If the Numbers Don't Add Up — Say Grace
If there is one single thing that is essential for a business, it is that Your Numbers Add Up. If they don't, the consequences could be serious — perhaps even the end of your business.
Fortunately, there is an answer — say Grace.
Adding Up the Numbers
Even in terms of personal finance, making sure the numbers add up is crucial. This has always been true.
Nearly two centuries ago, Charles Dickens put it: “Annual income twenty pounds, annual expenditure nineteen nineteen and six, result Happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.” *
This is even more true for a business, except that, of course, you would hope your business makes a rather better profit margin than 0.125%.
The minimum requirement, though, is that your cash flow is positive — but how are you going to know, if you can't keep track of your numbers?
What Happens if the Numbers Don't Add Up?
The consequences of getting your numbers wrong in business can range from serious to dire.
If you are a Limited Company, for example, it could mean your official accounts are incorrect, and this might result in anything from a fine from HMRC to prosecution for fraud. It could very well mean the end of your business.
Even if you are a Sole Trader, though, and are not legally obliged to produce accounts, that does not make you safe. HMRC are entitled to request to see your financial records as a random check, and you can still be in trouble if the data does not tally with what you have declared in your tax return.
The pitfalls are not confined to tax, though. Imagine buying vital equipment or services for your business, only to find when you go to pay the invoice that your bank balance does not cover it. You thought you had plenty, but you hadn't been keeping up with the numbers and had missed several items of expenditure.
In the end, a business that cannot be confident about exactly how much cash it has at its disposal could well lose the confidence of the market. And that can be near impossible to recover.
The best way to avoid this is to hire an Accountant — but not any Accountant. Some may simply produce accounts taken at face value from the figures you have given them. If those figures are inaccurate to start with, the accounts will also be inaccurate.
What you need is an Accountant who will be actively involved in your business and ask you all the right questions to ensure they will get the correct figures. An Accountant like this will be almost part of your business, rather than simply someone you have hired to crunch a few numbers.
So, if you're having trouble getting your numbers to add up (or just want the peace of mind of knowing they will), then, say Grace — and give us a call.
* For those who struggle with pre-decimal currency, the figures are £20, £19.97, and £20.03, respectively.
I hope this information helps your business run more smoothly through these difficult times.
Director & Managing Partner
Grace Certified Accountants