It’s been said that up to 50% of small business owners don’t understand their accounts. They are prepared once a year for the tax authorities and then just filed away.
We’ll cover how your business accounts are a valuable document, and also how you can gain a further understanding.
We talked about your business plan – that’s a looking forward projection, which is estimated. But your accounts are the actual true results of the business over a period of time.
As such they’re a very valuable document – giving you actual data that you can use, to see both where your money has come from and also where it’s gone.
If you are using the services of an accountant, they should be able to talk through the accounts with you and answer any questions you have.
However, it’s important to understand that the generic term ‘accountant’ isn’t protected, and anyone can actually call themselves one – even if they have no experience or qualifications. (The term ‘chartered accountant’ is protected, but many people would not notice the distinction.)
Indeed, I’ve had people, who have an ‘accountant’ come to me with their accounts asking if I could run through them and explain the detail, as their current provider could not explain them simply.
If you don’t have an accountant acting for you already then it’s highly recommended that you seek one out, preferably one that specialises in businesses of the same size as you.
Remember that an accountant’s fees are a qualifying business expense for the self-employed, so you’ll receive tax relief on their assistance as well.
When it comes to forward planning your accounts will provide in-depth detail. You can run projections based on proposed changes to the actual data and see how that would affect the business.
It’s another reason why you need to stay up to date with your bookkeeping, and prepare your accounts and tax returns as soon as possible after the year-end – otherwise you may be looking at out of date information if the market has changed. You could also miss out on tax planning opportunities that could mean that you are paying too much.
Remember, your accounts are not just something to be prepared for the tax authorities – they are actually an important tool for planning and growth.
