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News,May 2018

what is a franchise

A Guide for Small Business Owners about Franchise Accounting!

03/06/2022Accounting , Business Growth Ideas

Do you want to learn ways to own a franchise and be a franchisee as well? Even though you are the owner of the business. This blog will help you to gather everything you need to know about owning a franchise, how it will function, what the criteria for franchising your business, and the pros and cons of doing so. However, to begin with, the most basic factor to understand is what is a franchise to be exact. Entrepreneurs keep looking for business opportunities to mark their growing presence in the business world. What can be better than being self-employed and owning a franchise as well? Before you decide to get inspired and aim to follow the idea, gather the provided information in the details below. What is a Franchise? Let’s begin the discussion with the basic idea of what is a franchise. It is a great business opportunity for all the entrepreneurs to be here. With this opportunity, you can carry out your business through your company. However, this is done under the name of a brand that is already established. This way you can get the benefits of support and guidance on the financial planning and the marketing strategies. It is obvious that the brand is already running a good business with a stable marketing presence and healthy finances. These are the essential factors that will help you to grow rapidly right after you begin to carry out your business through the franchise. This is considered to be a great idea for small business owners who will enjoy factors like cost-effectiveness and expand the business swiftly. It is advantageous for the brands to grant the rights to small business owners to carry out the business in their own way by using the name of that established brand. However, to maintain the standard of the brand, there are certain legal limitations: Brand Standard Control Consistency Protection from damaging acts If you are looking for an accountant who can help you manage your franchise accounts, get in touch with us to discuss your requirements. We promise to provide the best services possible. How to Do Franchise Accounting? It is important to learn how to go along with the accounts of your franchise. Accounting with franchises is a very complex matter and this will require professionals and experts to meet the needs. Here are a few tips gathered from error-free accounting: Ensure a maintained record of the revenue and expenses. Keep a record of the employee scheduling, raw material cost, utility cost, rent, and salaries. Have a clear understanding of the cash flow and monitor your business profits frequently. Learn Ways About How Does A Franchise Function? Allowing for a franchise is like giving a business blueprint to the franchisee. With hard work and consistency, the franchisor makes it possible to earn the loyalty of customers and establish the growth of the business with time and experience. On the other hand, the franchisee showcases the ability to replicate the success of the already established brand. There are many food brands in the UK that are carrying out the business in food lines under an established brand name. However, they are liable for their staff and services to maintain a level. The use of an established brand name comes with the challenge of maintaining the standards by following the original brand. Eligibility Criteria for Franchising A Business Nothing comes easily or without the imitation of eligibility criteria in the business world. So is the case with being a franchise. The fundamental level requires your company to have the following listed limitations: Your business should be transferrable, that is you should be flexible enough as a business that different geographies are suitable for you. For instance, in Leicester, a surf shop will not work. There should be enough people to maintain the functioning of the business. A business with two or three people to function is not suitable for being a franchise. The business idea that is to be carried out under the brand name should be enough profitable for the franchisee and the franchisor. The business plan should not just be a vague idea but demonstrable evidence of how the business will reach success. Furthermore, an established brand will help but the market requires a unique statement for a new and positive change. This means you need to focus on the longer-term appeal for the customers rather than just being the temporary attraction. Are you searching for accountants for all your business needs, you will find us the fast and secure option to meet your standards. Contact us to get instant help! Advantages and Disadvantages of Becoming A Franchisee First things first, so let’s focus on how being a franchisee can be advantageous for you. The prominent factors include the following: The factor of shared experience will help the business grow faster than a new business. The shared experience comes from the franchisor and from the other franchises available in the market. When you are working with the name of a bigger brand, some essential factors like customer loyalty, generation recognition, as well as the demand for your product are already set in the market. You can get help from the brand experience to maintain your backup plans in case of low business times. It has been observed that the chances of franchisees are larger than those of new businesses in the market. The trial and error period has already passed by the original brand owners who have established the business. You are part of the growing phase and you will only follow the stepping stones of the brand that are already proven to succeed. Just like every other business idea that comes up with a fusion of advantages and disadvantages, so is the case with being a franchisee. Let’s have a look at the following listed disadvantages of being a franchisee: People who seek independence in implementing their own unique business plans are not a good fit for being a franchisee. …

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small business bookkeeping

Small Business Bookkeeping – A Beginner’s Guide!

