Reply to: What does my accounting report sound like to you?

[TheCyclingProgrammer]

I last used Xero when I started my own business 5 years ago and it was nice but seemed overkill for a one man company, hence I moved to FreeAgent. I'd still recommend looking at Xero for some times of small business though and I'm sure it's come a long way since I used it, as has FreeAgent.

I do have a Numbers spreadsheet that I use for cash flow and profit projections if anybody wants it. It's semi automated, will work out future VAT liabilities based on sales (calculated using the FRS) and FRS surplus income and gives you an idea of both your company's future cash and retained profit position.

[7specialgems]

I'm currently trialling Xero but I have to be honest and say that I'm a bit overwhelmed with all of the things I have to to do to set it up.

I think a trial of FreeAgent may well be in order.

I currently use Boox as my accountants but their web tool is primitive, with no useful reports and an assumption that you withdraw full eligible dividends every month (!). Hence all this hassle.

Thanks for everyone's input chaps.

I think I've got the answer that I am looking for - i.e. that we all make similar calculations but there is no FRS'esque standard management report for it (and that most of us get there using common reports provided by popular web tools).

Edit: FRS: Financial Reporting Standards (not Flat Rate Scheme!)

[ASB]

You seem to be going to quite a lot of effort to produce said spreadsheet.

Why not download a free account package, I think Microsoft small business accounting still has a free download and there are others.

Yes, they do take a bit of setting up, but basically all you need to do is enter the invoices that you raise, when they get paid receipt the payments.

You will then have a permanently up to data balance sheet and P+L. You vat liabilities etc are there at a glance.

You can journalise your accountants end of year figures too for things like depreciation and taxation.

If you are taking a cautious view you can debit P+L and credit a liability account with 20% of the P+L to account for the future CT liability.

I always used to use quickbooks. Never went beyond v 2004. It was really easy and provided all the management account information I ever needed.

Edit: probably not as effective as free agent as recommended by TCP, but could be cheaper.

[TheCyclingProgrammer]

Is this from FreeAgent ?

Had a look at the website, not sure about £25 pm unless it gives more than a good vlookup excel spreadsheet, but I notice there is a referral scheme thingy that benefits referrer and recipient - anyone using FreeAgent that wants to utilise this if I go for it ?

Also, can deduct the cost as an accounting expense each month ?

Advice appreciated.

Yes, it's from FreeAgent.

I'm happy to refer you, but it's certainly a lot more than an Excel spreadsheet, unless an Excel spreadsheet can also:

* Handle your VAT accounting and submit VAT reports for you
* Automatically import your bank transactions and reconcile them for you
* Handle your (simple) payroll with RTI support
* For self-employed (and soon Ltd Co directors), submit your self-assessment for you if your affairs are simple.
* Give you a reasonable calculation of your corporation tax liability (although there are a few capital allowance related things that it doesn't support which means it might not match your accountants calculation)

Plus lots more. It does invoicing, expenses, bill handling etc.

There's a trial, give it a try. Here's the referral link: Online accounting software: small business and freelancers - FreeAgent. Full disclosure: I no longer pay for my account (I actually won a free lifetime account but would have got this with my 10+ referrals anyway) and as part of the FreeAgent evangelist program I will get a regular commission if you sign up with my referral code. This is not why I recommend it; I use it myself.

There are accountants out there (including some that post on here) that are happy to work with FreeAgent (and other competing packages).

[Bellona]

Seriously, have you considered something like FreeAgent/Xero/Kashflow etc?

Is your screenshot from FreeAgent ?

Had a look at the website, not sure about £25 pm unless it gives more than a good vlookup excel spreadsheet, but I notice there is a referral scheme thingy that benefits referrer and recipient - anyone using FreeAgent that wants to utilise this if I go for it ?

Also, can deduct the cost as an accounting expense each month ?

Advice appreciated.

[TheCyclingProgrammer]

Seriously, have you considered something like FreeAgent/Xero/Kashflow etc?

I have a spreadsheet for cashflow/forecasting but at any point I can see what my company retained profit is - it's on my dashboard when I log in. I normally have a rough idea of what my future expenses will be so can account for this in my head but refer to my forecast if I need to.

[Martin at NixonWilliams]

I think some of the motivations for the complicated route include payment of VAT quarterly and that some dividend payments have already been made.

By calculating the turnover correctly you have already set aside the amount needed for VAT. For the dividends already paid, keep a total of the profit in the year to date plus any profit carried forward, less any dividends declared in the year.

If I do a P&L of the year to date, then it is difficult to compare the number that falls out of the bottom to what's in the bank because some of the liabilities and the profits have already been settled.

Agreed, this is the biggest problem - If you have an accurate profit figure, it should be easy enough to distinguish this from your liabilities.

As complicated as I have made it sound, I thought it made sense to just derive it all each time from first principles.

As I said, your thinking does work, it's just hard to manage. I think you would benefit from an online book keeping system, a good one will do exactly what it is that you are wanting to achieve. We are in the process of creating our own however there are plenty of good (and bad) ones out there at the moment.

[DirtyDog]

Freeagent will be quaking in there boots

their

[7specialgems]

In theory it should work but it is difficult to manage and is much more than what you must demonstrate in order to be able to declare a dividend.

I think some of the motivations for the complicated route include payment of VAT quarterly and that some dividend payments have already been made.

If I do a P&L of the year to date, then it is difficult to compare the number that falls out of the bottom to what's in the bank because some of the liabilities and the profits have already been settled.

As complicated as I have made it sound, I thought it made sense to just derive it all each time from first principles from the current revenue position.

It sounds like there isn't a recognised FRS type of format for this sort of report.

[Martin at NixonWilliams]

I meant to say Turnover. I'm including sales on an accrual basis

The structure I have at the moment is:

Cash at bank + unpaid raised invoices
- Expenses for this period (salary, company expenses, consultant expenses)
- Corporation Tax totted up to date and unpaid (includes amount attached by unpaid raised invoices)
- VAT totted up to date and unpaid (includes amount attached by unpaid raised invoices)
- 12 month company survival fund
= Profit available for dividends

In theory it should work but it is difficult to manage and is much more than what you must demonstrate in order to be able to declare a dividend. You are effectively extracting the profit and loss figure from a balance sheet in order to determine the profit available, which is more work than preparing the profit and loss itself to do the same thing, if that makes sense.

My advice would be to calculate the turnover, expenses and CT liability each period. If done correctly, and once the invoice is paid, then what is left in the account should be roughly the profit you have calculated plus any VAT, PAYE, CT etc. - At the yearend everything should tie up nicely.

Note that the above does not include other debtors/creditors you might have, cash tied up in assets, share capital etc.

I recall you saying in an earlier post that you were not completely satisfied with your accountant but this is really something that should really be provided for you.

I hope this helps.

Martin

[tarbera]

wow

I have put together a bit of a homebrew report which tells me, at the end of a period, how much distributable profit is left in my company account.

For a period (usually monthly) I start out with the total of cash at bank/published invoices. I then subtract the period's expenses, the VAT, and Corporation Tax. I then go one further and subtract the full amount of a 12 month budget that would pay my salary and all the company's expenses for the period if I was benched.

The number that falls out of the bottom is pure profit, ripe for dividends.

I tend to cream off the suplus above a certain figure as my dividend a couple of times per year.

I tried to describe this report to a contractor friend of mine on my current gig and how I found it useful, and he looked at me as if I come from Mars.

It's got me thinking that I've dreampt up something possibly overcomplicated for a problem that every contractor has.

Can any Account types on here recognise what I'm trying to do and chime in with a snappy googlable term that describes a common format for it?

Freeagent will be quaking in there boots

[7specialgems]

If this is what you are aming to calculate you should not be starting with the cash at bank - the company's cash position is an entirely separate matter to its profit position.

The calculation of the distributable profit is as simple as:

Turnover
- Expenses
= Profit before tax
- Corporation tax
= Profit available for dividends

I meant to say Turnover. I'm including sales on an accrual basis

The structure I have at the moment is:

Cash at bank + unpaid raised invoices
- Expenses for this period (salary, company expenses, consultant expenses)
- Corporation Tax totted up to date and unpaid (includes amount attached by unpaid raised invoices)
- VAT totted up to date and unpaid (includes amount attached by unpaid raised invoices)
- 12 month company survival fund
= Profit available for dividends

I think my problem is that my report is with respect to the company bank account after all expenses are paid - and to date, whereas P&L is with respect to sales for a period.

[Martin at NixonWilliams]

I have put together a bit of a homebrew report which tells me, at the end of a period, how much distributable profit is left in my company account.

If this is what you are aming to calculate you should not be starting with the cash at bank - the company's cash position is an entirely separate matter to its profit position.

The calculation of the distributable profit is as simple as:

Turnover
- Expenses
= Profit before tax
- Corporation tax
= Profit available for dividends

[7specialgems]

Are you trying to create a cashflow forecast?

I'm not sure it is a cashflow forecast because the only period I am looking at is up to and including the present day?

I'm subtracting my 12 month bench warchest from Net Profit to work out what's really available to me to pay in Dividends.

It has a similar layout to a Balance Sheet but it doesn't contain non-cash assets and it contains the 12 month bench fund as a liability.

[7specialgems]

A balance sheet?

I wasn't sure if Balance Sheet was appropriate because I'm including estimated, future values and I am not including non-cash assets.