Much more than just a tax return, end of year accounts include not only your Profit and Loss account required for Self Assessment, but also your Balance Sheet which includes all your Assets and Liabilities. This gives you a much better idea of how your business is progressing and what it may be worth.
Assets include all the monies that you are owed by your customers and any loans that you have provided for others, and the value of all the property, machinery, equipment and tools that you own.
Liabilities include all the monies that you owe to your suppliers and any loans that are still to be repaid, mortgages remaining on property, and the value of any outstanding contracts for which you have been paid but are still to deliver.
Limited Company Accounts
If you operate as a Limited Company then Annual Accounts are compulsory. You need to submit a Corporation Tax Return every year. I am registered with HMRC as a Tax Agent for Corporation Tax and I do Corporation Tax Returns and Year-end Accounts for dozens of limited companies in central Scotland.
Another great advantage of year end accounts is that you can have meaningful categories that allow you to judge what areas of you business are most successful and thereby worthy of greater focus. Detailed annual accounts will also point out areas where you may have a high level of unnecessary expenses.
Our software allows the setup of ‘Business Categories’ for business analysis, and not just ‘Tax Categories’ for tax returns.
As an example, in your tax categories you will have conflated categories such as ‘Rent, Rates, Power and Insurance’ – but this one tax category will include four (or more) business categories that allow you to get a more detailed breakdown.
As another example, in your tax category ‘Vehicle Costs’ there is no indication or separate record of how much you spent on fuel, insurance, repairs, road tax, vehicle hire, etc. A business analysis (as opposed to a tax analysis) provides you with the vital information you need to run your business more efficiently.