Adrian Goodman.
The start of a year is the time to reflect, prepare for the future and set out an achievable roadmap for your business. Chartered accountant Adrian Goodman, of PPX Consulting, explains how.
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FOR BUSINESSES, particularly limited companies, the first month or so of a new year is pivotal in the financial calendar.
Whether your company’s financial year aligns with the tax year (ending in March) or the calendar year (ending in December), it often becomes a time for reviewing the past year’s performance and setting the tone for the year ahead.
In the UK, the majority of limited companies either have a year end of March or December. In either case, December 31 is a key date as it is the filing deadline for the March year end and the closing date of the December year end.
For these businesses, now serves as an ideal time to reflect: was the year better or worse than expected? And, more importantly, what does this mean for the business’s financial health?
If a business performed better than anticipated, that is a reason to celebrate. However, it also comes with its own set of challenges. Higher than expected profits mean a larger tax bill. It is important to ensure that the business has the cash reserves available to meet this obligation.
Unexpected profitability can also be a sign of misguided budgeting, providing a valuable lesson for the year ahead.
Conversely, if the year did not go as planned, a business might be grappling with cashflow problems. Perhaps revenue did not meet expectations or unforeseen expenses eroded profit margins.
These issues can create a ripple effect, making it harder to meet upcoming financial commitments. Identifying these shortfalls early and taking corrective action is crucial.
For many business owners, the intricacies of accounting can add to the confusion. One common point of frustration is the Accruals Accounting Convention. This principle ensures that income and expenses are recorded in the period to which they relate rather than when cash changes hands.
While this provides a more accurate financial picture, it can sometimes ‘rob’ businesses of perceived profits or inflate taxable income, leaving owners puzzled by their financial statements.
Understanding these finer points of accounting is not just about compliance; it is about empowerment. By lifting the veil on these complexities, you can make better-informed decisions, improve financial planning and avoid unpleasant surprises.
Whether your business thrived or struggled last year, now is the perfect time to reset.
Updating your budgets and forecasts should be a priority. These tools provide a roadmap for the year, helping you to allocate resources effectively, plan for growth and mitigate risks.
A robust budget is not just about numbers. It is about establishing an achievable roadmap for your business and contingency planning for when things go off-road.
For business owners who find financial matters overwhelming, the key is not to struggle alone. Understanding your accounts and planning effectively can be transformative but it is not something you need to tackle unaided.
Seeking professional advice can provide clarity and confidence as you navigate the year ahead.
Of course, this is something we at PPX Consulting can help with so pick up the phone if you need additional support.
While this might feel like a month of reflection, it is also a month of action. By taking stock of where you are and planning where you want to be, you can set the stage for a successful year.
Adrian Goodman is managing director of PPX Consulting and author of
Achieving Profitable Growth: Use the ‘Four Points of Control’ to grow your profit and your business. Available on Amazon.
Online Excel training at ppxtraining.co.uk/practical-excel-skills/
Find out more at
Call: 01536 904 886
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