Accounting & Banking

Why do people start a business? How do they manage to sustain the business goals they set upon starting their own businesses? Business owners start a business mainly because they want to provide services to people and in return get some profit from those people who pay for the services they offered. Business owners should have a clear understanding how to grow their business, what strategies they need to do to grow it, and foresee where their businesses are heading to.

In order to do that, every business should have a good accounting and finance management. These two have a very important role in growing and planning strategies for the business. It is significant for the owners to know where their money is going and coming from so that it will be unlikely for them to lose control of their businesses. Good accounting and finance give them a chance to strategize to make sure the business continues to grow, and it can get through unanticipated financial mishaps.

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Table of Contents

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• Maintain and Keep Business Financial Records

• Compliance to Legal Business Laws

• Create a Financial Plan

• Analyze How the Business is Doing

• External Connections

• Internal Connections

• Creating Strategies

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There are some of the reasons why good accounting and finances are important in business management. Knowing what a good accounting and financial management can do to businesses can guide the owners to have a successful and less stress journey in growing their businesses. Some of these are:

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Maintain and Keep Business Financial Records

Keeping track of business financial activities can be done in accounting. Accountants and small business owners monitor the cashflows of the business' daily operation by using the balance sheet. If done correctly, this will be a great help for them to control the business financial future and will provide better understanding where the company's money is going and coming from. This will help eliminate the risk of spending and losing money in not value adding things.

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Compliance to Legal Business Laws

Having an up to date, fact-based and truthful financial records will help a business comply with important business laws. Not paying attention to minor details can result to major consequence on a business tax management.

The managers in charge in finance need to have a good knowledge about the payments to deduct, the amount of taxes to be paid and the right time to pay those taxes. Some businesses even hire seasonal accountants that work for them to check the business financial records because the last thing a business owner wants is to have poor financial records because once they get audited and proven that they are not legally compliant, the business can face serious legal troubles.

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Create a Financial Plan

Financial plan or creating a budget is what gives the business direction. To establish a good budget, it is important to use the financial records and have a good knowledge about the business cash flow. The budget provides the business owners idea about the present financial situation of the business and assist them in steering up the business towards the sustainable success and development.

There are few things to consider in making a budget for the business. Some of these are the profit, expenses, the future plan and foreseeing the unlooked-for adjustments. Keeping a good number on these things is important in managing business. It is necessary to regularly check the original business plan and make some adjustments along the way depending on how the accounting and finance status is doing.

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Analyze How the Business is Doing

It is a good habit for a business owner to check how his business is doing. He can do this by assessing and comparing the past and present financial records of assets and liabilities and other aspects that involves cashflows. He can use that information to determine how the company is performing over a period of time.

These financial records give the business owners a chance to know what mistakes they did in the past and learn something from the past mistakes. They can also easily foresee the problem before it becomes a real actual problem. Having a good knowledge of the business financial status can also give the owners ideas on how to do improvements for the business.

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External Connections

Financial information of a business is very essential in making deals and communicating with external parties. Correct and transparent accounting and finance management can be of good use when the business needs a loan from a bank or making a good impression to entice prospective investors.

A satisfactory financial management makes it simple for the business owners to show their external stakeholders the financial statements giving them a quick and easy overview of how the business is doing. The stakeholders and investors are given access to these reports for them to decide if they will continue being involved in the business.

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Internal Connections

Internal stakeholders are important too in the business. Financial reports can also be communicated with them. This kind of information maybe essential for the employees who shows interest in stock-based remuneration and profit sharing. It is important for employees to know the positives and negatives of the business, and this can be done by being transparent about the financial records within the team.

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Creating Strategies

It will be easy for the company to create good business strategies if it has a good accounting and financial management. Good strategies can be made if the business has a good accounting and financial records which are meticulously analyzed.

Knowing and understanding the business financial records gives more confidence to the owners to make reasonable and practical financial decisions about the smallest up to the biggest elements of the business that involves finances. Making a business budget is a serious matter. It should be well thought of because it is the business guide in making strategy and this strategy is the answer to a business' success and profitability.

