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Our accountancy Partner Garbutt + Elliott delivered an interesting talk this week on ‘how to present your figures in the best possible way’. At the start I said I thought they had to be presented honestly and the G+E team confirmed they must be honest as well!

How vital is it

Figures are what banks and investors look at. Every lender asks for your turnover, debtors and creditors, bank balance, who are your competitors, what is your break even sales figure etc.

How to keep on top

Xero and Quickbooks are 2 online accountancy packages that many people use and can give information instantly.

Credit Agencies also look at what is filed at Companies House e.g. what year on year growth have you achieved. 

Always file your accounts on time. You can always add a P&L a/c if you want, even if you aren’t required to. Watch out for overdrawn loan accounts, if a company has paid dividends to its owners but haven’t made the profits to cover them, it goes into an overdrawn loan a/c. It’s better to take out an affordable salary than unaffordable dividends.

Planning

It is vital to have a pre year end planning meeting with your accountants, in case you need to do/change something before the financial year end.

R&D Claims

R&D claims can cover a much wider field than many think. Improvements made to your business may get an R&D allowance. If you are successful and get 230% of your cost, capitalise it into your balance sheet i.e. remove it from your p&l and feed it back over several years. The rules changed on 1st April, if you include outsourced suppliers there’s a cap of £60k.

Key KPIs (Key Performance Indicators)

Current assets divided by current liabilities – needs to be over 1

Cash + debtors divided by current liabilities – best if over 1

Both are vitally important

Banks look at net debt / EBITDA max of 2.4

EBITDA / capital and interest payments – a minimum of 1.3. 

Interest covers EBITDA / interest. 

Leverage ratio Debt / Assets or Debt/Equity

Forecasts

Set targets and measure against them. There’s a G+E s/s for forecasting which is free.

Basics – What are the recent trends/history like? What will be the impact of any new strategy or marketing plan? Numbers must underpin the words. Show the gross margin, it’s vital.

The cash forecast is the most important doc, but you can only do it if you’ve done the P&L forecast. 

 

Nick Butler

09/06/21