Tips Guides Resources

HMRC will advise the new tax code change from 543 to 603 which was announced in May 2008 and the date the new tax code to be applied which is expected to be September 2008. The amended tax code is entered as a new tax code on the employee details tax amendments section of the payroll file and the tax reduction is then automated at the date the new tax code is applied.

The income tax deduction calculated by the DIY Accounting payroll package is different to the inland revenue CD Rom.

Small differences can occur because the DIY Accounting payroll system has in the past used the revenue manual tax tables whereas the inland revenue employers CD Rom use a percentage calculation. In fact the manual tables jump in pounds and tax tables can increase by four pounds between different look up rates which can create small differences.

In the current financial year many of the financial income tax and national insurance calculations have been changed in the DIY Accounting payroll calculations to a mathematical percentage basis. Differences can still occur where the subject of the calculation is rounded to ignore the pence.

All these differences are minor and immaterial and adjust themselves since tax is calculated on a cumulative basis. HMRC percentage calculations also differ from the calculations using paye look up tables for similar reasons.

Employee gross pay was entered and no national insurance contribution was calculated.

The national insurance contribution table applied is shown in the column to the left of the employees name on the payroll sheet and you will probably see the letter C when because this employee is of working age and not a second employment the national insurance table letter should be A. Check the date for both for this employee which may have been omitted or entered wrongly.

Income tax deducted for my employee who is on a normal tax code was much higher than normal.

The income tax code column to the left of the employees name on the payroll sheet may appear as zero which should show the tax code. To resolve the tax code check the employee starting date has been entered and the numerical value of the tax code in the employees details and the date that tax code should be applied.

When I try to enter wages on the payslips a dialogue box appears with the message that the payslip spreadsheet is protected.

No entries are required to the payslips file. All entries are automated from the payroll file and the protection prevents corruption of the formulae in the payslip file. The entry on the payslip file can be changed by entering the required gross pay on the payroll workbook and the payslip will automatically update itself from there as part of the paye system.

I cannot see any tabs at the bottom of the payroll software workbook.

After entering the employee details navigate to the month in which you wish to enter gross pay by clicking the tab buttons at the bottom of the excel spreadsheet. If you do not see any tabs at the bottom of the sheet you may not be viewing the full sheet. Click the square box at the top of the menu bar to view the full sheet and the tabs should then be visible.

When I open the payslips file I receive an error message saying read only, non repairable error has occurred.

This is likely to have been an interruption during the download process that has corrupted the payslip file. Download the payslip workbook again direct from the confirmation email sent to you after purchase.

We bought the up to 20 employee payroll package and now have 23 employees.

Make a second copy of the payroll software, saved into a separate folder and split the payroll into two parts. Perhaps use one package for one department and the other package for a different department or use one for existing employees and the other for new starters.

Do I purchase a new payroll software package each financial year or can the payroll software be updated for more than one year paye purposes.

The payroll software include that years tax rules to
enable the packages to automate the production of that year tax returns. Each year has new tax rules embedded and being on excel rather than a database then it is necessary to purchase a new package each year.

Does the payroll software automatically generate the amount payable to the inland revenue each month.

The payroll package automatically calculates the income tax and national insurance and collects the information on a paye payments schedule so you know exactly how much to pay each month. The paye calculations also complete all the revenue forms including the P35 annual employers return which is required when you file the paye information with the revenue at the end of the financial year.

The payslip workbook is not automatically updating from the payroll spreadsheet.

The payslip updates automatically and there are no calculations on the payslip file or links out of that file. The most likely cause is that the payslip file was renamed and has broken the links from the payroll file. If you have saved the file after breaking the links by renaming the solution is to download the payslips file again without changing the name.

Terry Cartwright, CEO DIY Accounting, a qualified accountant in the UK, designs Accounting Software on excel spreadsheets and Payroll Software for small to medium sized business providing a complete accounting solution and also supplies Company Formation packages for new limited liability companies

Firstly, what do I mean by a financial goal? For most of us, that would generally be a goal to either increase income or reduce consumer debt. Of course there may be times in our lives where we want to increase consumer debt to acquire goods and services sooner or to reduce our income as a trade off to have more time but in this article, let’s set those situations aside. In particular, let’s look at the scenario of reducing consumer debt by 50% in six months.

My standard formula for goal setting is to select a coach, have the required resources in place and to have a plan-A and a plan-B in place so let’s see how a financial goal fits in with this.

Selecting a financial coach these days is difficult indeed. Most financial advisors will only try to sell you products, thereby limiting their own risk in a highly litigious environment. If your goal is to reduce your personal debt by 50% in 6 months the financial advisor might be dismissive if there is no chance of selling a product into your situation.