Accounting, which is commonly named as the "Language of Business", plays a powerful role in a small business. This covers up financial data entry, summarizing, analyzing and investigating. These things are a big help to business owners, managers, and stakeholders to assess and understand the business financial health. Understanding the accounting and financial status of the business also helps them deal with the business problems well and give them the confidence they need in making strategic business decisions.

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Sole traders and small business owners working from a home-based office actually have a lot more pressure put on them when compared to doing a paid job working from an employers office space.

While the majority of people imagine that being your own boss comes with a lot of freedom, but in most cases the opposite is true.

You may think that every solo entrepreneur or small business owner can sit around all day in their pyjamas, drinking coffee and having the TV on in the background while they work from a laptop.

This image may seem really appealing, especially if you have to face the daily grind of commuting to an office every day, sitting in slow moving traffic, feeling uncomfortable sitting at your desk all day while wearing a suit, tie and tight shoes.

However, there are a lot of things that you can take for granted in your employed job that a small business owner must factor in. We are talking here about time-consuming, yet very important tasks, such as emptying your office waste bin, keeping your office environment clean and free from dust that can seriously affect the inner workings of your electronic equipment, and more....

More responsibilities than you think!

But it is not only the added tasks of a bit of office cleaning that you will need to take care of – the security of your home office will also fall squarely onto your shoulders.

An employer will provide their workers with a safe environment to work within and this includes having Health & Safety policies in place to keep staff physically safe and free from injury, but also Data Protection procedures that prevent sensitive data breaches and company information falling into criminal hands.

Working for an employer will also mean that your boss will be the one paying out for security staff, CCTV, security access points, fire alarm systems and equipment, smart locks and physical window and door locks.

Just because you run your business from your home office doesn't mean that you don't need to have security measures in place to protect your customer information and business data to remain compliant with the current Data Protection Act.

However, there are a lot of steps you can take to help automate your home office and free up your time from your day-to-day administrative tasks that are essential to the success of your business.

How to utilise digital assistants in your office

With the introduction of digital assistants in the form of Amazon's Alexa and others, we have been able to revolutionise our homes. Digital assistants have fundamentally changed the way a growing number of us interact with our digital devices.

Voice-activated AI technology is growing more versatile by the day. We are now seeing Alexa and other digital assistants being able to take on many different tasks in the day-to-day operation of our small businesses.

Setting up Alexa or an Echo-dot in your home office can immediately start to pay for itself through automating task such as scheduling your diary, conferencing calls, running productivity tools to keep you focussed on your work, organising your to-do lists, and delivering data.

Here are just three useful examples of how using a digital assistant can save you time and effort:

Automate your conference call schedule:

You can use a conferencing managing tool to sync with Google Calendar. This will help to remind you of your next conference call and will automatically connect your call without you needing to dial the number. You would simply need to say out loud: "Alexa, tell Conference Manager to start my conference call."

Organise your travel with email assistant:

If your home business involves visiting clients, then you can sync Alexa with an email assistant tool. This handy tool will parse your email inbox to find and read back travel confirmations, so if you want a quick rundown about your car rental, hotel booking or flight details, you will get the information you need without needing to physically check your emails for the information. You would simply need to say: "Alexa, ask Email Assistant what time is my hotel check-in."

Get up to date web analytics:

As well as delivering current news and curated data, your digital assistant can also give you real-time website data. Alexa offers web analytic tools that can sync with Google Analytics to deliver you fresh, real-time updates on your website data, such as visitor numbers and web traffic.

There are new skills being added by the day to digital assistants such as Alexa and Google Assistant. It is worth keeping up with the latest releases and useful tools that can help free up your time and keep on top of your office based tasks.

Automating your business bookkeeping and accounting

Balancing your books and keeping track of your business expenses can be an incredibly tedious job for most small business owners. Rather than sitting and pouring over your business bookkeeping and accounts for hours each week or month, you can look at automating these essential, yet quite boring tasks.