31/05/2022Accounting , Business , Business Growth Ideas

Small business bookkeeping gives you a clear view of the financial health of your business. Are you wondering what comes under bookkeeping in the case of small businesses or what are some ways to keep it interesting? We have got you covered here as we will explain the essential factors of bookkeeping for small business owners and beginners to have a basic understanding of it. Further in the discussion, you will gather important information related to the introduction of bookkeeping, how is bookkeeping a major requirement of small businesses, and how the process of bookkeeping practically functions. An Introduction to Bookkeeping Bookkeeping refers to a process that involves monitoring of financial transactions of your business, keeping track and then classifying them. In other simple words, it is a process that maintains a record of what is your business spending and what amount of money your business is receiving. Previously such tasks were handled with the use of ledgers and books, which became a reason to name the updated version of handling records as bookkeeping. The old practice of this process was quite time-consuming as the relevant individual or professional had to record the transaction of the business in the daybooks, journals, or cashbooks. Later this information will be transferred into a ledger which is considered to be the final destination. However, in recent times the bookkeeping software is luckily replacing the use of physical books and making it less time-consuming and more accurate. Our team of young tech-savvy experts and experienced chartered accountants will provide instant solutions to your bookkeeping problems. Call us on 02086868876 or email us today. What is the Requirement of Small Businesses Bookkeeping? Every business requires a record of how its money is being spent and what is the received amount of money. An accurate and well-kept record is the wish of every businessman so that he can have a clear view of his business’s financial health. Furthermore, when you ensure the error-free process of bookkeeping, you are several steps closer to carrying out a successful business. The reasons for this might include the following: It becomes easy to share and present your business financial information to other parties like lenders, accountants and investors. You will have the opportunity to complete your tax return in time and in an accurate manner. You will instantly identify frauds and false payments that can cause damage to your business finances. You can find better ways to avoid a cash crunch. This will be possible because you will be timely intimated what are the payments to be received or to be paid in near future. Accurate information about your finances will help you to plan and make your budget decisions more smartly. You can easily check and ensure that the money you are making is more than the amount of money you are spending. How Does Bookkeeping Function in Practical? Reconciliation and recoding are considered to be the most important tasks in order to ensure accurate small business bookkeeping. In the following, we have the relevant explanations for these tasks. This involves the following: Reconciling Transactions Maintaining Records of Transactions Reconciling Transactions: The word reconciliation refers to the regular cross-referencing of your business records and bank statements. This helps to ensure that the balance and transactions are in alignment and there is no mistake in the record. You can immediately identify the problem and rectify the transactions and balances that do not match. Moreover, it depends on the frequency of your business transactions which will help you to understand if you need bank reconciliation on a daily, monthly, or weekly basis. Moreover, the requirement of reconciling the books is at least to do it before you plan to submit your tax returns. Maintaining Records of Transactions: The importance of recording your sales is realised in the initial stage of the business world. Traditionally this practice was done by manually writing in the physical books and later these records were punched and attached to the spreadsheet. However, these days the data is downloaded directly for the online records and this helps further for the invoicing software. Just like the sales record, transactions need to be recorded as well. This will help you to note the business purchase at different times. In case you aim to make a claim about a business-related purchase, keep the proofs safe. Either you can put these details into your books or spreadsheets or this task can be automated. By doing this the debits from your business account will stream into the bookkeeping software. Reach out to our office for a consultation. We would love to discuss your queries and accounting problems over a cup of coffee. So what are waiting for? Arrange a meeting today to get instant help! The Bottom Line Now that you have gathered enough information about Small business bookkeeping and the discussion is coming toward wrapping up, we can finally sum up by saying that several businesses in the small business industry use bookkeeping software to save their time and energy. As this time and energy can be better utilised in growing your business valuation. Moreover, this practice reduces the chances of human data entry errors as well. In case you are way too occupied to manage bookkeeping yourself, you can always hire someone to do it for your business. There are plenty of levels of offers given by the hired bookkeepers and you can choose the one that goes with your allowed budget. At a modest cost, the basic level of bookkeeping can be started easily. Later you can ladder up to other advance offers once your business starts to take off. We hope these few minutes of reading will help you to handle your bookkeepers as well as make the right choice to maintain your bookkeeping well in the future. Disclaimer: The information about Small business bookkeeping provided in this article is general in nature. It Does not intend to disregard any of the professional advice.

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bookkeeping and accounting -

Factors that make Bookkeeping and Accounting Different from Each other!

