If you run a business providing a service on a project-by-project basis, you may find that it is far from straight forward to work out the individual profit on each job or project because those costs may be distributed across a range of ledger codes. This is where project costing can help.
From an accounting perspective, you need to account for the initial purchase of an asset but then add in a transaction for each year you hold the assets, to reduce the value to the business. There are no hard and fast rules on when or by how much you depreciate the value of assets but this explains some of the key facts and aspects to be aware of.
It is not uncommon for a director to loan a company money to assist with growth, asset purchases or cash flow matters. But loans into and out of the company accounts to a Director need careful management.
It’s hard to turn the television on or look at content on the internet these days without seeing various reports about the encroachment of AI into modern life and the potential risks it poses. But for many SMEs it can seem like pie in the sky and not something they’re likely to come into contact with. But is that actually the case or do SMEs need to consider if and how AI can support their businesses?
A bank reconciliation is an important part of the daily accounting function for any business. In essence it is a matching process whereby you link the receipt of funds into your bank account with a sales invoice or payment of funds with a purchase.
If you’re thinking of selling your business, one of the key questions you may ask is what tax I will pay on the money I receive? It’s a fair question too. Afterall, if you’ve been building the business for many years, you’ll want to ensure you see maximum benefit from the risk and hard work you’ve undoubtedly had to put into it.
There are a number of reasons for running your own business. It may be the flexibility of working hours, the opportunity to work for yourself or a wish to build something to pass on to the family. But whatever your driver for starting out, one thing is for sure, you’re most likely not doing it all for free. As well as securing a regular income for you and your employees, you’ll be looking to build value into your business. This value is called the equity.
It may not be a question that you thought you’d have to ask yourself, but as a Director, part of your legal undertaking requires you to ensure that the business remains solvent and trades within its means. Operating outside of these boundaries could see the company being declared insolvent, struck off and you, as a Director, being penalised or disqualified – meaning you cannot be a Director again.
EBITDA or the shorter, EBIT or EBT, is a financial reporting term which identifies the profit generated from trading activities of an organisation. However, it is fundamentally different to Net Profit which states the profit left after all costs have been applied. The acronym in full is Earnings Before Interest, Taxation, Depreciation and Amortisation and whilst historically used within larger corporations, is now a relatively common reporting metric in management accounts for SMEs.
If you have responsibility for budgeting in your business, the events of the last couple of years will undoubtedly have kept you busy and will probably have thrown some challenges your way. You’re not alone. Businesses everywhere are struggling to set and maintain accurate budgets, beset on all sides by world events and economic trends.
So how do you budget effectively, and more to the point accurately, with so many external influences at play?
If you’re thinking of becoming self-employed, you may be weighing up the choice between incorporating a Limited Company or trading as a sole trader. One of the key things to consider is the amount of personal tax you’ll end up paying, how it is calculated and when you have to pay it. It is subtly different in each case and you also need to be aware of other taxes which apply.
Yes, a salary of 100k + does still put you in a relatively select group at the top of the UK earners list. Whilst those at the very top of that heap are touching seven-figure salaries, the proportion of those on more than £100k continues to grow.
But with a cost of living crisis, slow growth and record amounts of government borrowing needing to be paid back, if you’re earning £100k or more in the UK, you may find yourself in the spotlight if there are any changes to the income tax bands.