By using an online bookkeeping and accounting service, such as Quickbooks for example, you can transform how you do your company accounts.

Many sole traders will start out simple and use free tools and easy systems to get them off the ground and the money rolling in. This can involve creating a simple invoice in Word and sending this to your customers at the end of each month, or on the completion of your work project.

A physical paper-based cash book would then be used to note down all income and outgoings, along with petty cash and recording of business-related receipts.

Instead, by automating your bookkeeping and accounts through an online service, you can save yourself a lot of time and effort. Your accounting service will sync with your business bank account and any merchant trading accounts you have. Every time you make a business transaction it will be recorded. You can scan in physical receipts for petty cash and non-electronic spending.

What is also a major time-saver with online accounting software is that you can create and send invoices in seconds. These will be logged and tracked and you will be sent an automatic reminder of any late payments and outstanding invoice details.

You will be able to see at a glance how much you are owed, how much you have spent and know instantly the state of your business cash flow. This is so much better than having to work out all of your figures by hand.

Automating your Annual Reporting

As a sole trader or small business owner, you will need to complete and submit your annual tax return based on your income and expenditure for each tax year. You can prepare and submit these easily by yourself by using an online accounting solution, such as Quickbooks or a similar option.

As a sole trader, you will need to pay tax according to your income tax band. You will also need to pay either Class 2 or Class 4 National Insurance contributions, depending on your total business profits. Again, your tax and NI contributions can be automatically worked out for you using your online accounting solution.

If you are a limited company, you will also be required to complete and file your audited company accounts each year. This is necessary to keep your company compliant with the law, but it will also show you the financial health of your business. Your figures will also be used to work out how much corporation tax you will need to pay.

Ideally, you should have your company accounts drawn up by a qualified business accountant. This can be an expensive overhead for a lot of micro-businesses owners, especially if they are used throughout the year to keep checks and balances on your business finances, so using an online accounting system to do all of the legwork for you can make your record keeping as simple as possible.

You can set up your own personal gateway online with HMRC and this portal will allow you pay your self assessment tax bill each year, as well as check on things such as your pension entitlement assessment for when you retire, and details of any benefit payments that you currently receive, such as Tax Credits.

Freeing yourself from your home office

As a business owner working from home, you will have important day-to-day tasks to perform that are essential to keeping your business ticking over. This includes completing menial tasks without becoming distracted or sidetracked.

It can be hard to concentrate on your work if you are worried about what is going on right outside of your home office door. You may have a sick child at home that needs your attention, or you may be trying to work during school holidays and your kids are causing chaos.

Before you know it, you have lost a day's worth of productivity and important business calls have been missed or cut short. Your incoming business mail is piling up and left unopened, and your emails are stacking up in your inbox, but you are unable to work through them because you are struggling to juggle with so many other office tasks.

You can take steps to free yourself from your everyday office tasks and be there for your family whenever they need you. It is possible to escape your home office to take care of family matters knowing that while you are absent all of your important business telephone calls are still being answered promptly, professionally and in a friendly manner.

Now would be a perfect time to make use of very flexible and cost-effective virtual office services, such as those offered by Capital Office, London.

Whether you want to have your business phone calls covered when you need to concentrate on work, meet with important clients, or simply spend time looking after a family member when they are sick, you can use our unlimited business call answering service or you can go the whole hog and have our complete virtual office services at your fingertips when you need a little extra help.

By using virtual office services to free you from your every day time-consuming administrative tasks you can focus your time and energy on other more important things, such as getting a work project completed to meet an impending deadline, meeting with customers or potential new B2B partners or trade suppliers.

Capital Office, London is here to help you if you are struggling to run your own business from home or find your everyday business admin tasks are becoming a little overwhelming. You can find out more about the benefits of using an unlimited call answering service and how it can set you free from being tied to your home office telephone. Or you can discover how using a complete virtual office can actually be good for you and your business if you are a sole trader.