30/05/2022Accounting , Bookkeeping

Whether you are a businessman or an accountant, you do realise the importance of bookkeeping and accounting in every sector of the business. Keeping a track of the records related to money transactions has been a practice for ages on different levels. However, in this era, the practice has raised its standards and it requires speedy and seamless processing as well. If we talk about accounting or bookkeeping, they are parts of the same family without a doubt. There are certain key functions related to this that is needed to be practised vigilantly. Moreover, in this article, we will stay focused on understanding the basic introduction of what is bookkeeping or what is accounting to be precise. There are of course some prominent factors that bring differences between both of them. We will put light on that explanation as well. What is Bookkeeping? Bookkeeping refers to the maintaining of records about the money transactions of your business in order to monitor the incoming and outgoing money. To have a better and clear view of the financial health of your business, the need is to monitor the money transactions on a day-to-day basis. When you are certain about your financial position in a business, this will lead you to make the right business decisions as well as handle your tax submissions with increased confidence. The job is done by the bookkeepers to handle the relevant data about daily transactions to add to the bookkeeping software. By using this precise information about your business finances, you will be able to present a summary and give error-free and updated financial details about your business. If we focus on the job of a bookkeeper, to be precise, it is often considered that they are to enter the details of the customer and the purchasing invoices. The list also includes some other typical duties like: Filing VAT returns Have control over the account balance Reconciling cash Posting Journals etc They are supposed to reconcile the control accounts. Bookkeepers are required to complete double-entry bookkeeping. It all depends on the role of a bookkeeper in the business as to what tasks they will carry out. The bookkeepers do it by having good use of the accounting software that you provide them. In order to ensure that the error-free data about your business finances is reaching HMRC and other required parties, it is important to ensure accurate and timely bookkeeping as well. What is Accounting? Accounting is all about the records of the financial details of a business and making its summary in a useful manner. This will help to make smart business decisions and interpret the data in a beneficial way. This required that the account should clearly depict the details of the following: How much profit is your business making? What is the current value of your liabilities and assets available in your company? What is the position of your cash flow? Having an analysis by delving deeper into your finances, the accountant allows you to look at variances and trends with a clear view. The accounts also use the data gathered by the bookkeepers which are mostly through the accounting software. This data further helps to reflect the actual position of the business. This could involve the year-end adjustments like stocks and prepayments as well as accrual adjustments. After all these steps, the accountant presents the data in form of year-end financial statements. Get in touch with our accountants to get to know more about bookkeeping and its essential factors. We promise to provide instant help. Call us on 02086868876 or email us today. What’s the Difference Between Bookkeeping and Accounting? There are several factors where bookkeepers and accountants overlap. In one way or another, both of them carry out the same job other than a few points. Bookkeeping is considered a part of the accounting process. The major difference is that in bookkeeping you tend to categorise and record your financial details, whereas, this gained data is further used in accounting for planning strategies. To help you understand the differences, we have listed a few points below: Making the Right Business Decision: With bookkeeping, you do not gather enough information to let you make your business decision. However, in the accounting process, the gathered information will help to further analyse and you are able to make your business decisions. Required Skills: A bookkeeper should be knowledgeable about the duties of bookkeeping and accurate in the working. However, an accountant is required to have relevant experience and a degree in accounting. Financial Details: Management of the financial information is normally not done in bookkeeping, however, the accountants are asked to manage and analyse the data to interpret it. Budget, management accounts, and financial statements are also the responsibility of the accountants. Responsibilities: The bookkeepers give you a surety of recording the required financial data and updated filing as well. The accountants on the other hand keep monitoring the broader financial health of the business and communicate it to the management. The Bottom Line Finally, the discussion of bookkeeping and accounting can be summed up by saying that the challenge for a business is to seek the right kind of bookkeeper or accountant to get the job done. The business owners should consider that there possibly can be many individuals who might claim to do the bookkeeping as well as the accounting job. However, hiring a bookkeeper and expecting him to make the financial statements is not a wise decision. We hope you have gathered enough information from this blog to make the right business choices. If you are still stuck with your accounts and seek professional help, get in your car and reach out for a meeting. We will love to hear out about your queries and offer instant help. Disclaimer: The information about the differences between bookkeeping and accounting explained in this blog is general in nature. It does not intend to disregard any of the professional advice.

