National Minimum Wage & National Living Wage Rates – 1st April 2021
The rates change on 1st April each year and the hourly rate for the minimum wage depends on your age and whether you are an apprentice.
You must be at least:
- school leaving age to get the National Minimum Wage
- aged 23 to get the National Living Wage – the minimum wage will still apply for workers aged 22 and under
The National Living Wage has been extended from those aged 25+ to employees aged 23+.
✻ Aged 23 and over will receive 2.2% rise to £8.91 per hour
✻ Those aged 21 to 22 will receive a 2% rise to £8.36 per hour
✻ Those aged 18 to 20 will receive a 1.7% rise to £6.56 per hour
✻ Under 18’s will receive a 1.5% increase to £4.62 per hour
✻ Apprentices will receive a 3.6% rise to £4.30 per hour**
** Apprentices are entitled to the apprentice rate if they are:
- aged under 19
- aged 19 or over and in the first year of their apprenticeship
- Example – An apprentice aged 21 in the first year of their apprenticeship is entitled to a minimum hourly rate of £4.30.
Apprentices are entitled to the minimum wage for their age if they both:
- are aged 19 or over
- have completed the first year of their apprenticeship
- Example – An apprentice aged 21 who has completed the first year of their apprenticeship is entitled to a minimum hourly rate of £8.36.
If you require any further assistance with regard to NMW and/or NLW please get in touch via https://www.cactusbookkeeping.uk/contact-us/
In the second part of the Accounting Jargon Blog we look at the Balance Sheet and Profit & Loss Statement
An asset is an item owned by the business for use within the business (e.g. machinery) or something which can easily be turned into cash (e.g. stock or accounts receivable). Assets appear on the Balance Sheet.
These are assets owned by the business which will be held in the business or a long time, including property, machinery and other equipment. Fixed Assets appear on the Balance Sheet.
These are assets of the business which will change in value or be used up within the space of a year. These include, cash, accounts receivable and stock.
This is a debt, person or bill which you need to repay. Liabilities appear on the Balance Sheet.
Long Term Liabilities
These are expected to be paid over a period longer than 12 months such as a bank loan or mortgage
These are liabilities which will change in value or be paid off within the next year, including supplier payments, wages, taxes and short-term debts such as overdrafts.
This is the value of the owners’ investment in the business or the difference between a businesses’ assets and liabilities.
This is a financial statement which shows what the business owes, what it owns and how it has been funded at a set point in time. A Balance Sheet is called this because it’s driven by a formula which needs to balance:
Equity = Assets – Liabilities
Profit & Loss Report
This report shows you the business’s income, expenditure and profit. It can run for any period to compare sales, costs and profits from month to month and year to year.
I hope this has helped to demystify some of the accounting jargon you will come across, however if you need further help and assistance please do not hesitate to contact me via https://www.cactusbookkeeping.uk/contact-us/
Starting your own business can be daunting enough, on top of this you need to get your head around a whole new language “Accounting Jargon”. Assets, liabilities, accruals, overheads, costs of sales; the list goes on and on. So where to start?
For me the first thing is to think about the ins and outs of your bank account. Money into the bank is a Debit and money out of the bank is a Credit.
This now leads us onto Customers and Suppliers.
Customers & Suppliers
Customers – owe you money and pay this into your bank account – they are a Debtor
Reports to show what your customers owe you:
❊ Aged Debtors Report
❊ Aged Receivable Deport
❊ Accounts Receivable Report
Suppliers – you owe them money and pay this out of your bank account – they are a Creditor
Reports to show what you owe your suppliers:
❊ Aged Creditors Report
❊ Aged Payable Report
❊ Accounts Payable Report
Income & Profit
Sales – aka Revenue / Turnover
Sales income before expenses or taxes
Gross Profit = Sales – Cost of Sales
This is the profit made on your sales once you have deducted the costs directly involved in making the product or services available for sale.
Cost of Sale
This is the costs of expenditure directly linked to producing the goods or services that you sell. It includes costs of the product(s) you sell, manufacturing costs and the costs of hiring people to deliver your services. It does not include overheads.
The costs of running the business which are not directly related to the product or service you sell. Costs you need to pay to keep the business running, including the costs for rent, power, marketing, administrative costs and costs of management staff.
Net Profit = Sales – Costs of Sales – Overheads
This is the profit made after deducting all the expenses incurred.
Gross Profit Margin = Gross Profit / Sales x 100%
Gross Profit Margin is Gross Profit expressed as a percentage of sales. You can monitor your gross profit margin against budget figures, previous periods or against the gross profit margin of other products or services you sell.
Net Profit Margin = Net Profit / Sales x 100%
This is net profit expressed as a percentage of sales.
I hope this has helped to demystify some of the accounting jargon you will come across. Check back for Part 2 which will cover assets, liabilities, profit & loss and the balance sheet.
In the meantime if you require help and assistance please do not hesitate to contact me via https://www.cactusbookkeeping.uk/contact-us/
Businesses who deferred their VAT payment which was due to be paid between 20 March and 30 June 2020 now have 3 options for payment:
- You can pay the deferred amount in full by 31 March 2021
- You can opt-in to the VAT deferral payment scheme which launches early 2021
- You can contact HMRC for additional time to pay
If you choose Option 1 you need to make the payment by 31st March 2021, there is no need to contact HMRC.
If you choose Option 2 you can make between 2 and 11 monthly instalments interest free, with the final payment being made by 31 March 2022.
To use this scheme you must:
- still have deferred VAT to pay
- be up to date with your VAT returns
- opt in before the end of March 2021
- pay the first instalment when you opt in
This scheme will open early in 2021 and you must opt-in to it before the end of March 2021.