A new study by FreeAgent has shown that around 20% or one-fifth of micro businesses have no idea about the government’s Making Tax Digital scheme, despite the government publishing further information about the plan at the end of January.

Lack of information

According to the research, some 84% of respondents thought that the government had not provided enough information about either the digital tax plans or how this new legislation would affect business owners around the UK. But on the positive side, 41% said they were aware of the plans and that they felt positive about them. A further 27% thought that the legislation would make running a business easier than before.

Changing tax system

According to Ed Molyneux, CEO and co-founder of FreeAgent, the Making Tax Digital scheme will see one of the biggest changes to the UK’s tax system for generations. Businesses could also see the start of the changes as early as next year.

Yet despite positive responses from some micro-businesses, it is also clear that others have little idea about what the scheme involves. And even those who are aware of it don’t fully understand how it will affect their business. He went on to add that the Making Tax Digital scheme is a great way for businesses to gain clarity over their financial position as well as being better equipped to calculate and pay tax bills.

For the micro-businesses surveyed who did know about the scheme, there was generally a positive attitude to the changes with only a small number saying that they felt the changes would make things harder. But FreeAgent also urges the government to keep these businesses up to date with the changes and ensure they were fully aware when the changes are implemented.

The scheme

The scheme was announced in the March Budget in 2015 but the 2017 Budget saw the government give small businesses another year to institute the changes. It will involve keeping digital records and sending HMRC quarterly updates with every business having their own personalised digital tax account.

What does Making Tax Digital for Business really mean?

For SMEs, entrepreneurs and sole traders, there are a few major changes that they need to be aware of that will be introduced over the next few years. Here we take a look at the most relevant changes that are planned to happen:

The end of annual tax returns

The Making Tax Digital (MTD) programme is designed to make the reporting of your business’s financial data to HMRC more straightforward through eliminating the need for an annual tax return. Instead, you will be required to send your financial updates to HMRC digitally via your online tax account on a quarterly basis. Rather than being asked to complete a new tax return four times per year, you will only need to submit financial data online without the need for any complicated paper form filling.

MTD has already begun

The initial consultation period for Making Tax Digital has already ended and we can expect to see the new legislation being announced at some point this year. The new MTD requirements will be operated through your existing digital tax account that you will already have with HMRC.

The MTD pilot scheme has already started with volunteers who have signed up to test the system. We can expect changes and tweaks to the system as their feedback is received. Hopefully this will make the system as user-friendly as possible to take into account those with minimal computer skills.

From July to December 2017, the online digital tax accounts will be able to give taxpayers an overview of their standing and what tax they will be liable for.

In 2018 it is expected that all businesses, landlords and self-employed people that have a turnover above the current VAT registration threshold will be able to start updating HMRC for income tax and NI on a quarterly basis using simple accounting software.

If the roll out continues to be successful, it is then hoped that in 2019 all businesses with a turnover falling between the current minimum threshold and the VAT registration threshold will also start to update HMRC on a quarterly basis too. This will also be done through their accounting software and submitted online.

Possible Software Issues

While it will be necessary to keep HMRC updated with your business finances digitally, HMRC have so far been pretty vague about the details. They will expect you to use a form of accounting software to submit your figures and have said that using spreadsheets is fine as long as the spreadsheet package you use will be able to connect to your digital tax account. This may be possible through some sort of software, but looking ahead it may be easier to simply use a digital accounting software package to compile your figures rather than rely on spreadsheets alone.

Real-Time Tax Information

By going digital, HMRC say that your business tax position will be reported to you in ‘as close to real-time as possible’. This will help to avoid you having to wait until the end of the year before knowing exactly how much tax you have to pay. This can help you to budget and set aside money over the year to pay your tax liabilities without the worry of being landed with a huge tax bill at the end of the year.

At the moment, the threshold for meeting the MTD requirements currently stands at £10,000. However, for those who are exempt because their annual sales fall below this figure, there is an option for them to opt in if they so choose. There are other groups that will be exempt from MTD and these will include charities and those deemed to be 'digitally excluded' for whatever reason.

