Get Ready for the 2024 financial year!
If you’re one of those people that has been organised and had all their accounts in order for 23/24 by the end of March – congratulations!
If you’re still scrambling around pulling everything together, thats ok too.
As long as you are consciously trying to get everything sorted then you still have time, and its great that you’re getting organised now to avoid a last minute scramble later in the year.
If you haven’t started sorting last year’s accounts, then perhaps its time you got yourself an accountant to help manage the process throughout the year.
Even if you’re one of those organised ones with everything filed and done, while it might be tempting as a business owner to sit back and take a break from finances, as the new financial year starts, it is wise to do some forecasting for the year ahead and make sure you have some solid plans in place.
The accounts you have just filed hold the key to a successful 2024/25 once you understand them. However,they can look confusing and deciphering where your financial strengths have been this year can be tricky.
What are the numbers you need to pay most attention to?
All of them, but specifically sales is the answer. Have you invoiced everything you’ve done or sold or have you invoiced anything you’ve not completed yet, for example a deposit? If you have then this needs to be deferred to the next year.
Costing goods
Have you received invoices for all purchases? If not you may need to include figures for any purchases not currently included to ensure a true picture when doing your forecast. Remember when you are looking at your profit from last year to add depreciation back on as that’s not tax deductible, then deduct the cost of assets (not always 100% so double check rules) to give you the taxable profit so you can estimate your tax bill.
A negative number is not always as scary as you think
A negative number when looking over last year’s accounts can sometimes be explained. For example in the first year or in a year of rapid expansion, extra costs could give you a loss.
However, you need to understand why those figures are negative, you need to know the story behind your numbers. If the losses are regular and there isn’t a clear reason behind them then this is something to dig into urgently to understand why.
Our top 5 tips for understanding your end of year accounts start with ensuring your different types of sales are split out so you can see where your money comes from.
This won’t necessarily show in your final Ltd accounts, but will show on P&L reports on your software.
If possible, try to line up your types of sales with the relevant cost of sales so you can directly see the profit for each product/service.
Here are our top 5 tips for understanding your year end accounts:
- Depreciation is a paper expense and not included when calculating tax, so your taxable profit could be higher than on your P&l report.
- Look at the comparison for this year vs last year’s accounts to see where the differences are. Do the differences make sense or do you need to investigate?
- Check the business has a positive balance sheet value. Do this by looking at the balance sheet statement which shows what your business has and what it owes. Scroll down to the bottom and make a note of the last number. It’s normally called capital and reserves. Is that figure positive or negative? A positive figure means your business has some value. A negative figure is a red flag and means if things carry on as they are, you will not have a business for very long. Take action to improve this. Improving profits is a good place to start. It’s a good idea to have a chat with your accountant at this point, if you have one, who will have a good overview of your business and be able to share their advice as to what you could do next.
- Your bank balance will rarely match the figure on your profit and loss report. The main differences will be money you’ve taken out of the business, VAT if you’re VAT registered, loan repayments (or receipts!) and asset purchases. None of these will be taken into account on the profit and loss report, but they will affect your bank balance.
- When prioritising for the year ahead go back to your goals and define what success for the following year means to you and your business. Don’t try and do too much or you’ll just overwhelm yourself. Choose 3 or 4 KPIs that are in line with your goals and focus there. For example, if you want to push a certain product/service line, track the sales for this, and maybe even your marketing spend to see if the investment is giving you a return. If you want to reduce the amount people owe you or is overdue, you need to be tracking the overdue amount weekly and note how quickly people pay you. Then put strategies in place to improve these.
Planning for the year ahead
When looking to the year ahead, take stock of what products/services did well and made a healthy profit. These are the ones to focus on for next year. Consider these products in terms of what clients or sales you are hoping to achieve and what extra resources, labour or staff you will need. Consider if you will need a bigger office or premises to allow for the extra staff or increased production/stock levels. You may need to consider outsourcing your distribution rather than holding all stock and doing all distribution in-house.
Remember seeking professional advice is always a good option
We at PPF are always here to help and guide. We can give you personalised professional advice, help you navigate complex accounts to plan for the year ahead and ensure that you’re taking advantage of all the available tax-saving opportunities around.
By staying informed, organised, and proactive in your tax planning efforts, you can hopefully minimise your tax liability, make sure you are compliant with HMRC requirements, and build and grow your business.
If you’d like to have a chat to see how we can help, complete our Quick Questionnaire and we’ll be in touch to book in a discovery call.