Similarly, a debt financer will try and sell you a product that appears to reduce your debt but in fact does very little. Finally there are educators, who provide information but are prohibited by law to give financial advice. While they can give illustrations or tell you what they did, they cannot specifically advise you what to do and therefore cannot really be your coach.

I am aware, however, of some wealth creation companies that provide ‘integrated’ solutions providing all of the required professionals in a single meeting. By nature, however, the cost of this service is out of reach of many. One solution might be to use self-help websites and software to help resolve this situation, in conjunction with education and perhaps a visit to a financial advisor if necessary.

What resources do you need to reduce personal debt? Well first of all, you must be able to measure and control what you are spending. Yes, I am talking about the dreaded budget. With internet banking and plastic cards, it is relatively easy to download transactions from all of your banks and put them into a spreadsheet. I believe that the most important tool, however, is the banking system itself. With high interest-earning no-fee accounts available it is possible to use the banking system and the utilities to do a lot of the budget accounting for you.

The Plan-A is what you will do if you are on track to achieve your goal. Is there some kind of reward for achieving your goal? Clearly to reduce personal debt, you must have a system to control what you spend, so at a minimum a separate card account and bills account but more likely around 9 high interest no fee accounts and one card account per partner, preferably a debit card (or secured credit card).

The Plan-B is to identify the biggest risk and what to do if it happens. If, for example, you think that your car might need $1,000 of repairs but you can’t set aside that much money over the next 6 months, what will you do? Will you change the deadline, or cut costs in other areas? Can you do without a car?

Finally, tracking a financial goal and measuring the level of success is straight-forward when you have the right tools in place, such as internet banking.

Glen Smith aka Glen The Goals Guy has been running both goal-setting and budgeting workshops.
Visit http://QuickStartGoals.com or http://BillBanisher.com

A number of questions are asked by clients either before purchasing or after downloading the accounting software. Many of these questions and the answers are the same the most typical of which are produced here.

Why is the monthly profit and loss account not updating from the sales and purchases entered.

Updating the profit and loss account in the financial accounts file is automated. If the financial accounts file is not updating automatically the links from the sales accounting spreadsheet and or the purchase accounting spreadsheet are not working. This may be because the file names have been changed which breaks the links between the files.

The most common reason is the way the files were originally saved when initially downloaded from the website by opening the files first before saving them. When a file is opened first before saving the computer stores that file in a temporary internet folder and changes the links to temporary links within that temporary folder.

When that file is then saved it is those temporary links which are being saved and not the original links. Those temporary links would not be recognised by the other files which form the link structure. The solution is to delete the files and save the files again direct to your accounts folder without opening them first thereby preserving the original links.

Accounting entries on sales and purchases appear on the profit and loss account but do not appear on the list of expenses on the self employed tax return.

The self employed tax return required to be completed in the UK is dependent upon the sales turnover. Small business with total sales income exceeding 64,000 pounds for the financial year ending 5 April 2008 are required to complete the full self employed tax return while businesses with a turnover under 64,000 pounds may complete the short version of the self employed tax return.. Coincidentally the threshold is the same as the vat threshold.

In addition if the sales income is less than 30,000 pounds then it is not necessary to complete all the individual expense classifications. The excel formulae within the financial accounts file automatically fill in the short or full tax return and only fill in the detailed expense classifications if required to do so.

Does the package produce my quarterly vat returns when a vat flat rate scheme is being operated.

The user guide contains notes on how to enter the value added tax flat rate percentage on the sales bookkeeping spreadsheet. The bookkeeping single entry of the flat rate vat percentage on the sales sheet updates throughout the package including the subsequent months on the sales sheet and also each month on the purchases bookkeeping spreadsheet automatically calculating value added tax at the flat rate percentage and expenses value added tax paid on purchases at the zero vat rate producing a quarterly vat return.

Does the self employed accounting software package produce a balance sheet.

Producing a balance sheet is optional for self employed small business and not an essential requirement of completing the self employed tax return. The self employed package is based upon single entry bookkeeping and does not produce a balance sheet which requires double entry bookkeeping while the limited company package does produce a balance sheet as it is a legal requirement for a limited liability company.

As the self employed accounting software includes sales and purchase spreadsheets and also cash and bank spreadsheets it is possible to manually produce a balance sheet if required but the accounting software does not produce it automatically.

Do I purchase a new software package each financial year or can the accounting software be updated for more than one year accounts.

As the accounting software and payroll packages include the current financial year tax rules that enable the financial packages to automate the production of that years tax returns then each year has new tax rules embedded and being on excel rather than an accounting database then it is necessary to purchase a new accounting or payroll package each year.

