Blog

20/08/2010

Just a couple of points to bear in mind when considering VAT registration

Are the majority of your customers Trade or Retail?

If your customers are mainly Trade customers then most will probably be already VAT registered themselves which will mean that your VAT registration will have little or no effect on them as they can claim back the VAT that you charge. If, however, your customers are mainly retail they will not be able to claim back the VAT that you charge and so any price increase that you make to cover the VAT will mean a net price increase to them (unless you reduce your net price accordingly).

When do you need to be registered for VAT?

It should be born in mind that the £70,000 turnover threshold is a rolling turnover. That is to say from any calendar date to another one year later. It is not necessarily within one financial year or one accounting year.

30/08/2010

How can you find out the true cost of your sales?

Say you are a trader selling shirts. You buy a shirt at one price and sell it at a higher price. You subtract the cost price from the sale price and get your profit (ignoring VAT for the moment). Right?..... Wrong! How about the other costs such as Rent, Rates, Employees, Advertising, Delivery etc, in other words your overheads? How can you include the cost of overheads in the cost of each sale?

There are a number of ways but for the moment I shall consider one such method. Say you buy 1,000 shirts at £5 each and sell them at £10 each, the gross profit is £5,000,

                       Total revenue (1,000 x £10) = £10,000       revenue per shirt = £10

                     Less Total Cost (1,000 x £5) = £  5,000       cost per shirt         = £  5

                                                                          --------------                                       ---------  

                                                   Gross Profit = £  5,000       profit per shirt       = £  5

Now say the total overhead cost of rent, wages, heating etc. is £2,000. You you divide the total overhead (£2,000) by the number of items (1,000) and add the result (£2) to the cost of each item,

                                                   Gross Profit = £   5,000       profit per shirt           = £   5

                                              Less overhead = £  2,000      overhead per shirt   = £   2

                                                                          --------------                                         ---------

                                                         Net Profit = £  3,000      net profit per shirt     = £  3

04/12/2010

How do you choose between Sage and QuickBooks?

Both Sage and QuickBooks have products designed for the small businessman. Sage is the more established brand in this country and is the one most commonly used by accountants. QuickBooks, on the other hand, is a relative newcomer to our shores having been designed in America specifically for use by the small businessman (it has been perfectly adapted for use in this country). I think it is fair to say that Sage is the system most accounting firms prefer their clients to use as Sage backups can be restored directly onto the accountant's own system. QuickBooks is not as compatible with many accountants, but it is perhaps easier to understand by businessmen who do not have training in accounting.

If you would like to know more about the differences between the two to enable you to make an informed choice, please refer to our section marked QuickBooks / Sage Training.