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operating costs

What Are Operating Expenses? Let’s Explore With Examples

27/05/2022Accounting

Are you going to calculate the operating costs of your business or do you want to invest in a company? Whatever the reason may be, you must understand the concept of operating expenses and why they are important for the growth of a company. Operating expenses are crucial to the smooth working of business operations. However, there are some costs that are part of these types of expenses while others are excluded from it. The importance of operating costs and operating expenses are as much important as the revenues generated during a year. So, the basic understanding of the different types of operating costs is also significant. In this blog, we will walk you through operating expenses, their different categories, their significance in a business, and how to calculate them. Moreover, we will provide you with a distinction between operating expenses and other non-operating expenses. So, let’s explore operating expenses in more detail!   Struggling to manage the operating costs of your business? Why not get help from a team of diligent chartered accountants at CruseBurke. Feel free to contact us.   What are Operating Expenses? Operating expenses, also known as OPEX, are the expenses incurred during the core business activities. A business requires some expenses to produce goods and services, and deliver them to the end-user. Moreover, they hire the services of some professionals and use machinery and other equipment. Moreover, the expenses for research and development are also a part of operating. All these expenses are called operating expenses or Selling, general & administrative (SG&A) costs. In other words, the business expenses are related to the primary business activities directly contributing to the execution of the business. For example, expenses on raw materials, payroll, machinery, equipment, inventory costs, rent and insurance. While studying a company’s income statement, you can find the financial strength by looking at the operating costs of that company. In other words, an income statement consists of six types of operating expenses. Cost of goods sold, selling, general & administrative costs, depreciation & amortization cost, and other operating expenses.   What are the Different Types of Operating Expenses? Basically, there are three different types of operating expenses. These three categories let you segregate the different types of costs and you can calculate and prepare an income statement conveniently and accurately. Compensation-related expenses Office-related expenses Sales-and-marketing expenses All of the above categories comprise all those expenses directly incurred in carrying out the business operations.   Why Are the Operating Expenses Important? Operating expenses are crucial to estimating the financial position and financial health of a company. If a company fails to cut back its operating expenses, it would not earn any profits as a result. As operating costs are part of the income statement, the borrowing or investor’s funds cannot be obtained if the expenses are more than the revenues. So, a business can catch investors and borrow money from the lenders only if it has a reasonable amount of operating costs on its income statement.   How to Calculate Operating Costs and Operating Expenses? Calculating operating expenses is not as complex as it may seem. You can calculate it from the income statement of a company. Moreover, the investor interested in a company can calculate the operating expenses as: Operating Expenses = Payroll/Wages + Sales Commission + Marketing/Advertising + Costs + Utilities + Rent + Insurance + Taxes The calculation and its elements can vary from industry to industry and organisation to organisation due to the varying nature of products and services. On the other hand, the operating expense ratio is used to analyse and measure the efficiency of a company. This efficiency is related to how well a company is managing its operating expenses. Whether a company is optimally managing its costs or making extravagant expenditures. Operating Expense Ration = Operating Expense/ Total Revenue So, it is essential to measure the expense ratio of an organisation to grasp the financial management and financial health. Operating Cost is different from the Operating expenses in that operating cost covers the cost of producing goods and the administrative costs. Operating Cost = Cost of Goods Sold (COGS) + Operating expenses.   Operating Expenses vs. Capital Expenses vs. COGS vs. Non-Operating Expenses Operating expenses are the expenses incurred to execute a business and these costs do not contribute directly to the production of goods. These expenses are also called Selling, general & Administrative Costs (SG&A). On the other hand, capital expenses are the expenses incurred on the investment or purchase of new equipment, machinery and intellectual property rights, patents and copyrights. Cost of Goods Sold (COGS) is the cost directly incurred for the production of goods sold. The expenditures on the production of goods to be sold are known as the COGS in finance. Non-operating expenses are expenses other than the operating expenses. For example, financing activities and paying off the interest on the loans. These expenditures are not as important as other expenditures in a business.   Final Thoughts In sum, operating expenses are a part of the operating costs. When a financial manager adds operating expenses to the cost of goods sold (COGS), the operating costs can be calculated. Operating costs do not directly contribute to the production of goods and services. Instead, they support the activities involved or used indirectly in the manufacturing of goods. Calculating operating expenses is not difficult as you can analyse it from the income statement of an organisation also. Moreover, you can use these expenses to measure the overall financial efficiency of a firm using the operating expense ratio. Lastly, operating expenses help a business grow its sales at the minimum cost. The financial managers can reduce the operating cost by lowering the operating expenses.   Let’s get instant help from a qualified team of accountants and bookkeepers to cut back the operating costs efficiently. Check our amazing packages now!   Disclaimer: The information about Operating Costs provided in this article is general in nature. It does not intend to disregard any …

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An Introduction to The Recognition Of Liabilities In Accounting!

Introduction to The Recognition Of Liabilities In Accounting!