While it is a pretty straightforward process for a UK resident to open a business bank account here, it can be a little more complicated for a non-UK resident. Although it is not a legal requirement for you to have a separate UK bank account for your business, it will be wise for you to do so from a practical point of view.Without a business account for your limited company, it will be very difficult for you to manage your finances and sort your business accounting records from your personal ones. It will also be much more difficult for you to obtain business financing for your company as you may not be taken very seriously without a proper business account. A business will have much more credibility in the eyes of financial institutions if they are seen to be running professionally with a dedicated business bank account.As a non-UK resident you may be eligible for a business bank account from some of the major UK banks: Barclays International or Lloyds Bank for example. The second option you could try is to open a bank account overseas by legalising your company formation documents.

Verification

It is routine for banks to perform credit checks on all applicants wishing to open a business bank account. This is done to verify the applicants suitability. Checks will include providing them with photographic ID and proof of a UK address, both of which must be submitted in person at the bank you are applying to. With Lloyds Bank, you may be allowed to open an account for your business if at least one of the account signatories resides in the UK. With Barclays International, it may be possible for you to open an account if you can provide an initial security deposit along with your application.If you are yet to incorporate your business, then you may be able to take advantage of our Barclays Business Banking service available to our registered clients. Please contact us for more information.Here are some details for the requirements to open a business bank account in the UK:

Lloyds Bank

An account with Lloyds would be suitable for a limited company with at least one UK-resident signatory. Applications can be made online or by telephone. The UK based director will be asked to present photographic ID and proof-of-address documentation in person at a Lloyds bank branch. Overseas company owners and account signatories must send copies of their photographic ID and proof-of-address documents to the same Lloyds branch. The documents will have to be legally certified before presentation by a banking official, notary, solicitor or government body.Remember to take copies of your paperwork. Do not post your original documents just in case they get lost in transit. Get your copies legalised and post those instead.

HSBC Business Banking

An HSBC account may be suitable for UK registered limited companies with all non-UK resident shareholders and directors. To meet with the requirements of the bank, the shareholders of the company must travel to the UK to meet with an HSBC representative at a HSBC bank branch.

Barclays International

Barclays offer accounts that are suitable for companies with no UK-resident directors or shareholders. To apply you must go through Barclays International that is based in the Isle of Man. Usually, you will be asked for a security deposit of £10,000 for the first month after account activation. Your account will be classes as being offshore. However, your account will be based in London and you will be able to access the same facilities as any other type of bank account, such as credit cards, debit cards, cheque books, online banking and telephone banking.

Your Local Bank

Check to see if your local bank has a presence in London. If this is the case then if you go through them you may be able to get an account opened at their UK branch.

An International Bank with a Branch close to you

An international bank will likely have a branch in operation in the UK. Check with them to see about setting up an account with their UK branch.

Online Merchant Accounts

There are companies who offer merchant account facilities and a type of basic banking and even MasterCard, but they are not registered banks so banking regulations do not apply to them. Some examples are Paypal.com, Skrill.com, and Cashflows.com. They also charge much higher fees than regular banks, so you may find banks to be more cost-effective in the long run.If you have a registered company in the UK, but you want to open a business bank account in your country of residence, you can obtain an Apostille for your Certificate of Incorporation and the Memorandum and Articles of Association. These corporate certificates will be required by overseas banks and authorities as evidence of the legal existence of your UK company.It is quite straightforward to get your documents legalised by a Notary by going to a qualified lawyer specialising in Notarial Practice. They will sign your company documents and liaise with the Foreign and Commonwealth Office in London to obtain the Apostille Certificates. You can also apply online through the Legislation Office.

Having decided to be your own boss, you have to do away with the job search and all the stress that employees undergo. This kind of thought brings out the entrepreneurial spirit in you. However, the decision is yours when it comes to the kind of business you want to go into. You can choose to set up a limited company or to register as a self-employed sole trader. Here are some questions you need to answer to help you with the kind of business that is best for you.

