DIY micro entity accounting & Xero & others...

[J Sidoli]

I have a very small limited company (two directors, no employees, though having PAYE would be nice as then I could pay myself something!) founded last year... it's more of a hobby for us as we both have FT jobs. But, it's making money and will turnover maybe £15k in first year with zero investment and making good profit of maybe £8-10k. We print and sell fanzines and posters basically.

We have good records in spreadsheets of everything we've done, and I am numerate and good with detail... but know little about accounting.

I've emailed around for quotes to get an accountant and they have priced up to £750 per year to do everything for us. Whilst I respect accountants very much however, I feel that for such a small operation we should be able to do this ourselves somehow.

I therefore wanted to ask advice from this forum (which has always been incredibly helpful in the past) as to whether:

1. It's feasible to roll-your-own accounts

2. Is something like Xero the way to go or is it a waste of money and all I need are my spreadsheets? This is really my main question!

3. On another topic, is there a tutorial anywhere online as to how to do your micro entity accounts and what information they should include?

 

[Opinion87]

2. Both. Xero is great and it's not particularly expensive, and if you do grow and and use an accountant, they can login and see/do everything they need to. I still keep spreadsheets because they're much easier (better) for forecasting, budgeting and planning.

 

[J Sidoli]

Thanks! Can Xero a) handle all the sh*t you need to file with companies house (auto produce the pdf, declaration, calculate your corporation tax) and can it genuinely and easily handle PAYE for me so I can pay myself a few hundred quid for all the time I've sunk into this (lol)?

 

[gpietersz]

Their very cheapest package is £120/year which is not cheap. If you use it for 10 years you pay £1,200 assuming!

If you want payroll that is a another £60/year. If you need to reconcile more than 20 bank transactions, or send more than 5 invoices a month that is another £84/year.

We use Gnucash which is free (and open source) and installs on your desktop.

The companies house return for small business can be very simple. You qualify for filleted accounts so all you need to send them is a very minimal balance sheet. Corporation tax is another issue. I know Xero supports VAT returns (not a problem for you at the moment) but I do not think it will do corporation tax for you - I may be wrong about that though but if I am no doubt someone here will correct me.

 

[gpietersz]

There are also cheaper accountants. I think some of those on here will do simple accounts at a reasonable price.

 

[J Sidoli]

Yeah I only asked quite big companies as I don't know any small ones around me or freelancers etc. I don't mind paying £250 for example, but £700 was getting a bit silly when we are so small.

I'll have a look at gnucash... but quite like that xero is cloud as it means we can both login (we are not geographically close).

 

[NicoJ]

Quickfile is free (up to a certain number of transaction then it's around £45 I think) and is cloud based.

For accounts, a decent firm will charge at least £500 for a set of limited company accounts. You can get cheaper but you get what you pay for.

 

[Opinion87]

Their very cheapest package is £120/year which is not cheap. If you use it for 10 years you pay £1,200 assuming!

I wouldn't call that "not cheap" to be honest. If I have a query or issue, my accounts team can login, take a look and clear it up. If it was too complicated to deal with going back and forth over email and I had to go to their office to sit down and sort it, that costs me time and money.

 

[J Sidoli]

I don't have a problem spending £250 on Xero if it's going to do everything I need to file my accounts, be compliant and proper etc.

My main question is therefore, as a novice (albeit numerate and with half a brain), can Xero do everything I need for a micro entity company with turnover of no more than £20k?

Or am I still going to need an accountant?

 

[MyAccountantOnline]

I have a very small limited company (two directors, no employees, though having PAYE would be nice as then I could pay myself something!) founded last year... it's more of a hobby for us as we both have FT jobs. But, it's making money and will turnover maybe £15k in first year with zero investment and making good profit of maybe £8-10k. We print and sell fanzines and posters basically.

We have good records in spreadsheets of everything we've done, and I am numerate and good with detail... but know little about accounting.

I've emailed around for quotes to get an accountant and they have priced up to £750 per year to do everything for us. Whilst I respect accountants very much however, I feel that for such a small operation we should be able to do this ourselves somehow.

I therefore wanted to ask advice from this forum (which has always been incredibly helpful in the past) as to whether:

1. It's feasible to roll-your-own accounts

2. Is something like Xero the way to go or is it a waste of money and all I need are my spreadsheets? This is really my main question!

3. On another topic, is there a tutorial anywhere online as to how to do your micro entity accounts and what information they should include?

Don't confuse bookkeeping with looking after the company accounts and tax affairs. It's not the same thing.

