Daily, businesses and individuals alike are seeking the advice of financial advisers because they have made poor choices in financial transactions and are now suffering the consequences of mounting debt. This can be extremely devastating because one wrong figure carried forward on an accounts ledger can affect everything from taxes to disposable income and/or cash flow. How can accounting courses help you overcome debt? Actually, there are a number of ways in which a better understanding of accounting can be invaluable.
Long Gone Are the Days of Handwritten Ledgers
In days gone by, businesses kept their accounts in big red and black books known as ledgers. It was easy to make a mistake when hand calculating figures and carrying them forward. This often offset an entire year’s calculations which affected everything from taxes due to HMRC to overpayment of debts incurred. Today there are a great number of commercial accounting programs on the market which can be run on the company’s computer, but it is also easy to make errors here as well. Whilst they are truly a timesaving investment, some are not as user-friendly as others and a basic accounting course can help the user learn to navigate the screens so that data entry is flawless.
Laws, Laws and More Laws – HMRC Will Keep You on Your Toes
One aspect of running a business which never ceases to amaze company directors is how quickly HMRC can change their rules and regulations. Usually reporting dates remain the same but small variations in regulations can affect what should be reported and how much can be claimed on allowances. There seems to be some amount of confusion, especially when it comes to what can be claimed back on VAT. Introductory accounting courses can help sort through the current laws and help directors know where to find recent updates on HM Revenue and Customs’ website.
Learning to Forecast Trends in the Market
One of the aspects of accountancy is that they quickly learn where the market is headed. Many business directors invest in the wrong area because they haven’t learnt to forecast market trends. Believe it or not, a huge portion of investing is in knowing how much capital is available to be invested and to differentiate between acceptable and poor profit margins. Even traders need a basic introduction to accounting courses to understand the principles of finances! A sound investment needs to be based on available funds and without proper accounting there is no way to arrive at those figures. It’s as simple as that. All else is conjecture and many businesses have failed in just this way.
Debt – The Root of All Business Evil
We often hear the old proverb that money is the root of all evil. When it comes to owning or operating a business, you can take that one step further. Debt is the root of all evil because it can quickly lead to insolvency proceedings. Being unable to pay debts with no reasonable hopes of doing so in the future has led numerous companies to formal insolvency. Creditors will not hesitate to petition the Court to wind up an indebted company. Basic accounting courses should be able to help directors spot the warning signs of insolvency in order to seek help and advice in time to stave off formal insolvency. Whether it is in seeking loans, Company Voluntary Arrangements for additional time to pay or Company Administration to restructure a business model, learning when to act is integral to sound business practices.
No one expects a director to be an accountant, but having a basic understanding of the principles of accounting can enable him or her to quickly spot the warning signs of insolvency. Debt, after all, can mount quickly enough to threaten the future of a company. Learn the basics in order to know when professional help is called for.
Laura writes for www.liptrottandwoosey.com, an accountancy company that specialises in helping small to medium sized businesses with their finances.