What industry will you be working in?

The industry you get into plays an important role in how clients view your business. In some industries, it`s very common for freelancers to be sole traders. On this basis, clients are usually very happy to deal with them. For instance, writers or artists may decide to form limited liability companies. Clients prefer to deal with bigger organisations that are registered. The main reason for this is due to their transparency as the details of the company is displayed publicly in the company house.

How much paperwork do you want to do?

Whether you are a sole trader and the owner of a Limited Company, or you are a director of a Limited company, you`ll have to complete a self-assessment tax return with HMRC every year. The difference is that there will be extra paperwork for the director of a Limited company. The penalties for wrong filing of paper work are usually higher for the directors of a company than it is for sole traders. Limited companies must produce Year End Accounts (also called statutory or annual accounts) and also send HMRC a Company Tax Return and Companies House an annual return.Both limited companies and sole traders must register for VAT if their estimate for annual takings is estimated to be up to £81,000 at the year.

How much responsibility do you want?

As a sole trader, you are entitled to all the profits as long as you have paid tax and National Insurance contributions. However, you are responsible for the losses your business incurs. For this reason, you might lose all your assets if you eventually run into debt.If you form a limited company, you will be taxed for any money you withdraw from the business. More so, you have to record what you want to use the money for (e.g. salary or loan). As a director, tax and both employee and employer`s NI contributions will be deducted from your salary by PAYE. This means that you`ll pay more NI this way than you would as a sole trader. However, the benefit is that your personal assets are all protected against any debts your business may incur. Again, your legal liability is limited as well.

How much money do you need?

It is much easier for a freelancer to work for a big organisation or apply for business loans if he chooses the limited liability route. The Limited company gives you an edge due to its legal and financial protection.

Don`t forget you can change your mind.

If your decision is to form a limited company, we can help you with that. You will receive a certificate of incorporation indicating the registration date and the company number.However, if you choose to be a sole trader, you will need to register for self assessment with HMRC by 5th October following the end of the tax year. Contact us if you need more advice or information on registering as a sole trader.It is very possible to shift to the structure that suits you if the nature of your work or that of the clients you hope to attract, changes.For more information on this matter and lots more tax and financial news, see Your Virtual Office London blog today!

While they are two substantially different concepts, many new business owners dont fully evaluate the variances between equity and working capital which could represent a clear financial error.Indeed, according to specialists in the field, stockholders' equity and working capital operate two completely different areas of business.Stockholders' equity, strictly speaking, is nothing more than business assets. That is, the difference between assets and total liabilities of a company.Stockholders' equity, experts add, consists of the capital, which basically refers to the assets assigned by the members to the company in which participants, reserves, dividends, profits and, in general, all assets net for those entitled owners or partners of the company.In simple terms, equity is what actually owns a business.Working capital, on the other hand, refers to the operational capacity of firms, i.e. the implementation of activities that typically allow them to create benefits.While working capital also requires the comparison of assets and liabilities, the analysis has a short-term approach and does not consider the total assets and liabilities.In simple terms, working capital is the difference between assets and liabilities for the short-term flows of your business.

Current assets to consider:

- The cash at hand- Short term accounts receivable- The bank accounts of your business

Within current liabilities, you must include:

- Payable to suppliers- Taxes- PayablesThis working capital is needed to resolve unforeseen events that endanger the operating cycle of your business, such as machine breakdown or replacement of materials.In short, stockholders' equity refers to the actual value of the company, while working capital concerns what it has to remain active.

