Our client was going around the bend

There was very little communication between our client and his previous accountant. Because his End of Year Accounts were submitted just two days before the nine-month deadline, the financial information he had about his business was badly out of date. He hadn’t seen a copy of the accounts so he didn’t know how much corporation tax would be due. 

 

Fines were being issued for late Construction Industry Scheme (CIS) submissions and the process for his furloughed employee during the coronavirus lockdown hadn’t been properly completed. 

 

Neither he nor his employee had been receiving payslips, he didn’t know how much he was receiving from the business, and he often used his personal account for business expenses. 

 

He was already using Xero accounting software for invoicing. However, he wasn’t using all the other valuable business tools it provides, which would show him clearly his turnover, profitability, and tax liabilities. In fact, his Xero account hadn’t been reconciled for over a year. 

 

We also discovered his previous accountant had submitted his last three VAT returns late. Worryingly, they had been based on bank statements rather than using Xero, so they didn’t meet the requirements of Making Tax Digital (MTD), which has been in effect since April 2019. This also meant his CIS payments weren’t included in his sales figures, so he didn’t have an accurate picture of his finances. 

 

We took over all the bookkeeping and accountancy for the company and introduced weekly bookkeeping so that everything was kept up to date. 

 

We gave him the Dext (Receipt Bank) app which allows him to take photos of all his paper receipts and to forward ones he receives via email. We also set up an accounts email address for his business so the LEOBS team could have access to purchase invoices and emails from suppliers. Where possible we set up online accounts with suppliers so we could extract invoices for him. 

 

We also reviewed his expenditure and made recommendations to help him save money. 

 

VAT - after discussions with the client and his business coach we decided moving from flat-rate to standard-rate VAT would be helpful. He was starting to work on zero rated new-build projects where he could reclaim the VAT on his costs and materials. 

 

Payroll and CIS – processing payroll and CIS each month in Xero allows statements to be sent easily to subcontractors and employees now have payslips. CIS deducted from the company is now offset against CIS payments for subcontractors so there is nothing to pay. Any CIS payments that build up can also be offset against corporation tax at the end of the year. 

 

We amended the details for the furloughed employee and paid back the extra amount which shouldn’t have been claimed. 

 

We now hold a monthly management accounts meeting to go through the previous month and discuss the VAT liability and make sure money is put aside for Corporation Tax. We also monitor the director’s loan account and pay dividends where necessary. 

 

Our client can now receive a regular amount from the business each month rather than occasional £100 or £200 payments, so he has control over his personal finances. 

 

We have built a good relationship with our client and he knows he can contact us when he has a query without feeling like he is asking a ‘silly’ question. 

 

Turnover has increased as we are working closely together to make sure he has good processes in place for the future. He knows that his CIS is being dealt with and that we are looking after things for him. 

 

He has now started another business and can move ahead with better control, confidence, and knowledge of his finances.