Terry Cartwright, CEO DIY Accounting, a qualified accountant in the UK, designs Accounting Software on excel spreadsheets and Payroll Software for small to medium sized business providing a complete accounting solution and also supplies Company Formation packages for new limited liability companies

The best choice is often dependent upon the size of the business and the employment of full time accountants, accounting staff, bookkeepers or management of the accounting records by the proprietor. Every business needs to choose the most appropriate accounts package according to both the requirements of the business and the capabilities of the person or people who will operate the accounting solution.

Many small businesses do not benefit from sophisticated accounting software if the technical requirements of that software exceed the abilities of the users to produce efficient financial records and use the full capabilities of the accounting software to maintain a high level of financial control.

Alternatively a simple bookkeeping package may not offer the degree of financial control over such financial matters as debtors and credit control, creditors and cash flow liquidity that may be required. Financial control and cash flow is of supreme significance and importance when credit is tight.

Every business needs to maintain a set of books and accounts to satisfy the legal obligations to calculate the net taxable profit which has to be both declared to the taxation authority and provide sufficient financial records to support that calculation.

Up until the mid twentieth century it was common practise to produce accounts handwritten on paper, Typing being reserved for the final set of accounts for publication as required. Handwritten accounting records are largely obsolete for medium and larger businesses although still used by many small business organisations.

With the advent of computers accounting software has become the norm and there are many simple bookkeeping packages that can be easy to understand and offer sufficient levels of financial control for even the smallest business.

In essence each small business has a choice between preparing a handwritten set of accounts, using a simple bookkeeping package which could be based upon spreadsheets or a more sophisticated accounting software package that almost invariably use a data entry system into a database which can then be queried to produce the required financial control.

Choosing handwritten accounts would only be applicable to the smallest business where the proprietor had no employees, limited numbers of transactions and had full financial control without the need for written information. Such handwritten accounts would not be suitable for any business that required control over debtors and creditors or that needed to produce a balance sheet.

For those businesses that could suffice with handwritten accounts there are better options available such as using computer spreadsheets. Minimal knowledge would be required and the benefits substantial compared with being handwritten.

An accounting package based upon computer spreadsheets is suitable for most small business as it can be no more difficult than maintaining handwritten accounts but in an organised format. The sophistication of the format would be according to the ability of the designer of the accounting solution or the bookkeeping knowledge of the person preparing the accounts.

Accounting software written on computer spreadsheets have advantages in that they can save time in data entry, improve accuracy, can be changed to correct errors, highly visible and provide all the basic bookkeeping needs of a small business. Accounting solutions written on spreadsheets are normally limited in relation to financial control and medium sized businesses that require additional control over debtors and creditors may be more suited to a database accounting software system.

Generally if a business is large enough to employ a full time bookkeeper or accountant then that business potentially has the accounting knowledge and skills within the accounting function to use a database accounting system and achieve the additional financial control elements which become available.

Accounting software that uses a database has the facility to produce regular financial and tax reports, debtors reports and statements, creditors reports and statements, cash flow statements and a set of monthly and final accounting reports such as profit and loss accounts and balance sheets.

The disadvantage of such accounting solutions is that to get the most and best out of the system you also need to understand how the package works and how technically to obtain from it the benefits of increased financial control that are available.

The main priority in choosing any accounting package is to first determine the final requirements you need from that administrative system. If detailed financial control, particularly over individual supplier or client accounts is essential and the business is large enough to employ office based staff including an accountant or full time bookkeeper then a database system may be the appropriate choice.

If the business is smaller and requires detailed accounting records to support the year end financial statements while financial control is already sufficient to be in the hands of the business owner then accounting software based upon spreadsheets would probably be adequate. The degree of adequacy being dependent upon the level of expertise contained and automated within the accounts program.

Handwritten books would be the lowest choice. Adequate for some small businesses but only suitable if a computer based option was impossible.

Terry Cartwright, CEO DIY Accounting, a qualified accountant in the UK, designs Accounting Software on excel spreadsheets and Payroll Software for small to medium sized business providing a complete accounting solution and also supplies Company Formation packages for new limited liability companies

The text book definition of “sunk costs” reads something like this:

Sunk Costs: Costs that were incurred in the past that cannot be recovered and thus are irrelevant for decision making.

Well most costs are incurred in the past so that part of the definition is not all that helpful. More central is the idea of recoverability. But the key underlying idea, which is not spelled out in the definition, is that sunk costs are assets. Huh? How can costs be assets? Well keep in mind that costs involve the expenditure of resources (usually money). But expenditures come in two flavors: those that have only short term benefit and those that have long term benefit. Costs (expenditures) that have only short term benefits are called period expenses or just expenses. Examples include expenditures for monthly utilities and rent. Costs that are expected to create benefit into future periods are called assets. Examples are machinery, furniture and equipment.