23/05/2022Accounting , Accounting Issues

Whether you are associated with the business or accounting, you have to deal with the liabilities and asset details. To do your job in the finest way, it is important to learn what is liabilities in accounting. It refers to the financial obligations of a company. A few examples related to this might include payable wages, loans, and the amount of money that your business has to pay to its suppliers. Some of such details are also part of the balance sheet. Moreover, it is important to learn about the settlement of liabilities which is possible when your business will possibly bring economic benefit. This will only happen by selling your specific products or services to your customers. The economic benefit is also associated with the fulfilment of service, company assets, and cash. In this comprehensive guide, we will help you to understand the common liabilities of small businesses, their types and the factors due to which liabilities are important.   An Explanation of Liabilities In Accounting The simple way to define the liabilities when we are looking for their recognition in financial accounting refers to the finance-related responsibilities of a business. According to accounting experts, common liabilities while you are carrying out a small business include the following: Amount of money that your business owes to the suppliers. Accounts payable The recognition of the liabilities is normally found as part of a balance sheet. This is known as a financial statement commonly. These days normal and smart way to generate financial statements is through the use of financial accounting software. They are also considered payables generally in the language of accounting. Moreover, there is no way that a business is free from liabilities. There is an exception to the business structure that is carried out solely. Such businesses are operated with the owner’s cash solely. In such an operating business structure, the owner tends to pay using cash as well as receive the payments in form of cash. Physical cash is a suitable option for this or a business checking account will ensure secure payments.   Do you get chills while you are thinking about the management of liabilities? Our experts can build the help smart strategies. Get in touch and enjoy instant help.   Small Business and Common Liabilities We normally know that in case of borrowing rather than paying outright, we will have liabilities. Several people are not aware that payments made using a credit card come under borrowing terms too. However, if you make the payment before the month ends, you will be free of any kind of debt. The following are considered accounting liabilities in the case of small businesses: If you take a business loan from any possible means. In the case of availing of business mortgage real estate, you will touch on the conditions of business borrowing again. The amount of money that a company owe to its employees is a liability. The amount gathered from the sales tax charged to the clients is bound to send to the government, this comes under the list of liabilities. Furthermore, this is important to understand that the sales tax is allowed to receive in certain states and businesses. The rates of sales tax have a tendency to vary in this situation. There has to be a permission process before the small online businesses charge and collect sales tax from their customers.   Why Are Liabilities Important? There is a business tradition to consider liabilities as bad, however, this is not the case always. Sometimes the business applies for loans to buy some assets which are good for the growth of a business. Business vehicles and tools to operate the business in an efficient way helps to grow rapidly. However, crossing a certain limit of liabilities can cause financial damage to a business. A fine track of debt to equity ratio and debt to asset ratio by the business owners will help to make the right choices. There is no doubt that there must be enough assets of a business to clear business debts.   Are you looking for a professional charter accountant who can answer your queries related to accounting issues? Feel free to call us on 02086868876 or email us today.   What Are The Types Of Liabilities? Business liabilities are majorly known as the following two categories: Long Term Liabilities Short Term Liabilities Long Term Liabilities: In the case of long-term liabilities, the amount relevant to financial liabilities is normally paid off after the time period of a year or more than that. Business loans and mortgages are some of the examples that refer to long-term liabilities. Short Term Liabilities: In the case of short-term liabilities the financial responsibilities also known as business debts are supposed to be paid off within the time period of a year. Some examples of the short term liabilities are listed below for you: Mortgages and loans, such payments are to be made every month. Sales tax is another example that has to be paid off every month or quarterly. Employment and income tax that is to be sent to the government and deducted from the employee’s income are considered short term liabilities.   Wrapping Up Now that enough information about Liabilities in Accounting is gathered and understood, we can finally sum up the discussion. After the identification of the liabilities, they are categorised as long-term or short-term. A major point that makes both cases different is the time period of a year. However, this can even change depending on the kind of business you carry out. Moreover, under the law, all the liabilities are not enforceable. In most cases after the situation of obligations, it is normally clear to the individuals who are handling such business affairs. Now that you have developed a better understanding of the liabilities, let your business grow by having the most benefits.   Disclaimer: The information provided about Liabilities in Accounting in this article is general in nature. It does not …

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Importance of Maintaining Accounting Records

Importance of Maintaining Accurate Accounting Records!