I realise my opinion as an accountant is bias, but it's my view that someone working as a sole trader can with time complete a Self Assessment tax return and probably claim most of what they are able to claim. Looking after the accounts and tax for a limited company properly ensuring you deal with all that's required, and dont pay any more in tax than you need to is very hard without the experience and training a good accountant will have. I've seen lots of people try and DIY and its gone badly wrong.

If you keep some good and accurate records using dedicated accounting software or an online system you really should find an accountant who will charge less than you've been quoted.

I suspect the £750 fee is because your accountant is having to do quite a bit of work before they can use your spreadsheets to prepare the accounts and tax return.

 

[Opinion87]

I suspect the £750 fee is because your accountant is having to do quite a bit of work before they can use your spreadsheets to prepare the accounts and tax return.

Yes. My accountant charges less to prepare accounts for the businesses I have using Xero then the businesses using spreadsheets. (I still send them my spreadsheets, though.)

 

[J Sidoli]

Thank you for the comment @MyAccountantOnline very helpful points.

In that case, maybe I should consider using both Xero and then an accountant to file and do stuff/wrap it all up at the end of the year? If you know any good UK companies who will support this sort of system please feel free to recommend. And note that I am not/never was expecting cheap, I just don't want to pay over the odds.

 

[MyAccountantOnline]

Thank you for the comment @MyAccountantOnline very helpful points.

In that case, maybe I should consider using both Xero and then an accountant to file and do stuff/wrap it all up at the end of the year? If you know any good UK companies who will support this sort of system please feel free to recommend. And note that I am not/never was expecting cheap, I just don't want to pay over the odds.

I've nothing against Xero but it's very expensive. I have a few clients who use it and am happy to work from Xero records.

I'd check out VT cashbook which is free if you arent VAT registered and have straightforward bookkeeping requirements.

If you want an online system Accounts Portal is good - it's £6 plus VAT per month for my firms clients.

I run an online accountancy practice, have a look at the website to see what we charge.

 

[J Sidoli]

I'll take a look, thanks! Meanwhile, am I not correct that Xero has the added benefit that I could add myself to PAYE relatively easily?

 

[MyAccountantOnline]

I'll take a look, thanks! Meanwhile, am I not correct that Xero has the added benefit that I could add myself to PAYE relatively easily?

If you need to have PAYE Moneysoft is a cheaper option and very good.

Is a salary the best option for you though as you have full time jobs?

 

[J Sidoli]

Well, because we are two directors and only I do significant work we did not think the dividend route would be good because the other director would not want to take anything out of the business profits. And, as I understand, dividend waivers can get complicated?

But yes, ideally it'd be dividends (the only other route I am aware of?).

 

[MyAccountantOnline]

Well, because we are two directors and only I do significant work we did not think the dividend route would be good because the other director would not want to take anything out of the business profits. And, as I understand, dividend waivers can get complicated?

But yes, ideally it'd be dividends (the only other route I am aware of?).

Different share classes would enable different dividends to be paid to each of you.

 

[gpietersz]

Just a general comment on spreadsheets from a IT point of view. They are brilliant for some things (like financial modelling) but there are all kinds of things wrong with using them as a general purpose tool. I do not mean just for keeping accounts, either. They:

1) increase the risk of human error,
2) you have to do more work yourself (e.g. an accounts program will let you see the P & L for a particular year in a few clicks)
3) Its easy to go wrong in subtle ways. For example, it will not warn you if entries do not match (assuming your spreadsheets do double entry at all?).

What ever you choose, use something meant for the purpose.

@J Sidoli Just to say thanks, I think you have me a really good idea - essentially extending something I was planning to do anyway for people like you.

 

[MyAccountantOnline]

Just a general comment on spreadsheets from a IT point of view. They are brilliant for some things (like financial modelling) but there are all kinds of things wrong with using them as a general purpose tool. I do not mean just for keeping accounts, either. They:

1) increase the risk of human error,
2) you have to do more work yourself (e.g. an accounts program will let you see the P & L for a particular year in a few clicks)
3) Its easy to go wrong in subtle ways. For example, it will not warn you if entries do not match (assuming your spreadsheets do double entry at all?).

What ever you choose, use something meant for the purpose.

@J Sidoli Just to say thanks, I think you have me a really good idea - essentially extending something I was planning to do anyway for people like you.

I agree entirely.

I don't actually think I've ever been sent a spreadsheet by a client which hasnt had at least one error in it.

