We keep a close eye on the accountancy and tax world - its vast, complex and changing faster than at any time in history. When I first trained in practice we had one computer between ten of us and as a practice that made us forward thinking and cutting edge among our competitors! The accounting rules of the game (known as Generally Accepted Accounting Principles or GAAP for short)) were well established and really didn't change a great deal – that world has changed and its just the start.
If you own or run a limited company in today's social media savvy world, it would be easy to take the view that technology has solved all of your accountancy and tax challenges after all ‘The Cloud’, with its fixed fees from only a few pounds a month means that software has it all in hand. A word of warning - watch your back and your business, because even though it’s true that technology has made the preparation of financial statements a much easier platform for us all, with much quicker outcomes and information available at the touch of a button, it also brings with it a significantly higher number of risks to be considered.
Cloud accounting saves a lot of processing time and brings clients and accountants closer together by allowing us all to access the same data but it cannot provide an experienced accountant’s keen eye for detail and knowledge of trends. Nor can it deliver a consistent interpretation of a complex accounting policy or the correct notes and disclosures in the accounts to meet your legal obligations under the Companies Act. In a world where we are still seeing errors in financial reporting from some of the best businesses and accounting firms in the world (not mentioning Tesco as an example here obviously) it’s imperative that you don’t allow yourself to become complacent. By all means value the technological skills of your accountant but please don’t undervalue what their relevant experience, up to date broad spectrum of specialist knowledge and trusting, supportive relationship that cuts both ways can deliver to your business.
Let me share with you 5 key things that I believe you should be discussing with your accountant in relation to your company's statutory accounts - not necessarily in one meeting but over the years you work with them:
1) Your Responsibilities under the Companies Act as a director and shareholder
Read the engagement letter and ensure that, at the very least, the key pages of the financial statements are explained to you every year. The Companies Act is an important piece of legislation and it is your responsibility, as a business owner, to understand it.
2) The key accounting policies that matter to your business
What is included in each Balance Sheet item is often straightforward but not always - it's complex at times and you should be working with your accountant to understand which ones may change, which need careful consideration and which may potentially need expert third party advice. Entries involving dividend declarations, directors loans, related parties and revenue recognition are common discussion points.
3) Communicating the financial performance and value of the business to key stakeholders (including employees, shareholders, investors and customers)
These numbers are the most important that any Limited Company produces in a calendar year – they are not the only ones that matter but they are the most important as they become public record and once filed can rarely be amended. Your disclosures especially via the directors report are an opportunity to practice your communication skills to all relevant stakeholders.
4) Debt and Equity Investors view
How will these numbers be viewed if you plan to secure debt or equity investment? Lenders and investors will always carry out due diligence before they make a decision - as important as the people involved always are, so are the numbers. Take the time to ensure you understand how these will be viewed.
5) Planning, Calculating and submitting to HMRC the correct amount of tax liability for your business
The corporate tax regime continues to develop and change and at present is driven predominantly by corporate profit within the annual profit and loss statement within the financial statements. Work with your accountant to understand how it's calculated and which are the key planning tasks that you can control.
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