17/05/2022Accountants , Accounting , Accounting Issues

Along with several other factors to carry out a business successfully, the Importance of Maintaining Accounting Records still is in the business limelight. It can cause a chaotic business situation if you are unable to maintain accurate accounting records. Moreover, this can lead to struggling with legal repercussions because you can’t keep up with paying the right amount of tax. The accounting records are meant to be safe for a long period of time. The question that arises here is how is it possible to maintain accounting records in an accurate manner. This handy blog is a comprehensive guide if you intend to learn about Maintaining Accounting Records. See below for the details: Accounting Records In A Nutshell The Importance of Maintaining Accounting Records Learn to Store Accounting Records The Bottom Line   Accounting Records In A Nutshell To carry out your business in a successful manner, it is important to maintain your accounting records carefully. You might wonder what exactly comes under the definition of accounting records. These are the important elements that are included to manage the accounting records. Self-assessment tax returns and company tax returns, old annual accounts are needed to be saved as they might be needed in the future. PAYE Records VAT records Expense and purchase records Income and sale records might include bank statements, sale invoices, till rolls and cash receipts. Details related to the assets of the company When the financial year ends, the stocks are also needed to be a part of the record. Statements that explain buying and selling of goods and products. There should be a detail of buyers, sellers, and the goods. Debts that the company owe to others.   Are you seeking someone with a combination of a young tech-savvy and an experienced team of qualified chartered accountants? You are at the right place, we will help you to learn smart ways to maintain your accounting records. Get in touch today!   The Importance of Maintaining Accounting Records It is a legal requirement and an obligation to have an accurate record of accounting. In case you are unable to maintain the accounting records or maintain them well as directed, your company will be disqualified as per the instructions of HMRC. You have to pay the fine charged by HMRC as well. To realise the importance of accounting g records, the following reasons are also included: The records are a way forward to ensure business growth because they will clearly identify the weaknesses and the strengths of the business over a specific time period. Accounting records will help to reduce the tax payment and maximise the claim of expenses. In case a company is gone under the inspection of the HMRC, the accounting records of the past will be required by the inspector. For the purpose of cross-checking, the past records will help to give you the details of all the transactions. You will be more than satisfied. At times it is required to disclose the financial health of the company, accounting accuracy will save the moment to provide transaction details of the company.   Learn to Store Accounting Records In the case of a limited company, a time period of six years is suggested to keep the records protected. Following are the conditions that will bring you under the obligation of keeping the records for a long: There is a compliance check on your company as an investigation by HMRC. The tax returns that your company has sent are late. The company has added something to its asset that purchase will last more than six years. Machinery or other such equipment are examples. There is an evident transaction that is more than the amount of the accounting period of the company.   Is Accounting record management giving you chills? Take a back seat. Our team of expert chartered accountants help you build long term strategies. We’ll do a yearly analysis that talks about the decisions that worked and didn’t work out for you.    The Bottom Line Finally, the discussion of the Importance of maintaining Accounting Records is wrapped up since you have gathered enough information to make the right business choices. The work habit of keeping the accounting and finances of your business aligned and in order ensures rapid business growth. There are plenty of professionals who offer to do the job with the required standards of accuracy. This professional help always spares time for you to focus on your day-to-day business affairs and ensures the efficacy and accuracy of your accounting as well.   Still, looking to learn more? Satisfy your business quest with the guidance of our experts. Get in touch to get instant help!   Disclaimer: The information about the Importance of maintaining Accounting Records provided in this article is general in nature. This does not intend to disregard any professional advice.

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Purpose Of An Audit

What is an Audit? Its Purpose and Its Importance

12/05/2022Accountants , Accountants for Contractors , Accounting , Accounting Issues

Most of us know audit refers to an official inspection of the accounts of a company. This inspection is done by an independent body normally. It has been observed that several organisations in the UK are in need of an audit, however, they are not very clear about what exactly is the purpose of an audit and when they require it. When Is An Audit Required? This is important to know for an organisation when it actually requires an audit. An audit becomes a legal requirement in case it meets any two out of three of the following thresholds: The strength of employees crosses the figure 50. The asset of the company is more than £5.1m. The turnover of the company is more than £10.2m. In some cases, a company has not crossed the above-mentioned figures but even then it requires an audit. Wondering why? It is possible when the company is likely to be part of a group that reaches the discussed figures or crosses them. What Is The Purpose Of An Audit? By now you must be wondering about the purpose of an audit and why it is required. The financial statement of a company is so important that it gives a picture of financial health. What is required to be changed, grown, or moulded for a better business future? The financial statement needs to be crystal clear to identify where a company really stands. An audit is a kind of independent opinion about the financial statement of the company. The main purpose of the audit is to get that third party’s opinion about the accounts inspection and financial statement to realise the growth of the business. This opinion is associated with the following factors: The financial statement must communicate a fair view of the finances of the business. The financial statement is made according to the required standards of accounting. Auditors are accountable for identifying material misstatements. Moreover, there has been a misconception about the auditors that they are liable for identifying all the misstatements through the process. However, that is not the case. Only material misstatements are required from the process. Importance of An Audit No matter what kind of business a company might carry out. Each one of them intends to achieve a certain and fair level of position and financial health. The process of an audit helps the organisation to achieve its ultimate goals. Some of them include the following which also adds to the importance of an audit. Have a look: A fair picture of the financial performance of the company. The true position of the business is carried out by the company. Realising the valuable insight after the process of audit. The factor of accuracy and managing accounts in a more smart way with comfort. Systematic errors that were happening throughout the year are fixed. Furthermore, The process of an audit is no doubt critically analysing the management decisions and it challenges the internal control. However, if you see it with a broader spectrum, this always helps to improve the internal system and financial health of a company. So, one can’t deny the importance of valuable feedback and the external perspective of the company. Eventually, this will help to grow the level of business. Final Thoughts Now that you have developed a better understanding of the purpose of an audit and relevant details, we can sum up the discussion finally. There is no doubt that the process of an audit challenges the internal control of a company. However, it ends up developing business valuation as you learn the unseen mistakes that are being carried out throughout the year. On the basis of third-party perspective and insight, you can develop strategies that will help your business to grow. The organisational performance will improve which will secure peace of mind and reduce the risk of business falling down in the future. We hope these few minutes of reading will help to make the right business decisions. Disclaimer: The information about the purpose of an audit explained in this article is general in nature. It does not intend to disregard any professional advice.

