Budgeting, Cloud Software and Accountants

How well do you know your financial situation?

Money is one of the major causes of stress for business owners and often has people wondering whether or not they need a budget. The biggest mistake you can make is to ignore the issue altogether.

Here’s why in a single sentence...

Businesses that plan their finances are more successful.

Simple as that. I am always keen to make this point to my clients because many of them come to me describing financial record keeping and planning as nothing but a chore. They put their efforts into winning new work and doing the work. Assuming that if they keep doing those bits right, the money will take care of itself.

Good financial management isn’t just about making sure you can pay your bills and stay on the right side of the taxman. Your books can tell you a lot about your business and how it’s performing. For example, by looking at the figures, you can see where your best revenue streams are and where your biggest costs are. This helps to shape your whole business strategy and lets you identify goals for a more profitable future.

The Benefits Of Digital Accounting

This month, the HMRC introduced Making Tax Digital, requiring all businesses over the VAT threshold to file their VAT returns via one of the many digital accounting platforms, such as Xero and Quickbooks. It won’t be long before this becomes the obligatory method for filing all accounting information for all businesses.

Far from being a nuisance, the move to digital accounting is a massive step forward for all business owners, according to accountant Matthew Baker from Champ Consultants.

“The move to cloud software is brilliant. All my growing clients are on it. We don’t miss anything because the data’s all there. It’s no longer a case of interpreting each client’s spreadsheet; the method of data entry is consistent, thorough and accurate. You never get the wrong data entry with digital.

And nothing goes unnoticed either. In the past we would occasionally come across a client who had gone over the VAT threshold without realising it. They weren’t keeping abreast of their income and outgoings. Now we can see it for ourselves as it happens. All they have to do is issue their invoices via the app. It’s easy.

And when it comes to Tax Return time, you’re not having to do a year’s worth of bookkeeping in a weekend, which has always been a common problem for small businesses and sole traders.”

Getting More Value From Your Accountant

From an admin point of view, keeping up-to-date financial records is much more efficient than storing them all up for a year or more, and digital platforms make it very easy to do so. But, as Matthew points out, the benefits go far beyond easing the administrative burden.

With accurate records comes efficiency and that brings a number of benefits.

Up-to-date records will tend to mean:

• Less time is taken by accountants and bookkeepers to get your records in order.
• More time can be spent analysing performance.
• You can better review and assess key performance indicators and targets for your business plan.

“When a company is growing or going through any sort of change, regular financial monitoring and reporting is a valuable service. A monthly report that flags up any trends or anomalies in the accounts helps the business to take necessary strategic steps in good time.

So do you really need a budget? Budgets can be fairly arbitrary and are not essential for all businesses, but if your business needs working capital it needs a business plan with a budget. I see fewer plans among businesses that aren’t borrowing but I will also say this: those that do plan are more successful. If you’ve made a plan to grow, you’re more likely to grow.”