Management accounts, produced on a regular basis, will give you and your professional advisor the information you need to manage your business and keep your planned profit growth on-track. They also provide the basic data that you will need to minimise your tax payments and keep your business on track to produce sustainable profits. Additionally, management accounts can be used to:
Keep your bank informed
If your business is constantly pushing towards the top end of its overdraft or loan facilities, your bank manager will be much more sympathetic to your requests for more support if you can provide regular up-to-date accounts.
Plan the purchase of new plant, equipment or vehicles
The tax allowances you can claim for capital purchases can vary significantly. In particular the date on which you buy and the specification of the vehicle or equipment will need to be taken into account. Well worth taking professional tax advice before you make any significant investment in this area.
Plan how you pay yourself
The options you have available to minimise tax and National Insurance on any income you draw from your business depends on the type of business structure you have opted to work with. Self-employed traders will pay tax on their profits regardless of the amount of cash they withdraw for personal needs; directors and shareholders of Limited Companies will pay tax on the amount of salary or dividends they take. Dividends, however, do not attract a National Insurance charge. Each business offers its own opportunities to minimise state deductions and maximise take home pay. You should certainly take advice prior to your year end to make sure you choose the right strategy; waiting until after the year end may close down beneficial options.