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Importance of General Ledger Reconciliation

Reasons That Make General Ledger Reconciliation Important

10/05/2022Accountants , Accounting , Accounting Issues

The main reason to use the general ledger reconciliation by the accountants is to ensure that the integrity of the account balance is error-free on the general ledger of a company. The importance of general ledger reconciliation is real because it helps to compare the general ledger account balances with data of third parties, other independent systems or supporting documentation etc. Such reports and statements are to ensure the error-free work and completion of the balances. This process also helps to identify problems and find professional ways to resolve them. A company that intends to release its financial details to the public also wishes to verify the final information. General ledger reconciliation works as the key tool here. Before we delve further into the discussion, we better have a look at the point of discussion in today’s article. This includes the following: Learn To Prepare General Ledger Reconciliation Importance of General Ledger Reconciliation Final Thoughts   Learn To Prepare General Ledger Reconciliation Once the financial reporting period ends. it is time to process General Ledger Reconciliation. Before the process begins, the accountants ensure the accuracy of information provided in the general ledger of a company. Normally following steps are taken to make a General Ledger Reconciliation: Gather important details of the general ledger account. Comparison of General Ledger accounts with other supporting documentation. Investigation of Discrepancies Corrective Journal Entries   Gather Important Details of the General Ledger Account: When you decide to prepare general ledger reconciliation, the first thing to do is that you gather the necessary information about the general ledger account. Most of the time it is the balance available at the ending period. This depends on the type of account you have. Sometimes the activity of the account is also required. This may include the debit and credit details of the account.   Comparison of General Ledger Accounts with Other Supporting Documentation: Comparison of general ledger account balance with the data collected from independent systems is the next step after you are done with getting the required information. Credit card statements and bank statements are a few such examples. This is considered to be an important step in the process of preparing general ledger reconciliation.   Investigation of Discrepancies: In case there have been discrepancies identified between the details of the general ledger account balance and the supporting documentation. Serious actions are taken to fix the discrepancies. The reasons for such problems could possibly be missing transactions, time differences, or other mistakes. All the discrepancies do not refer to the real mistakes in the general ledger account balance. So it is important to do an accurate investigation.   Corrective Journal Entries: Because of the need for corrective journal entries, accountants must get their hands on preparing for corrections of possible errors.   We are a team of young qualified Croydon Chartered Accountants with a combined experience of over 100 years. Moreover, the team has extensive experience working in Big four accounting firms, which makes us the right people who can deal with any size of the business.   Importance of General Ledger Reconciliation In order to ensure the accuracy and completeness of the financial statement and the general ledger, General ledger reconciliations are considered to be a must process. As it will help to avoid significant errors, increase the factor of accuracy as well the problems are resolved in time. Some prominent factors of general ledger reconciliation that bring benefits include the following: Error-free work Timely Adjustments Accuracy Factor Error-free work: When a discrepancy is handled in a professional manner, it is handled well. This results in the need for investigation. The process of investigation increases the accuracy of the financial statements. Timely Adjustments: In case of discrepancy identification, it is required to do adjusting journal entries. This adjustment record improves the accuracy of the financial statement. Accuracy Factor: A feeling of confidence and comfort comes with the process of general ledger reconciliation that ending balance and activity captured is error-free. This is possible because the balance is compared with supporting documentation as well.   Final Thoughts Now that you have developed a better understanding of the Importance of General Ledger Reconciliation, we can sum up the discussion finally. General ledger reconciliation only brings the required result when handled appropriately. This needs professionals to ensure a seamless working process. We hope these few minutes of reading will help you to make the right choice in accounting.   Stuck with your accounts and looking for a helping hand?  Call us on 020 8686 8876 or email us today.   Disclaimer: The information about the Importance of General Ledger Reconciliation provided in this article is general in nature and does not intend to disregard any professional advice.

