awaccs.co.uk

How do I do a stocktake?

A client of mine has a stocktake coming up and they have a mixture of goods and products to value, so how should they do it? This depends on what the product is and how it is going to be used. The normal basis for valuing stock is at the lower of cost or net realisable value. This means whichever is the lowest of:

Cost

The actual cost of goods including bringing them in (ie delivery costs)

Net realisable value

The amount that you will realistically be able to sell it for. In many cases stock is held which “may” be useful in times to come but in reality this is not in the foreseeable future. In this case it may be that the value is a fraction of the cost or may actually be zero.

There are a number of different categories of stock and the practical way these are valued varies, but nonetheless all use the same principle. In all cases you should consider whether the realisable value is greater than cost and if not take a view on what value to apply.

Raw materials for manufacturing

These will be valued at cost of bringing the product to site. Clearly if the item is complete as it came onto site then the value will be that shown on the invoice. If there are a number of deliveries at different prices these are usually priced on a FIFO (First In First Out) basis, ie assume the oldest stock is used first. So you may have to refer to a number of prices if the quantity in stock is greater than the items on the last invoice.

The next problem is partially used “raw material”, you will need to value this based on what remains, so if it is a product sold by length you will need to measure the remaining amount and pro rata that by the cost of a complete unit (eg cable or fabric). A similar principle can be used for products sold by weight or volume.

Finished goods

These are valued at the cost of the materials used ,including any scrap or off cuts not useable elsewhere, together with the cost of any labour to produce the product.

Goods bought for resale

These are typically retail goods and are valued similarly to raw materials, this may be the area most prone to realisable value valuations due to obsolescence or old product lines.

The big mistake many business owners make is to value goods or products at sales value, this is an incorrect way of valuing and hopefully the above will be of assistance. This article is a brief summary of the principles of stock valuations and may not apply to specific circumstance so please seek professional advice before taking any steps based on the information shown. If you would like advice in this or other areas feel free to call.  Alastair Wood, AW Accounting – Accountants who “speak your language”

Twitter Tax Advice week 2010-07-05

• RT @Adept_IT_Ltd: Have spent today preparing client’s data for migration to new server over weekend. //Hope you get out in sun #BBQweather #
• Networking followed by potential client meeting, then helping client out with Quickbooks query. Now off to docs re bruised/cracked rib. Ow! #
• RT @essentialpa: @alastairwood have you been introduced to @Xero? //A client uses @Xero, I was v impressed, now following them too #
• RT @amyaccountant: Ready for VAT online? Useful HMRC guidance at http://ow.ly/25F31 with online or offline training. #
• RT @BBC_TopGear: The Bugatti Galibier… Could this be Rolls-Royce’s worst nightmare? #TopGear http://bit.ly/dv0h75 //great pics #
• Preparing accounts from incomplete records, will be better next year with help from AW Accounting http://bit.ly/5iprxB #
• RT @TheFundingCoach: Gift aid income continues to rise: The amount reclaimed from HMRC by charities has passed the £… http://bit.ly/b0YqMh # read more

Scanning and emailing documents

After helping out a client email some bank statements to a bookkeeper and an interesting chat with a document scanning company at the Be An Amazing Business Builder Show on Tuesday I thought I would share my views on scanning documents.  I come from a “less paper” background and have carried this over into my own business.  Apart from a few documents I am required to keep by my Association such as signed enagagement letters, all of my paperwork is electronic read more

Understanding your limited company accounts

Clients are always telling me that they do not understand their accounts. Clearly they know their business, and how to price to make money so it is only a small step to actually understanding the end of year accounts:

1. The very back page or two is the detailed profit and loss account which as the name implies shows the profitability of the business after expenses but before tax.  The first figure will be sales or turnover which is the income for the year based on sales actually completed, but not necessarily paid for.  read more

What year end should I have?

Whether you have just started up a business or have been going a number of years there are a few factors which will influence what year end you choose:

• Date registered at Companies House: The default date chosen is the end of the month one year from incorporation, so if you incorporated on 4 February 2010, your year end would automatically be 28 February 2011.  You can however change this.
• If you did not start trading through the business until May, you may want to change the year end to April so it represents a full years trade read more

Why you should have an accountant and how to choose one

As new research from business software and services provider Sage shows that

accountants are now seen as the most trusted source of business advice

for UK firms, we consider why you should have an accountant and how to choose one.

A qualified accountant is an experienced professional read more

Debt collection – how to make it easier

It is a common tale from business that they have tried all courses of action to recover debts, the credit controller is pulling their hair out and going through the courts is a waste of time and money.   I have recently met up with an agency that is dispelling this myth.  Once you have obtained Judgement, and if your debt is over £600 they will collect it for you, and in 2008 they collected 96p in every £1 of enforceable debts.  The steps are as follows, and for the latter part of the article credit goes to guest blogger The Sheriffs Office:

1. Small claims can be made on line using HM Court Service website, moneyclaim.gov.uk.  There is useful guidance on the HMCS website.
2. There is an excellent flowchart on p11 of the HMCS Guide for debt recovery for Small Businesses
3. Once Judgement has been registered by the court the customer is obliged to pay you, however this is where so many businesses stall and where The Sheriffs Office can come in useful read more

Thinking of going Limited?

My finance presentation to Mumpreneurs, in association with Buss Murton solicitors, highlighted the interest there is in the possibility of going limited.  While many small businesses have started off as sole traders they have evolved and grown to the extent that they should be considering whether this is the best structure for them.  I have recently been approached by a prospective client turning over £500k+ read more

How should I set up sole trader or company?

So you are thinking about setting up your own company or wondering whether you are trading through the best sort of company.  There are basically three types of company you can trade through and they all have their pro’s and cons.

Sole trader

This is the simplest way to work for yourself and there has been much discussion in recent months about people reverting back to sole trader status, or setting up as a sole trader in preference due to increasing company tax rates of which more later.  read more