Entrepreneurs need resources to transform their corporate projects into a tangible and profitable business. Small and Medium Enterprises (SMEs) require capital to evolve, by getting a foothold in the market and to eventually expand.These resources typically allude to what we know as financing. Experts in business administration define it as the mechanism that allows entrepreneurs and companies to acquire the assets they need to launch their production processes. Furthermore, this helps meet the expenses related to them and, in general, aids with the overall development of their initiatives.Funding has no specific origin but comes from various sources, all willing to offer financial solutions to business leaders and their companies, but not without getting some revenue.As a result, the options available to an emerging entrepreneur are diverse:

1. External Financing.

- Bank credit specialising in the SME sector.- The short-term credit granted by suppliers.- The deferred payment to suppliers.- The capital injection by an investor.

2. Domestic Financing.

- The capital of the entrepreneur themselves.- Contributions of the partners (if the company has them).- The proceeds from the productive activity of the company.- The sale of idle assets (those that are no longer used).All these alternatives (except as regards to the entrepreneurial resources), represent certain costs for companies.Funding associated with bank loans must be repaid with interest included. Credit agreed with suppliers will have to be settled by the deadline, otherwise the risk of losing their services or supplies will apply.Similarly, the investor benefits after injecting money into the project. The partners want to get better dividends than to bet their capital in less risky financial instruments. Therefore, although the sale of idle fixed assets represents certain income from capital, this will be lower than what would be achieved from the sale of assets in terms of use.As a result, potential funding partners have to assess your financial situation, consider all alternatives available to promote their projects and define what the costs of each are to make the best decision.They will take into account financial conditions, interest rates, payment terms, fines and penalties for non-payment, and benefits payable by creditors, among others.

The balance sheet is a financial statement that portrays the economic situation of enterprises in a given period. The analysis of this defines the relationship between assets, liabilities and equity of the business.This document is usually made at the end of the financial year of a company. However, it is feasible to create balances relating to more tightly contested lapses. The following functions of a balance sheet are to:1. Know the total value of assets, liabilities and equity of the firm.2. Identify the origin and use of assets, and evaluate management and repayment of debts incurred by the business.3. Facilitate the historical evaluation of corporate finance.4. Take timely decisions and avoid financial crisis.As anticipated above, the variables included in the balance sheet are:AssetsThese are basically the assets, rights and resources available to companies to generate future economic benefits.According to specialists in finance, assets can be classified into two groups:a) Fixed Assets. This subsection refers to the operational infrastructure of goods, which includes machinery, furniture, transportation equipment, technology and accumulated depreciation. It is also categorised as fixed assets to assets of temporal duration, such as raw materials.b) Current assets. These are fluid property i.e., or those that can be easily converted into money. In this category are receivables, bank accounts business, sales made on credit, potential investments to be sold, products in process, manufacturing, inventory and items under sale.LiabilitiesThese are the obligations of companies in a given cycle. Liabilities are divided into:a) Non-current liabilities. In this subcategory are located long term debts with financial institutions.b) Current liabilities. In this group are debt covenants signed with suppliers documented by invoices and taxes.The balance sheet is nothing more than the value of the business, after subtracting liabilities of the total assets of the company.To prepare the balance sheet, it is necessary to break down this information in two comparative columns (assets and non-current liabilities and current.)The next step is to add assets and compare this with total liabilities. The result of this comparison data reveals the assets of the business.

Factoring is to delegate the management of customer invoices to an external company (a factoring company, also called a factor) and to get an advance on its debts if the company would grant payment terms to its customers.The mechanism of factoring is very convenient, but it is not free! How much is factoring? What type of society uses these services? Here we analyse the typical profile of a client company.