Now assets are sometimes referred to as unexpired costs to emphasize the fact that the expenditure will create benefits for future accounting periods. But these assets (unexpired costs) also come in two flavors: recoverable assets versus non recoverable assets. Most assets are recoverable at least to a degree. You buy a piece of equipment or furniture and you use it for a few years and it still functions so you can sell it in the used furniture or equipment market. Maybe you will not recover much of your original outlay but you will recover something.

But non recoverable assets are exactly sunk costs. You lay the money out and you cannot recover much of anything in the secondary market. Why not? Well these kinds of assets or sunk costs are usually custom made for very specific purposes. A piece of equipment specially designed to perform one unique function in a unique manufacturing process. A custom made software that only suits the specialized needs of one business.

So what is the big deal about these non recoverable assets that we call sunk costs? The big deal is that once we make an investment in these kinds of assets we are very reluctant to think clearly about whether or not we made the right decision. We are very reluctant to admit that we made a mistake.

Example. You invest $2,000,000 in special equipment to manufacture a certain model of desk lamp. Excluding the original investment of $2,000,000 the unit cost of producing one lamp is $3.50. This unit cost includes labor and materials directly associated with producing the lamp. Now some time after you make the investment in the special equipment you find out that a factory in China will manufacture the identical lamp for $3.00 per unit delivered. What is the prudent course of action?

Well the prudent course of action is to outsource the production and utterly disregard the $2,000,000 investment made in the special equipment. But the prudent course of action runs utterly contrary to human nature because abandoning the asset entails admitting to yourself that you made a $2,000,000 mistake.

How willing you are to abandon a bad asset investment is related to at least two things: the size of the investment and when you get the bad news that you made a mistake. If the sunk cost is large you are more likely to resist rational action than if the outlay is small.

If data on your mistake becomes immediately obvious after making a large investment you will do everything in your power to ignore or refute the data. On the other hand if you have gotten some benefit from the investment over some period of time you will be more willing to act prudently and write the investment off.

Michael Sack Elmaleh is a Certified Public Accountant and Certified Valuation Analyst. His book, “Financial Accounting: A Mercifully Brief Introduction”, has received wide critical acclaim. He has nearly 30 years of accounting and 10 years of teaching experience.His web site is understand-accounting.net

Company owners are often confused by the tangled web of business and financial regulations. To simplify the complicated financial part of the business, many of them choose to protect themselves by contracting for outsourced accounting services. On the other hand, some companies are still trying to handle their own bookkeeping or hiring non professionals to tackle the job in an attempt to save time or money. However, not using a professional is one that can cost a business owners more time and money than they realized they were gambling.

There are several reasons why choosing professionals to handle online bookkeeping services is one of the most cost-effective investments that a company can make.

Navigating the Regulatory Maze
The legal landscape changes quickly and businesses struggle to keep abreast of the latest developments. In our increasingly litigious society, ignorance of the law is no protection from significant financial liability.

This is one of the many reasons companies chose to employ outsourced accounting services. Unless a business is primarily involved in financial services, it is difficult to keep track of the changes. By hiring an experienced professional, not only does a company get its books in order, but it also gets financials done in compliance with the law.

Recent Changes Turn the Financial World Upside Down
The past few years have seen some of the most sweeping business reforms since the Great Depression. High-profile financial disasters like Enron and Worldcom have fueled public outcry for legal protection that has put a burden on all companies, public and private. It is harder for companies to use the casual internal bookkeeping services that have served them in the past. They need dedicated, full-time specialists that are familiar with today’s proper accounting practices, not the practices of ten years ago.

Using online bookkeeping services that use highly specialized accountants relieves the company of much of the burden of following frequent regulatory changes. These firms do nothing but financial work, so they can focus on using the correct practices and that protects their client companies.

You’re in Control When Using Online Bookkeeping Services
Although hiring an outside firm to do financial work can provide protection against liability, it doesn’t absolve the company of responsibility. For that reason, some companies are hesitant about using outsourced accounting services. They fear losing one of two things: control or security. If you choose the right service provider, neither of these will be a problem.

Online bookkeeping services give you full, real-time access to all of your financial data. Nothing is done without your permission or behind your back. You get regular financial reports that allow you to keep an eye on the company’s financial health. The service is there merely to process the data; all financial decisions are still yours.

That unlimited access doesn’t mean there is no security. In fact, your data is probably more secure if handled by online bookkeeping services. Professional companies have dedicated systems have hacker defenses, virus protection, and backup capabilities that small or even mid-sized companies can’t match.

Few companies need or can afford to hire a full-time, dedicated accounting staff and yet all companies need those capabilities. Outsourced bookkeeping services give you the benefit of expert financial services at far less cost.

Author is a freelance copywriter. For more information on Online Bookkeeping
Services, visit http://www.osibusinessservices.com