The Importance of Cash Flow

Often overshadowed by its glamorous counterparts like revenue and net income, cash flow is the lifeblood of any business.

Cash flow refers to the movement of money in and out of a business and can have a significant impact on a business’ ability to trade, grow and invest.

A positive cash flow ensures that a business can cover its day-to-day expenses such as materials, rent, utilities and payroll.  Without adequate cash flow, even a profitable business can find itself struggling to meet its immediate obligations.

During tough times the importance of cash flow becomes even more important. A cash reserve will provide a buffer, allowing a business to weather a storm.  In contrast  a business with poor cash flow may find itself vulnerable and unable to navigate any unforeseen circumstances.

If you are looking to grow your business, whether it be by investing in research & development, acquiring new assets, or expanding into new markets, being on top of your cash flow will pay a major role in enabling your plans to come to fruition. Having a clear understanding of cash flow patterns, will enable businesses to make strategic decisions in line with their financial capabilities and long-term goals.

Maintaining a healthy cash flow should be a top priority for all businesses, regardless of the business size or industry.

Remember for cash flow forecasting to be effective, your business accounts will need to be kept up to date.

What is Anti Money Laundering (AML)?

When you decide to outsource your bookkeeping to a professional bookkeeper you may come across the term AML which stands for Anti Money Laundering. AML regulations exist to prevent criminals from laundering money through legitimate businesses.

Any business who has access to the finances of another business, such as bookkeepers and accountants, must be authorised and regulated under AML regulations. Cactus Bookkeeping are qualified with the Institute of Certified Bookkeepers (ICB) and are supervised and regulated by them to comply with these regulations.

For each new client we onboard we must conduct checks to comply with AML, these checks will require photographic ID for each person with significant control in the business.  We will ask for a passport or driving licence and proof of address in the form of a recent utility bill or bank statement (dated within the last 3 months). We use this information to run verification checks to confirm identity through secure software, these checks will be stored on our system to comply with AML regulations.

We will also be in touch with you from time to time if your proof of identity is expiring so that we can run a new check using your current information. We must be notified if you change address, as we will need to run the check again. This is an essential process bookkeepers and accountants need to undertake and is no cause for concern.

Hopefully, this explains why we ask for this information.  As always if you have any questions about the process then please let us know, we will be happy to talk it through with you.

What are the responsibilities of a director of a limited company?

If you’re transitioning from being a sole trader or a partnership, things can feel a little different when it comes to being a limited company. Maybe you’ve chosen to start off your business as a limited company but just need to be aware of your responsibilities. So here’s what you need to know…

 Director’s responsibilities 

 As a director of a limited company you will take on responsibilities such as:

 Articles of association – this is an agreement you make to form the limited company and take on the responsibilities. If you register your business online this will be part of the process.

 Keeping company records and reporting any changes – you must keep records of the company such as;

1. Shareholders, directors and company secretaries.
2. The results of any shareholder votes. 
3. Agreements for the company to repay back any loans
4. Indemnities – payments made by the company if something goes wrong.
5. Transactions if someone buys shares in the company.
6. Loans or mortgages secured against the company’s assets.
7. Register of people with significant control.
8. Accounting records.

 Taking money out of the business

 Taking money out of your limited company is much different from that of a sole trader as the company’s finances do not belong to you like they do when you’re a sole trader.

 There are various ways you can take money out of the business;

• Salary, expenses and benefits
• Dividends
• Directors’ loans

 Company changes

 You have an obligation to tell HMRC if your contact details change and if you appoint an accountant or tax advisor. You also need to report if the persons with significant control change for any reason. 

 Any changes which are made within the business must be agreed by the shareholders and minutes of the meetings should be recorded.

 Confirmation statement

 Every year you have to confirm that your business details are correct, this is called a confirmation statement. There’s a fee of £13 to submit your confirmation statement online or £40 by post. 

 Signage, stationery and promotional material

 With the exception of running your business from home, you must display signage of your company name at your business premises. It must be visible and easy to read.

 Company stationery such as letterheads should include your company name, registered address, company number and whether it’s registered in England and Wales, Scotland or Northern Ireland. You must display that you are a limited company with the use of the word Limited or Ltd. 

 It is your responsibility as a limited company director to ensure that you are complying to all of these rules set out by HMRC. If you don’t you will be fined or worst-case scenario you could be struck off as a director.

 If you want to ensure your compliant, seek advice from a professional.