ‘Help’ sections to aid users.

A relatively new accounting package is Xero, which is an online package and shows information in real-time. Bank statements and invoices can be uploaded to update the system with the transactions that have taken place.

Green & Co are able to offer advice to business owners regarding the most appropriate method of keeping their accounting records, depending on the individual circumstances of their business. We are also able to provide training in the use of Sage, and offer a bookkeeping service for those businesses that would like to outsource this. For more information, please contact us on 01633 871122.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

How healthy is your company?

www.greenandco.com

In recent months there has been news of large corporations and even football clubs falling into liquidation, with many jobs lost and well known household names disappearing.

However, the situation is not restricted to prominent companies, with millions of pounds passing through their bank accounts. Any company, of any size, can drift into insolvency. If your company owes its suppliers more than it can realistically generate, it could be insolvent.  The current business climate means that it is now extremely important to keep track of your company’s  financial health.

There are several ways key ways that you can do this:

  • Activities as simple as regular bookkeeping can make a big impact. With bank accounts regularly reconciled, you will be able to see the funds available to your company.
  • By keeping active records of balances owed from customers and due to suppliers, you should be able to pinpoint any cash flow problems that you might encounter in the future. It may be that you will need to chase long standing debts, or negotiate with  any businesses that seem to have problems paying you.
  • Actively generating management accounts, either quarterly or monthly, will give you a good idea of the profitability of your company throughout the year. Relying on your accountant to provide you with bad news about your figures, potentially 9 months after the company’s year end might not give you enough time to effect a turnaround.
  • You should act quickly and decisively on the information provided to you in your management accounts. If you can see that your business’ performance has started to decline, then review the business for any costs you incur that do not bring value to the business.
  • Prepare financial forecasts. A clear idea of where the company is going may help make valuable decisions that would keep your business growing.
  • Consider outsourcing activities and labour in order to maintain flexibility. With uncertainty over the economic landscape companies will continue to rely on the skills, expertise and ‘can-do’ attitude of flexible workers like contractors and freelancers.

Many of the above can be achieved through purchasing a copy of Sage accounts software, which we can provide to you if you are interested.

If you would like any help with bookkeeping, management accounts or forecasting, please let us know, so that we can help keep your company healthy.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Image courtesy of jscreationzs at FreeDigitalPhotos.net