At Albert Goodman, our business services team have the great pleasure of working with a fantastic variety of businesses across the South West. We work with everyone from haulage companies to chicken farmers, aerospace firms to coffee shops. While each business is unique and faces its own distinct challenges, we’ve tried to identify and provide answers to some of the typical questions business owners will ask us within this useful list. Most, but not all, of these questions, are generally asked by relatively new businesses and highlight the importance of having an accountant who can provide excellent business advice as well as first class compliance work. So, what do business owners ask their accountant?
Question : I have recently set up in business – what things do I need to consider?
Answer: When starting in business, there are many things that you need to consider! It is generally best to contact an accountant at an early stage. Typically, the things you need to consider are as follows:
- How should I structure my business, i.e. sole trade, partnership or maybe company?
- Do I need to set up a bank account?
- Do I need to tell HM Revenue and Customs what I am doing?
- How should I keep a record of my income and outgoings
At Albert Goodman, we offer all new businesses an initial free of charge introductory meeting. During this meeting, we would be able to run through everything with you.
Question:What is the best way to keep my books?
Answer: This will really depend on your personal preferences. There are a lot of good packages available and even a simple manual system or excel spreadsheet could be suitable. At Albert Goodman, we can advise you on all the options available to you.
Question: How long do I have to keep bank statements and invoices for?
Answer: HM Revenue and Customs require all businesses to retain records for a minimum of 6 years. We therefore, recommend that you keep records for the previous 6 years plus the current year.
Question: How do I make more money from my business?
Answer: This could well be top of the ‘what do business owners ask their accountant’ list. We are sure this is something that everyone in business would like to know! As accountants and business advisors, the key things that we would look at with any business is the level of turnover they are achieving, the margin that they are making on their sales. In addition, it is important to make sure that when pricing jobs or products for sale, businesses are factoring in labour costs and overheads correctly. In order to be competitive, you invariably have to keep your overheads well controlled.
Every business is different and it is important that you take stock from time to time. Take a step back from the business, review the figures and consider where savings can be made.
Question: What is the best way to take money from my company?
Answer: This really depends upon your individual circumstances and the level of income required. It will also depend on the set up of your company as to whether one individual owns the company outright or there are different parties involved. A good accountant will be able to advise you on the best way of doing this.
Question: My business turnover has grown rapidly over the last 12 months, but I never seem to have any money to pay my bills. What is going on?
Answer: This is something that we typically see with businesses that are expanding rapidly. There is generally a time difference between paying money out on your overheads and getting paid for the work done. This can leave cash flow tight as you grow. With any growing business, it is important that you keep on top of the bookkeeping . Make sure sales invoices are raised on time and debts are collected. Preparing a cashflow forecast may also be beneficial, so you can understand when shortfalls may arise. It may be necessary to speak to the bank about a short term overdraft.
The other key thing to ensure is that the quality of your turnover is there and you are not chasing work and achieving low margins, just for the sake of increasing your turnover. A good quality turnover that gives you a good return can be far better than high turnover but at low margins.
What do business owners ask their accountant? 13 Frequently Asked Questions
Question: What should I look at to determine if my business is profitable?
Answer: If you are running a full bookkeeping system, you should be able to produce a record of your income and expenditure on a monthly basis. This would give you a broad indication of how you are doing. If you use a software package such as Sage, Quickbooks or Xero, you will be able to produce a profit and loss account on a regular basis.
It is also important to look at individual sales, to make sure the level of profit achieved on each one is sufficient to cover your overheads. This is something that it is sensible to do on a regular basis. If, however, your bookkeeping systems are not that sophisticated, we would recommend getting your annual accounts prepared as soon as possible after the year end. At this stage, you can then make a proper assessment of how the year has gone.
Question: How much tax will I have to pay on my profits?
Answer: This will depend on how you run your business. If you are a self-employed individual your profits will be added to any other income you have. You will either pay tax at the basic, higher or additional rate of tax, depending on your overall level of income. As you are self-employed, you also have to pay Class 2 and 4 National Insurance on your profits. If you operate through a limited company, the company is responsible for its own tax. The current rate of corporation tax is 20%. Money that shareholders then take out of it are taxed separately and the rate of tax paid will depend upon how the money is withdrawn and the individual’s own personal circumstances.
Question: Why do I have to pay tax personally if I trade through a limited company?
Answer: A limited company is a separate legal entity from the individuals that own it. The company will pay tax on its profits at the corporation tax rate. As an owner of the company any money that you receive from it will either be by way of salary or dividends. Your salary has to be taxed at source, just in the same way as any other individual employee would be. Dividends are now subject to tax at 7.5% if you are a basic rate tax payer and 32.5% for higher rate taxpayers. A company is a separate legal entity, any money that is paid out of it should be accounted for correctly.
Question: Should I be a sole trader or a limited company?
Answer: This will really depend upon your personal circumstances and the business you are undertaking. It is best to take advice before you start a new business. It is quite easy to move from a sole trade to a limited company and therefore if you are not sure at the outset how the business will develop, it may be best to start as a sole trader and then move over to a limited company as you become more established.
Question: Should I have a company car?
Answer: This will really depend upon your personal circumstances. If you run a business as a limited company and the company buys and provides you with a company car which you use for private journeys, there will be a tax charge on you as an individual, for the provision of the company car. The level of the charge will depend on the type of car provided. If you travel substantially for businesses purposes it may be sensible for the business to provide you with a vehicle or alternatively it may be better for you to have your own vehicle and charge the business as and when you undertake business journeys in your private car.
Question: If I die, what will happen to my business?
Answer: This something that any business owner should consider and have provisions in place for. It comes down to individual circumstances. For somebody who works alone, the answer will be very different to somebody who employs members of staff. Get something written down about what you would like to happen to the business in the event that something does happen to you. Perhaps you simply want the business sold on the open market? Or perhaps you would like a nominated individual to step in and continue the business for you.
Consider the impact it would have on your customers and family. It is essential that you consider both business and personal insurance, to make sure staff/dependents will be provided for in the event of the worst happening.
Question: Why should I have a Will?
Answer: If you die without a Will, the process of sorting out your affairs becomes more complicated. How your assets will be distributed after death depends on your personal circumstances. It will depend if you are married, have children or have parents who are still alive. Undertake some tax planning as it is important to consider the Inheritance Tax upon death. Steps can be taken to ensure this is mitigated, but it must be planned in advance.
So what do business owners ask their accountant? Hopefully, we’ve shed a little light on the subject with our FAQS. In a wider context, we get asked a plethora of different questions everyday, which is one of the great pleasures of the job. Don’t be afraid to ask a question, will always do our best to help.