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How to Calculate Profit Margin

How to Calculate Profit Margin?

27/04/2022Accounting , Finance

Are you going to analyze the financial health and financial performance of your business and you are advised to calculate the profit margin for this analysis? However, are you struggling to know how to calculate profit margin at the same time? Don’t worry!!! As we are going to discuss how to calculate profit margin in more detail in this blog for you, so that you can measure the financial viability of your business. But, let’s break down this topic into the useful information you must know before calculating profit margin.   What is Profit Margin? Profit margin measures how many pounds have been generated for each unit of product sold in a given period. Moreover, this indicator reflects the financial position of the company relatively. In other words, profit margins are described as percentages or ratios, so you can use this figure to compare with the profit margin of your competitors in the same industrial sector. Without this financial statistic, no business can analyze the relative position of their business in an industry. You cannot rely on the numbers such as profits alone. Knowing the financial profitability requires you to calculate the profit margin. For example, you calculate the profit (Revenue – Costs) of your business which gives you a number. This number cannot make a whole picture for you as you cannot decide whether your business is growing is losing market share. Let’s make it clear with an example!   Example Suppose there are two companies in a market. Company A is making a profit of £50,000 the same as Company A making. So, how can you decide which company is more profitable than the other? Because it is possible that Company A’s costs are higher than company B’s costs because Company A lacks managerial expertise, etc. To gauge the relative performance, both companies need to calculate profit margin. Let’s learn how to calculate profit margin!   How to Calculate Profit Margin? Calculating profit margins doesn’t require the financial managers to dive deep into complex accounting equations and numbers. Instead, they need simply two numbers: Cost & net sales   Profit Margin = Cost/Net sales   Let’s Suppose Company A is manufacturing products at a cost of £50,000 and their sales revenue is £100,000. On the other hand, Company B is producing the same product at a cost of £100,000 and earning £150,000 in net sales. In this case, their profit is equal to £50,000. However, calculating profit margin will present the actual picture of both companies’ financial position. Profit Margin of Company A = [Cost/ Net Sales] * 100 = [£50,000/£100,000] * 100 = 0.5 * 100 = 50% Profit Margin of Company B   = Cost/ Net Sales] * 100 = [£100,000/£150,000] * 100 = 0.66 * 100 = 66.67% So, you can see that Company A is potentially more profitable than Company A. Profit margins have given more clearer picture of their financial performance than other financial indicators.   Get in touch, explain your requirements, or sign up online for customised services just like your business requires.   Why is Profit Margin Important? Profit margin is essential to learning about the performance of a business. Moreover, financial experts find this indicator more insightful due to the relative nature and strong insight into the cost structure of a business. Moreover, it is one of the viable financial indicators that is widely used to measure the financial health of a firm.   Analyze Relative Market Position Similarly, if you are an investor and wish to invest in a business by buying the stocks, you can decide by calculating the profit margin of that business. Besides, it helps you compare different companies in the same industry and make a final decision about investing in a potentially profitable business.   Evaluate Managerial Decisions Moreover, you can judge the managerial expertise of a business by comparing the profits across different companies. It is possible that a product can be manufactured at lower costs, but poor management decisions increase the costs and lower the profit margins.   Cost & Price Decision-making Lastly, the company managers can cut costs as this profit margin provides insights into the costs of producing more goods. So, if the costs increase on additional products, the manager can look into the costs and lower them to increase the revenues. On the other hand, he can increase the price to raise the sales revenue. So, we can say that profit margins provide key options to the company managers to accelerate the growth of their company.   Conclusion Lastly, we can conclude the discussion on how to calculate profit margin by saying that it is one of the most crucial indicators, and without it, no business can move forward. As we have seen that profit margin is a key performance indicator for exploring the actual growth potential of a business, so profit margin makes a huge impact in making a key financially sound decision. Moreover, we have observed that profit margin helps shape the cost structure into the most favorable structure as business managers can decide on which costs are not viable and are useless liabilities. Besides, the profit margin is preferred over other indicators because it provides a relative position of a company in an industry or sector. So, you can get an edge over your competitors by making decisions that are better than your rival businesses. Finally, you must not get confused about how to calculate profit margin as you have read in detail with strong examples in this article.   Stuck with your accounts and looking for a helping hand? How about you get our guys on a quick call. We love talking about taxes, payroll management and any opportunities that help you expand your prospects. Call us on 02086868876 or email us today.   Disclaimer: The information about How to Calculate Profit Margin provided in this article is general in nature and does not intend to disregard any professional advice.

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