Small Business Finance All-In-One For Dummies (UK Edition)
Keeping track of the finances is fundamental to the success of every business, small or large, but tackling the task yourself can be intimidating. This Cheat Sheet offers tips and advice to help you get the essentials right.
Main Tasks of Business Accounting
Getting your head around business finance is not easy. To help you get started, here’s a list of the most important tasks of business accounting and their meaning.
Payroll: Based on detailed private information in personnel files and earnings-to-date information, the correct amounts of income tax, social security tax, and several other deductions from wages have to be calculated. NI contributions, PAYE payments, retirement and holiday pay have to be updated every pay period.
Cash inflows: All cash received from sales and from all other sources has to be carefully identified and recorded, not only in the cash account but also in the appropriate account for the source of the cash received.
Cash payments: In addition to payroll cheques, a business writes many other cheques during the course of a year to pay for a wide variety of items including local business taxes, paying off loans, and the distribution of some of its profit to the owners of the business.
Purchases and stock: Accounting departments are usually responsible for keeping track of all purchase orders that have been placed for stock (products to be sold by the business) and all other assets and services that the business buys. The accounting department also keeps detailed records on all products held for sale by the business and, when the products are sold, records the cost of the goods sold.
Capital accounting: A typical business holds many different assets called capital, including office furniture and equipment, retail display cabinets, computers, machinery and tools, vehicles, buildings, and land. Except for relatively small-cost items, a business has to maintain detailed records of its capital items, both for controlling the use of the assets and for determining taxes.
Your Best Sources of Help and Advice for Your UK Business
You’re not on your own when setting up or running a business. The following organisations in the UK offier a wealth of information and expertise if you need help from filling in your tax forms to recruiting people or setting up your business finance system.
Business Link is the government’s small business service with offices in most big towns and cities and advisers with the whole range of business expertise. Call 0845-600-9 006.
The Federation of Small Businesses offers various services including a legal helpline. Call 01253-336-000.
The Advisory, Conciliation and Arbitration Service (ACAS) is an invaluable source of help to business. Call 0845-747-47 47.
Job Centre Plus offices are helpful on recruitment and employing people with disabilities. Visit the website or your local office.
The Disability Rights Commission Helpline, call 08457-622-633.
The Women and Equality Unit can help on equal pay.
Health and Safety Executive or call the infoline on 08453-450-055.
Inland Revenue or call your local office.
The Information Commissioner gives help on the Data Protection Act. Call 01625-545-745 (England), 0131-225-6341 (Scotland), 02920-894-929 (Wales), or 02890-511-270 (Northern Ireland).
How to Calculate VAT
Calculating the VAT (Value Added Tax) element of any transaction can be a confusing sum at the best of times. Following these simple steps can help you get it right:
Take the gross amount of any sum (items you sell or buy) – that is, the total including any VAT – and divide it by 117.5, if the VAT rate is 17.5 per cent. (If the rate is different, add 100 to the VAT percentage rate and divide by that number.)
Multiply the result from Step 1 by 100 to get the pre-VAT total.
Multiply the result from Step 1 by 17.5 to arrive at the VAT element of the bill.
Can Your Business Make Money?
Can your business idea leave you rolling in used tenners? Even with the most thorough of market research and the best business plan in the world, you’re not on to a winner unless your business idea can bring in the pennies. You need to establish:
Day-to-day operating costs
How long it will take to reach break even
How much start-up capital do you need?
The likely sales volume
The profit level required for the business not merely to survive, but also to thrive
The retail price of your product or service