You will be able to apply for this scheme through your business Government Gateway tax account as your VAT agent will not be able to do it for you.
Get ready to opt in to the new payment scheme
Before opting in you must:
- create your own Government Gateway account if you don’t already have one
- submit any outstanding VAT returns from the last 4 years. You will not be able to join the scheme if you have not done so
- correct errors on your VAT returns as soon as possible
- make sure you know how much you owe, including the amount you originally deferred and how much you may have already paid
You should also:
- pay what you can as soon as possible to allow us to show the correct deferred VAT balance
- consider the number of equal instalments you’ll need, from 2 to 11 months
For further information click here to visit HMRC
In the accounting world Bookkeepers and Accountants are to some extent intertwined as bookkeeping is part of accounting. Bookkeeping (keeping books) is the first step of the accounting process, an accountant will complete the process by analysing the information prepared by the bookkeeper.
What will a Bookkeeper do for my Business?
Bookkeepers play a vital role in the efficient running of a business, keeping an accurate and complete record of the financial transactions of the business and help maintain compliance.
By nature, most businesses generate a whole lot of paperwork, such as purchase invoices, receipts and expense claims. A bookkeeper will transform that bundle of paperwork into something orderly and accurate that will reflect the current position of the business. They will help keep the business running smoothly by maintaining a general ledger, paying supplier bills, credit control your customers, undertake bank reconciliation, record inventory and complete VAT returns and payroll.
Depending on the business requirements, bookkeeping can be undertaken more regularly on a weekly, fortnightly or monthly basis. Completing the paperwork more regularly will allow the bookkeeper to provide more up to date information on the current position of the business.
What will an Accountant do for my Business?
Accountants look at the big picture, they will use the financial information prepared by the bookkeeper and provide insights and financial advice based on that information.
Accountants have an in-depth understanding of the taxation system and requirements. They will perform audits, prepare tax returns, financial forecasting, and tax filing.
Depending on the business an accountant will generally work less frequently on the business accounts. Accountants may only look at the business books once a year when completing the annual accounts or they may work on quarterly vat returns or when dealing with cash flow forecasting.
The following table provides a comparison of some of the services offered but is in no way a definitive list and bookkeeper/accountant services may vary.
|Process invoices, receipts, payments
||Prepare adjusting entries
|Produce sales invoices & credit control
||Prepare financial statements
|Bank transactions & reconciliation
||Tax returns & filing
|Maintain and balance ledgers
||Financial analysis and strategy
||Tax advice and planning
|Cash Flow & Reporting
Does a business need a bookkeeper and an accountant?
This will depend on the preference of the business owner and the size and complexity of the business itself.
A bookkeeper will keep a business well organised and help with the cash flow of the business by getting invoices out on time, tracking payment and paying bills and maintaining compliance.
An accountant will ensure that the business meets its tax obligations and assist the business with financial management to help drive it forward.
Both bookkeepers and accountants have their place in any business which is why so many businesses rely on both.
You’ve gotten over the hurdle of starting your business, you’re established now and in the main things are going great, however you never realised how much paperwork there would be, never mind the admin of all the accounts on top of that.
Didn’t you start your own business so you could spend more time doing the work you love? Helping people create new things, providing great products and unrivalled service? So why is it that you are struggling to find the work-life balance, launch that new product, develop your team and more? Be honest, are your accounts and bookkeeping taking more time than you ever thought they would?
If this is the case read on ….
1. Bookkeeping software isn’t a substitute for Experience
Software adverts make it sound easy to deal with your accounts yet nothing replaces knowledge and expertise. Are you able to set up your software correctly? Get this step wrong and you could be in big trouble as your software could be miscalculating your taxes!
Qualified Bookkeepers have the knowledge and expertise, are aware of legislation and filing deadlines? Think about it, you wouldn’t contact a bookkeeper for a hair appointment so why tackle your accounts if that’s not your thing.
2. Your books are not up to date
When you fall behind with your paperwork, your accounts stop reflecting the actual position of your business. That makes it harder to understand profit, cash flow and accurately gauge the health of your business.
Once you fall behind it is increasingly unlikely you will ever get caught up – if you don’t have the time to keep it up to date, how can you find the time to catch up! Let’s be honest spending evenings dealing with your accounts are going to take a back seat when the dog is sat there wagging its tail ready for their walk
3. You haven’t billed your customers and have overdue invoices
The minute you get too busy to bill your clients, your cash flow will suffer and you could even miss billing someone altogether. Your clients won’t pay you without an invoice and without money in the bank how will you pay your staff and your suppliers?
Billing your clients regularly and undertaking credit control is vital – keeping control of outstanding debt should enable you to take care of your bills and overhead expenses.
It’s just like being on the beach, the regular tide in of customers paying, the regular tide out of your supplier and expenses payments – no hat or sun screen required!
4. Your bank statements haven’t been reconciled
Checking your bank balance on your phone does not give you a clear picture of how much money you have. It doesn’t tell you how much money your customers owe you, how much money you owe your suppliers or highlight any errors in your accounts.
It’s important to keep your reconciliation up to date and connecting bank feeds in accounting software now allows for this to be completed daily, if you have the time. This will give you an instant view of your financial position – assuming of course everything else has been done!
5. No time to grow your business
There are only 24 hours in the day and as a business owner you are constantly juggling the work-life balance. Every hour you spend on your accounts is an hour lost on selling your products or services, developing business opportunities and client relations.
Get your work-life balance back on track – keep a log of how much time you spend on your accounts per week, then calculate how much that time is worth to you. Outsourcing is a cost effect way of dealing with your bookkeeping to enable you to grow your business.
If any of the above sounds familiar and you wish to find out more, please use the link below: