Category: Compliance

Accountants aren’t always checking your accounts

Has your accountant made sure your annual accounts agree to your books?

Too often we see examples of companies where the published accounts at Companies House bear little resemblance to the numbers in the client’s accounting software.

They should be the same.

How could they be different?

And what is the impact?

How does it happen?

A company, it could be yours, does its own accounting in its accounting software and everything is seemingly working OK.

The company goes past its year-end and, in a cloud accounting world, the company’s accountant logs in to the software to prepare the annual accounts.

The accountant, in their accounts preparation software, makes some adjustments – typically to do with bad debts, accruals, corporation tax, dividends etc. – and produces the accounts to be submitted to Companies House.

So far, so good, but the accountant should then make very sure that all of the adjustments are properly reflected in the client’s own software. If not, the client’s own bookkeeping is simply wrong.

Management accounts will be wrong, possibly VAT returns will be wrong and if this goes on for a couple of years then the discrepancies just get bigger.

If your management accounts are wrong then, to put it bluntly, you don’t know how your business is performing.

HMRC turn up for an inspection of the adequacy of accounting records (something they’ll be doing more of with extra resources and AI) and find that the accounts they have received with the corporation tax return are different from the records they’re looking at and it’s not a good start to their inspection!

Couldn’t happen to you, could it?

It is one of the first things we check when companies  change to Blue Dot Consulting for their accounting work. Worryingly, more often than not there is a difference between the company’s books and the accounts at Companies House.

What can be done?

As more and more businesses adopt cloud accounting solutions we should see this problem less often.

But you should insist that your accountant either:

  • sends you the list of adjustments that need to be made to your books along with instructions for how to make them or
  • logs in to the accounting software and make them directly

Get your accountant to take responsibility for ensuring that your books agree to your published accounts. After all, it should be part of the service they have asked you to pay for.

It seems this is not always happening. Go and check yours now!

Michael

Related links:

Year-end accounts and tax

Milestone or millstone

Our year-end should take care of itself, shouldn’t it?

Paper-free accounting

Actually, the inertia that holds most people back from paper-free accounting is a reluctance to lose the paper.

This blog first appeared in 2017 and this is the 2025 uppdate.

Since 2017 there have been huge leaps and bounds in technology but in many ways the state of play in 2017 is very much what it it now.

AI may change that but to date I haven’t seen much in the AI space that offers a significant improvement to a meaningful problem.

Actually, the inertia that holds most people back from paper-free accounting is a reluctance to lose the paper.

Apps for paper-free accounting

Suppliers’ invoices and receipts

Apps such as AutoEntry and Dext manage and store images of invoices and receipts and will push the documents, along with the correct accounting entries, directly into your cloud accounting software.

You forward emails containing the PDF of your suppliers’ invoices to these apps. Equally you can download a version of the app on your phone and capture an image from there.

Sales invoices and e-commerce

If you use a CRM system to raise your invoices then there are several apps that will import the sales invoice data straight into to your accounts system. You can also create your own program to do it for you.

If you sell online then take a look at A2X, a highly-recommended app that takes accounting data from your e-commerce site and does the accounting for you.

On both the sales side and the purchases side, nothing is printed out and nothing needs to be physically filed. Workflows change, and they change for the better!

However, it’s vitally important that the business has a full and reliable back up of these documents in case the primary source is somehow lost or damaged.

Also worth visiting is HMRC’s guide on record keeping – even they say “HMRC recommend you keep all the original documents you receive. This does not mean you need to keep them on paper.”

Accounting software and paper-free accounting

Since 2017, bookkeeping software has migrated from the desktop to the cloud.

Advantages include:

  • You and your accountant can both work on and access your data and financial reports any time and anywhere
  • You can be in a PC or a Mac environment on a phone or on a tablet and still use the software
  • The client is best placed to raise sales invoices and raising them in the online accounting system does the accounting at the same time, improving credit control and saving time and money
  • Apps continue to be developed that link to accounting software – not all of them are as helpful as their marketing suggests

The disadvantages:

  • Prices keep rising! This is one of the biggest changes since the 2017 blog. We’ve all painted ourselves into a corner with this and I’m afraid there’s not much we can do about it.
  • With only one or two exceptions, the cloud accounting software services do NOT allow you to keep your own back-up that can be restored if needed. You can subscribe to third-party apps at a cost
  • Additional functionality keeps being added, into the product and into the price, but is it all useful to your business?

How can Blue Dot Consulting help you become paper-free?

Firstly, you’ve got to want to do it and, in fairness, we still see businesses owners who will not give up the lever-arch files.

But even if you’re not ready to give up the paper, you can still use the programs and apps I’m discussing here and we can help you to do that.

Indeed, if you’re self employed or a private landlord, then HMRC will soon mandate that you do your bookkeeping digitally if you fall into the size limits for their Making Tax Digital (MTD) regime.

Give me a call on 020 7125 0270 or email me at info@bluedotconsulting.co.uk and let’s have a chat about being paper-free.

Michael

 

 

 

How do we solve a problem like Maria’s?

Our first piece of advice was for Maria to open a separate business bank account, tell all her clients to pay into it and to use it for ALL business expenditure.

Maria is self-employed, VAT-registered and has a turnover in the high tens of thousands each year.

She’s been using QuickBooks for several years but only for raising her sales invoices.

The sales invoicing is going well, all the invoices get paid, but earlier in 2025 Maria decided she needed to get all of her bookkeeping working in QuickBooks and, ideally, to do most of it herself.

Open a separate business bank account

Our first piece of advice was for Maria to open a separate business bank account, tell all her clients to pay into it and to use it for ALL business expenditure.

The impact was instant:

  • we connected the business bank account to QuickBooks which makes all her bookkeeping easier, quicker and more accurate 
  • because all business expenditure goes through the new bank account, Maria never misses any business expenses which means her accounts are more accurate and she pays tax on the right amount of profit
  • all of Maria’s clients now pay into the business bank account and getting paid has become easier still

Accounting software – invest in training

Accounting software is a game-changer for small businesses.

There’s a wide choice of accounting software which is low-cost, accessible and will help you get on top of your business finances and tax.

It’s fair to say that bookkeeping and accounting are not for everyone and you may choose to outsource your business accounting to a local bookkeeper or accountant. Indeed, we can help you (see below).

But, if, like Maria, you’re at all curious about doing some or all of it yourself then – invest in training!

  • bookkeeping is cheaper if you do it yourself
  • parts of the bookkeeping, such as sales invoices, are things you’d probably do anyway
  • information such as income & expenditure and who owes you money become easier to undertsand if you’ve had a hand in the bookkeeping

What changed for Maria?

Now that all her bookkeeping is being done (and done very well) in QuickBooks, Maria is in a much better place:

  • the separate business bank account is beyond useful and makes the bookkeeping much easier
  • Maria can see her profit building up during the financial year and has a decent idea of her tax and national insurance liability
  • all of Maria’s receipts and suppliers’ invoices are saved in Quickbooks as part of the bookkeeping transaction – so it’s an online, paper-free filing system
  • we’re only a Zoom or Teams call away if she needs a helping hand
  • VAT returns simply fall out of the bookkeeping
  • As do the year-end accounts and Maria’s tax return

Bookkeeping is now one of Maria’s favourite things!

Making Tax Digital for Income Tax (MTD)

We got this far without mentioning MTD and that’s because the important part of MTD is the D – Digital.

Our view is that MTD is extra work for business and property ownes and their bookkeepers and accountants for no great advantage.

But there’s one big benefit, which is to encourage business owners and private landlords to get started with separate bank accounts and bookkeeping.

Be more Maria – start now!

How can Blue Dot Consulting help?

It’s an article of faith for us that ALL businesses should have good bookkeeping and we have a long track record helping businesses owners with:

  • outsourcing all of their bookkeeping, VAT, payroll etc. to us
  • software training for Xero, QuickBooks and FreeAgent
  • cashflow
  • explaining clearly what the numbers mean and how to improve them

Let’s have a free-of-charge chat about your business – call Michael Austin on 020 7125 0270 or email info@bluedotconsulting.co.uk

Let’s grab a coffee or perhaps a drink with jam and bread!

Michael

Related links:

QuickBooks training for your business

Making tax digital – the useful bits have little to do with tax!

Improve your business by changing your accountants

© Blue Dot Consulting Limited

Chartered Accountants – Bedford House, Fulham Green, London, SW6 3JW

Change accountants and get the numbers you need for the business you want

If you don’t have the right mix of technology you’ll lag behind where you should be and pay more for the privilege.

As the Owner / Chief Executive of a London-based business there’s no shortage of accountants you could work with.

It’s a pivotal relationship and it needs to be right.

But what if it’s wrong and holding you back?

It might be time to change your accountant.

Frustrations and challenges with the wrong accountant

  • They don’t understand your business – this is paramount. If your accountant doesn’t understand your business and its markets then they simply won’t be able to provide the right help
  • Slow and unresponsive service – telling you what you needed to know five months ago isn’t going to help you make important decisions
  • Too much or too little technology – there’s a “Goldilocks” level of technology that underlies good business accounting. Have you found yours?
  • Personal chemistry is wrong – rapport and trust are key, you should be comfortable with the relationship and not distanced from it
  • Poor value for money – quality service comes at a cost but fees should represent good value for money

The list could easily be longer but it certainly suggests it’s time to change accountant.

If you stay as you are and don’t change accountant

You’re almost certainly not getting the financial information you need in order to grow your business, improve your cashflow and increase your profitability

And if you don’t have the right mix of technology you’ll lag behind where you should be and pay more for the privilege.

Why consider Blue Dot Consulting?

From the beginning we’ll understand your business and make sure your accounts are structured to reflect your business.

We will:

  • discuss and agree the financial information you need so you understand financial performance and the key decision makers can make their key decisions
  • look at workflows and software to see if you could be better organised and if there are better applications available that will generate useful information sooner
  • put the right people from our team into your team
  • build customised financial reports that measure financial performance and are available at the touch of a button
  • put cashflow and profit improvement front and centre in your financial environment

All of our people have worked in finance roles in businesses like yours and we’ll put that real-world experience and practical know-how to work for your business.

What the clients say

” Blue Dot Consulting went above and beyond in helping us navigate not only the transition to cloud-based accounting but also in leading our accounts team through a broader period of transformation.  

Their deep understanding of our unique needs and challenges was evident from the outset. They provided unwavering support to our team, ensuring they felt confident and well-prepared for the changes ahead. “

Take the next step

You already know if things aren’t working well enough with your current accountant but changing accountants isn’t something you do every day and it might feel daunting just to think about it.

Let’s have a free-of-charge chat about your business – call Michael Austin on 020 7125 0270 or email info@bluedotconsulting.co.uk

Michael

Related links:

E-Commerce bookkeeping

You can’t run a million pound business and only update your bookkeeping every three months

What are management accounts and why are they useful?

© Blue Dot Consulting Limited

Chartered Accountants – Bedford House, Fulham Green, London, SW6 3JW

National Living Wage and National Minimum Wage increase – April 2025

The National Living Wage and National Minimum Wage will increase in April 2025. Good for low-paid workers but when joined up with the increases to employer’s National Insurance it might be quite a burden to bear for employers!

National Living Wage and National Minimum Wage – what are they?

By law, an employer must pay a minimum amount on average for the hours you work. This is called the:

  • National Living Wage (NLW) for anyone aged 21 or over
  • National Minimum Wage (NMW) for anyone aged under 21 or an apprentice

Someone must be at least of school leaving age to get the National Minimum Wage.

Employers can choose to pay more than the minimum wage.

Increases to the National Living Wage and National Minimum Wage

New rates compared with current rates:

So, every increase is above the rate of inflation and the youngest get the highest levels of increase.

At a rate of £12.21 per hour, an adult earning the NLW and working 35 hours a week will earn £22,222 – a pay rise of £1,401 and if they work 40 hours a week then their annual salary becomes £25,396 which is a pay rise of £1,601.

Employer’s national insurance

The much-heralded increases in employer’s national insurance begin from April 6.

In summary:

  • the rate of NI increases from 13.8% to 15%
  • the amount an employee can earn before employer’s NI applies is falling from £9,100 to £5,000
  • the Employment Allowance ( a rebate many employer’s can claim) is increasing from £5,000 to £10,500

The headline news is that large employers and some employers of low-paid staff will face a higher employer’s NI cost but some employers will be better off if the additional employer’s NI they’ll pay is less than the additional Employment Allowance they can claim.

Employment costs are rising in April for many businesses

There are some winners but many employers will be losers from these changes as more tax is raised across the UK.

It’s worth looking at your own business to see if you’re amongst the winners or the losers and make plans in respect of profitability and cashflow according to what you expect.

Michael

Related links:

ACAS summary

Increases in National Insurance – is your business better or worse off?

Bookkeeping, profitability and cashflow

© Blue Dot Consulting Limited

Chartered Accountants – Bedford House, Fulham Green, London, SW6 3JW

Employer’s national insurance increase – is your business worse off or better off?

The government announced a massive employer’s national insurance increase in the October 2024 Budget.

They set out three changes to employer’s National Insurance Contributions (NICs) to take effect from April 6, 2025:

  • An increase in the rate of employer NICs from 13.8% to 15%
  • A cut in the threshold at which employers become liable to pay NICs – down from £9,100 a year to £5,000 a year
  • An increase in the Employment Allowance from £5,000 to £10,500

The net revenue expected to be raised by these changes is predicted to be just under £24 billion in 2025-26 rising to just under £26 billion in 2029-30.

According to a research briefing in the House of Commons Library, HMRC expects the changes to impact 1.2m employers:

  • 940,000 employers will see their NICs increase
  • 820,000 employers will see no change
  • 250,000 employers will see their NICs reduce

Which are you?

How much more NI will each employee cost me?

The two changes are that NICs become payable on ALL earnings above £5,000 rather than above £9,100 AND the rate of NICs is increasing from 13.8% to 15%.

For someone on a monthly payroll, NICs at 15% will apply to earnings above £417.67 compared with 13.8% on earnings above £758.33.

Employer's National Insurance increase

If an employee earns £30,000 p.a. this means:

£30,000 salary example

If an employee earns £6,000 p.a. this means:

£6,000 example

This example for a lower-paid employee will affect industries such as hospitality in which there are many lower-paid, part-time employees.

Essentially, the employer’s national insurance increase means every employee earning over £5,000 will be more expensive for the employer from April 6, 2025.

What about the increase in the Employment Allowance?

The Employment Allowance is a rebate of employers’ NICs up to a level of £10,500 (previously £5,000) which means that IF YOUR BUSINESS IS ELIGIBLE:

  • Your annual employer NIC cost is reduced by £10,500
  • If your annual employer NIC cost is less than £10,500 then you pay no employer’s NIC

Check eligibility and, in particular, note that you cannot claim if your company has just one director and that director is the only employee liable for employer’s NIC.

That said, what does it look like when the Employment Allowance is factored in?

Example 1 – a company with six employees earning between £40,000 and £70,000 p.a.

£40k to £70k employer

This employer with an annual payroll cost of £290,000 is only paying £1k more in employer’s NICs.

Example 2 – a company with five employees earning between £15k and £50k

£15k to £50k employer

This employer, a bit smaller than the first example, is actually better off because the increase in the Employment Allowance is greater than the increase in employer’s NICs.

Example 3 – the single-director company with a low-salary-high-dividends remuneration policy

Single director company

Because this company is not eligible to claim the Employment Allowance the employer’s national insurance increase means a higher employer’s NIC cost.

Overall, how does the employer’s national insurance increase play out?

This is a massive increase in tax and most of the burden will fall on large employers.

Every employee earning over £5,000 will be more expensive for the employer from April 6, 2025, which makes sense if £24bn is to be raised every year.

However, for many employers the increase in employer’s NICs will be modest. Even in the example above where the payroll cost is almost £300k, the employer is only paying £1k more.

Some smaller employers will be better off but single-director companies may be worse off.

Many more employers will see no change because the Employment Allowance they can claim is greater than the employer’s NIC cost they incur.

Employers facing a higher employer’s NIC cost will pay less corporation tax if their profits fall as a result and vice versa.

The cashflow effect is that the Employment Allowance will last longer into the tax year than it used to but single-director companies will start to pay the employer’s NICs earlier in the tax year than previously.

Because the increase in the rate and the lowering of the earnings threshold work in the opposite direction to the increase in the Employment Allowance, the devil is in the detail when it comes to calculating whether your business is better or worse off and by how much.

Increasing costs of employment don’t stop with the increase in employer’s NICs. In April there are also significant uplifts to the National Living Wage and National Minimum Wage which employers need to be aware of.

Small print:

Much to think about and the devil really is in the detail. It all makes 2025-26 that bit more tricky to navigate even if your business will benefit from these changes.

Can we help you and your business as the year goes by?

Let’s have a free-of-charge chat about your business – call Michael Austin on 020 7125 0270 or email info@bluedotconsulting.co.uk

Michael

A useful NIC ready-reckoner

National Living Wage and National Minimum Wage increase – April 2025

Business growth – the financial essentials

© Blue Dot Consulting Limited

Chartered Accountants – Bedford House, Fulham Green, London, SW6 3JW

The year-end accounts process should take care of itself

Keep your bookkeeping up to date as you go and your year-end should take care of itself.

She’s right!

The MD who said this is absolutely right – if you keep your bookkeeping up to date as you go then your year-end accounts process should take care of itself.

The MD in question does most of her own bookkeeping but then she would ask the accountants to complete the year-end.

They would take their time to do a bunch of opaque stuff and then present her with numbers she didn’t entirely understand.

And a bill!

It doesn’t have to be this way

Cloud accounting makes it easier but (whisper it) this has always been the case and it’s as true for the one-person business as it is for a multi-national group.

By keeping your bookkeeping up to date you will know:

  • how much money your business has
  • how much profit you’re making
  • how much you can pay yourself
  • who owes you money and who you need to pay

You can be on top of how much tax you need to pay and quarterly VAT returns will be a simple task rather than a last-minute nightmare.

Year-end accounts adjustments become in-year adjustments

In fact, they disappear, with the possible exception of a final tweak the amount of tax you need to pay.

So don’t let your year-end accounts become chore. Keep your bookkeeping up to date and the year-end should take care of itself.

Michael
@bluedotmichael

Annual accounts – a milestone or a millstone?

Annual accounts

Annual accounts – a milestone or a millstone?

Drafting your annual accounts while last year’s performance is still in everyone’s mind is easier than leaving it for several months and coming back to the task when the business has moved on.

Annual accounts are a key measure of performance both for your company and in the world beyond. Yet many companies get close to the deadline before they think about them.

Don’t wait for the deadline (nine months after the year-end for a private company) to file your annual accounts. There are several good reasons to file early – and to keep on doing so. Continue reading “Annual accounts – a milestone or a millstone?”