Buying a new Business, Accounts
You will need an Accountant experienced in the business that you are buying.
Don't use one that does not deal with that sort of business or has no experience in that field, I made that mistake initially, they have to have a knowledge of the business you are in
You need Accountant that will do the VAT (Value Added Tax) and PAYE (Pay As You Earn) returns for you, collect the paperwork, monthly or fortnightly and tell you where your weak and strong aspects are in the business.
You might think it’s more expensive doing it this way, I spent many years doing the accounts myself, thinking I was saving money, I put the accounts in to the accountants and had four months trying to remember all the queries.
The cost was far more than my present accountant who is always on top of things, all the time, in addition the amount of time that it saved me was invaluable.
Most Accountants have an insurance scheme to cover VAT or PAYE investigations, you might say you have never had an investigation and that you run a straight business, so why should they investigate.
One malicious phone call and it can cost you a lot of money on Accountants fees, I had just that, until it was dropped, you have no redress.
You have to do the day to day documentation of all your purchases and sales, staff hours etc., if you are very busy, this can be very inconvenient, there are book-keepers who will come in for a few hours a week and do this for you, some will do your staff PAYE, but it still needs checking by your Accountant.
There are many good paperwork systems available to be used on your computer, but don’t buy one until you know that it is compatible with your new Accountants system, he will in all probability provide you with a system, so that you can down load your accounts on a specific day each month.
Having been subject to many routine VAT investigations over the years, normally around every three years, they can be time consuming when you are busy, especially if you do the VAT returns yourself, they assume that you will have made an error and go to extreme lengths to find it.
After a very lengthy VAT investigation that took three days, the Investigator finally said he could only find one error and that was that there was no VAT on coal, at that time, this seemed rather strange since we didn’t use coal.
He finally produced the receipt showing coal at £23.00 per bag including VAT, I pointed out that it was synthetic coal for the gas fires, he beat a hasty retreat after a long three days.
If your Accountant does your VAT, they know that it is correct and their visits are relatively brief.
A useful tip is set up a graph of your takings day by day, depending on your business, with a retail business especially, noting the causes for fluctuation in trade, it might be weather, bank holidays or whatever, but it will give you a flow pattern that will guide your stock purchases, the results can be surprising.
If you have a retail business in a tourist area with seasonal fluctuations, a useful tip is build up your stock by June and July, which you pay for in August your busiest month, only buy the minimum stock needed in August. The reason being that prior to August your turnover has been increasing giving a false impression of high profitability against purchases, after August your turnover is dropping, but you are paying for the previous months purchases and the perceived profitability drops dramatically, many businesses struggle in late Autumn, if they have spent too much money thinking their profitability was higher, a good Accountant should warn you of this.
Your Accountant should be a source of all Financially linked business information.
Staff Employment Contracts.
Initial Insurance advice.
Tax savings, legitimate and justifiable expenditure in connection with your business like professional institution subscriptions, vehicle and travel expenses etc., these can vary from business to business.
Pension advice, staff and yourself. Previous accountants have always told me that my wife’s earnings should be kept below the National Insurance and PAYE thresholds as a part timer, this is not necessarily correct. If my wife’s income had been kept above NI threshold and had been paid every year, her State Pension would have been considerably higher, it is an error that many Accountants miss. The present Government are considering changing this anomaly.
Compulsory staff pensions where applicable.
Stock Control, ensure that you have regular stock control, in my early days in a retail business, petty pilfering was not rife, but occurred causing a serious drop in profitability and an embarrassing interview with the Inland Revenue. With tills linked to your computer recording all sales, you still need physical checks.
Finally, don’t ever be nervous about changing your Accountant, there are good ones and bad ones or unhelpful ones and expensive ones, which doesn’t always mean good, your Accountant should be your general financial adviser not just the person who completes your accounts.
There is no point giving your Accountant the Business Accounts if they don't add up, without some very good reasons.