Factoring in detail

The mechanism of factoring includes several additional benefits, and several distinct costs!First, the factor manages all or part of the business' client account. The service involves monitoring and charging regulations, customers and raises the risk of default. "The commission factoring" encompasses all of these benefits, including the unpaid guaranteed.FeesThe factoring fee to pay back the factor varies. Generally, the price to pay for peace of mind is based on the gross sales of the business, but also the volume of invoices to be processed or the reputation of debtors of the company.The factoring fee is indeed a commission rather than a fixed charge. This will be deducted directly from revenues collected by the company.Then, in the case of delayed payment, the factor provides an advance on debt, which can be up to 90% of the bill of the company. The latter then pays the factor, via a sort of "interest borrowing ", called "the funding fee”.Lastly, most factoring companies add various fees, such as fees or additional voluntary benefits (audit, consulting etc.)Factoring: summary of the costsSo with this cascade of costs, how much are the returns factoring? Some companies offer a factoring fee ranging from 0.5 to 2% of sales to manage.Others have a more ambiguous billing that includes a factoring fee and other charges (various commissions, overhead ...) of the total cost for all services, ranging from 7-15% of the amount plus VAT. It is advisable to make detailed specifications to control costs. In short, each factoring company uses a different method to calculate its price.

The benefits of factoring

Given the price tag, the benefits of factoring are many. The possibility to offload customer reminders and get cash advances are the primary benefits. If you look closer, factoring is a solution to outsource an entire department and the management of the account.

Factoring or discounting?

Discounting is a process that allows the company to sell its debt to its bank, which allows them a cash advance, with interest. The procedure involves the signing of a bill of exchange, subject to acceptance of the bank. Factoring is simpler, in terms of procedure and additional documents.

Factoring: Who is affected?

To benefit from economies of scale, we have to see its sales increase.Factoring is typically for high-growth companies that do not have the time to organise their customer service and are thrown in at the deep end. The same goes for companies with multiple activities, wishing to delegate some, especially when they are deployed overseas.Companies that perform substantial payment delays will have an incentive to seek a factoring company to better manage their cash flow and to discharge reminders. Traditionally, payment delays affect enterprises B to B (business to business) or activities for professionals (not individuals).Factoring is biased towards "large and medium-sized companies". To diversify their customer base and attract "small" companies, some factoring companies offer a flat-rate system, rated to the volume of invoices to process.For plenty of information and other accounting news, check out Your Virtual Office London today.

If you are a small business owner and operator, especially if you are what some people call a solopreneur (where you are the sole owner and sole employee of the company), then you are bound to have a lot on your plate every day. Time is always of importance; there are not enough days in the week for everything you have planned. To spend even a lunch or a few hours in the evening with friends and family becomes increasingly difficult and the idea of having the time to sort out the taxes of the company is something like a pipe dream (or even nightmare for many of us!) Technology is something that can be given to small business accounting as a fresh concept.However, the sheer volume of numbers and percentages is not in the interests of your professional life, even with the support of computer software and smartphone applications that can be used. All you can find yourself surrounded by is often unclear instructions and the sense of being overwhelmed by all the efforts it takes.

Going Solo

For some people, small business accounting, can take a long time to adjust to. It may take technology or expert advice from friends or family, or previous experience in this field in general, but some entrepreneurs have managed to make it work more than others. Is this is a good thing? This is a difficult question, as the time these small business owners spend on record keeping, accounting and tax filing can very well be used for the expansion of business networks and personal growth.

Hire an accountant

Whether your business is ready or not, you might consider hiring a professional small business accountant. It frees up more time for the important and urgent issues – after all, you are an owner who has to work! But at the same time, hiring a full time in-house accountant can also be a serious drain on your budget. Are you ready? Do you really need someone to be there forever, even when there is little or no work for them to do?

Workforce

Perhaps the logical answer for effective growth and stability comes from outsourcing your small business accounting. Now, this used to be too difficult to design and was an arena filled with doubt and stigma. However, it is the way that more and more business owners choose nowadays when considering the needs of its accounting.An accountant using outside resources will not be used for the time when there is little or no accountability to speak of- at the same time, they will be priceless when the tax issue permits, or needs modifications or other complex structures. Knowing that your accounting matters are in the hands of an expert, you can finally focus on doing what you love, which is to work towards greater prosperity and the growth of your company. Your small business accounting and fact-based decisions will help you achieve your goals faster.Your Virtual Office London help many small businesses get up and running, from virtual office &mail forwarding address, too accounting and banking services and introductions. What ever the need we can help your business, get in touch with us today to see what we can do for you and your company.