24th August 2021
If you are a contractor working through your limited company and find yourself guessing throughout the year as to how your business is doing, you may be missing out. Is it time to ask your accountant for quarterly management accounts?
The purpose of operating through your own limited company is to be tax-efficient, have control over your pay and pension contributions and have the flexibility and freedom of a freelance contractor. Management accounts can help you make the most of your opportunities and avoid paying penalties or additional tax.
Why should you opt-in?
Is it possible to run a company without management accounts? Sure, your accountant can look at everything at the end of the accounting period; if you have the time and you are careful with your finances, you may be ok.
However, if you are busy (and also not an accountant), you want someone to review your company regularly. This way, you can be alerted of any opportunities, or possible errors you may have missed.
Let’s look at five areas where management accounts can help:
1. Sales income
Have you missed raising any invoices? Have all your invoices been raised correctly? Are you being paid accurately and on time?
These are all the questions your accountant will look into; any problems can be addressed without delay at the end of each quarter.
Business expenses are a significant factor when it comes to your accounts due to their tax-reducing nature. Your accountant will look into whether you are missing out on claiming any expenses or if they have the correct VAT rate applied.
3. Taxes and liabilities
What is the estimated tax liability? How much do you need to set aside in the company to meet those liabilities? Is there anything overdue?
Your accountant will make sure that the company has enough in the bank at the end of the year. Any missed tax payments will also be highlighted to help you avoid late penalties.
4. Profits and dividends
Management accounts are effectively a snapshot of your company financial information. They will indicate the company’s performance and let you know how much profits are in the company available for withdrawal as a dividend. Knowing the accurate figures will help you avoid accidentally taking too much and paying interest or additional tax.
5. Personal tax efficiency
Your quarterly accounts also include a summary of your income in the tax year to date. Based on this information, your accountant can advise you on how to maximise your income with minimal tax implications.
If you are an existing client and interested to know more about how management accounts can help you, please contact your accounts manager. If you are new to us, please get in touch via firstname.lastname@example.org or call 0800 917 9100.