 

[J Sidoli]

Thanks for further thoughts. I've just been reading up on various book keeping packages and funnily enough have now come full circle back to the spreadsheets.

The reason for this is that I am doing them myself and am incredibly particular about getting it right when it comes to formatting and correct data entry. Also, both our banks we use can output csvs so in the most part I can setup a quite detailed spreadsheet with various rules and calculations that keeps everything up to date in virtual real-time. If I do this well and keep it all reconciled, surely it just comes down to being able/knowing how to turn it into fileted/short accounts for filing?

[Aside from PAYE that is...]

[Yeah... still haven't quite sussed what I am going to do... ha]

 

[Opinion87]

Just a general comment on spreadsheets from a IT point of view. They are brilliant for some things (like financial modelling) but there are all kinds of things wrong with using them as a general purpose tool. I do not mean just for keeping accounts, either. They:

1) increase the risk of human error,
2) you have to do more work yourself (e.g. an accounts program will let you see the P & L for a particular year in a few clicks)
3) Its easy to go wrong in subtle ways. For example, it will not warn you if entries do not match (assuming your spreadsheets do double entry at all?).

What ever you choose, use something meant for the purpose.

@J Sidoli Just to say thanks, I think you have me a really good idea - essentially extending something I was planning to do anyway for people like you.

Agree 100%. Xero is great, I can see things like my P&L, my running VAT Return, but if I want to forecast the next 3/6 months at 0% growth, 25% growth, the impact of X and the impact of Z, spreadsheets are great. I have a scan through my online banking every day, only takes a couple of minutes at most to update my spreadsheets.

 

[Karimbo]

I bank with barclays, they gave me the option of using their business software tools. Which includes freeagent, mozy online backup, liveplan, credit checking & legal document producer.

Initially it was £17.99 a month which was a steal. Now it's £30 a month and I consider it reasonable.

I mainly use freeagent. And it's perfect for my needs.

Most of the work (bookkeeping) is done by myself, then I give it to an accountant to do the annual accounts for £150 a year off peopleperhour (credentials checked out).

I could possibly do the annual accounts and corporation tax filing as well as the companies house abbreviated accounts myself. But it's a good idea to get a third party to do this because I'm sure you'll get under HMRCs radar if you're doing everything yourself. With a 3rd party accountant, they know it's been lightly audited, and the reconciliation is done and the figures use for accounts tally up with the banking.

 

[J Sidoli]

Hi Karimbo - I've come around to this position as you've suggested now. I am considering using FreeAgent or Xero myself, keeping it up to date, and then finding someone who can file everything at the end of the year. If it's just the cost of FreeAgent + £150 for an accountant to do it properly then I'd be happy with that.

QuickBooks also looks good and seems to be cheaper...

 

[Karimbo]

Hi Karimbo - I've come around to this position as you've suggested now. I am considering using FreeAgent or Xero myself, keeping it up to date, and then finding someone who can file everything at the end of the year. If it's just the cost of FreeAgent + £150 for an accountant to do it properly then I'd be happy with that.

QuickBooks also looks good and seems to be cheaper...

I'm not hung up about the accounting software, I would change from freeagent to something else cheaper if it was such a royal PITA to export data, relearn the new software.

A desktop based software may be more efficient if you're like me and leave stuff to the last minute and want to post invoices all in one go for the quarterly VAT return.

Google Adwords recognised the pitfalls of using a web based system for complex work and they have a desktop client which works alongside the web based one.

You may need to work with an accountant for the first year and get some tax advice. I was taught the use of home expense, most efficient way to pay myself by the accountant, flat rate scheme (earns me over £2K per year).

 

[J Sidoli]

All good advice. However, since we are sooooo small I'm not sure there is much complex to deal with. We are only going to take ~£12k sales in the year.

That's not to say I don't have a few basic questions an accountant could easily answer though... but surely I could ask them when it comes to the end of the year.

 

[Karimbo]

All good advice. However, since we are sooooo small I'm not sure there is much complex to deal with. We are only going to take ~£12k sales in the year.

That's not to say I don't have a few basic questions an accountant could easily answer though... but surely I could ask them when it comes to the end of the year.

Yes, I don't know how proficient you are with accounts. It's possible to do your ltd company accounts on a spreadsheet for such a small company.

If you're handy with excel you can post your entries and generate a trial balance for the accountant to compute off. But you'd have to be a pretty adept bookeeper to do that.

perhaps contact an accountant on PPH and see if they will send you a excel sheet template to work with.