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FAQs

Q1. What accounting software do you recommend?
A1. The purchasing decision should be made with great care because you will effectively be running your business on the accounting system. Today, many best-selling products can be configured to match the way you do business already.

The price of accounting software can be used as a very rough guide to the flexibility of a system. The lower cost products (some of the basic book-keeping packages now only cost around £149) are very simple, but inflexible. In products that cost between £200 and £500, you may be able to adjust some of the screens and data fields, and for most businesses this will provide an adequate degree of flexibility. All accounting systems conform to the fundamental rules of double entry book-keeping.

Companies with specific requirements often find that a standard package meets 80% of their requirements, but can't cope without that often crucial 20%. If this is your business, don't worry, we are experienced SAGE dealers who can address your exact needs. Whatever your particular needs, we know that you need a complete system that meets your every requirement, as well as those of the Inland revenue, Customs & Excise and most importantly, your accountant!

Q2. What is my product margin?
A1. Any analysis of a business must consider the current level of sales activity. When you examine profit margins, all costs, expenses are expressed as a percentage of sales. This ratio makes comparisons both possible and realistic. The gross profit percentage is obtained by deducting the cost of sales from the sales, and expressing the result as a percentage of sales. This ratio gives an indication of relative manufacturing efficiency

Q3. How much working capital do I need?
A3. The more money a business has tied up in working capital (the day to day money used to finance the working of the business), the more difficult it is to make a satisfactory return on capital employed. The primary ratio for controlling working capital is usually considered to be the current ratio. This, however, is of more interest to outside bodies, such as bankers and suppliers wanting to see how safe their money is.

The main aim of working capital management is to have as little cash as possible tied up in your working capital. In an ideal world, cash receipts from debtors are used to purchase stock and pay off creditors so that stock can then be sold and money is received, thus returning to the beginning of the cycle. However, you should have a cushion of cash to allow for debtors not paying on time (or at all), creditors requiring payment before debtors pay you, purchase prices increasing suddenly and other unforeseen expenditure.

Q4. Are we above or below average in our industry?
A4. Knowing your business sector is important to your business planning. This information can be obtained from a number of useful sources, including different government departments such as the DTI, the Inland Revenue and Customs & Excise, trade organisations and associations. Alternatively, contact us as we have access to specific industry data and can compile comparisons for you.

Q5. How do I successfully monitor my debtors?
A5. Any business selling on credit knows just how quickly customers can eat into their cash. This is particularly true if the companies are big companies. it is important to remember that even if your terms are 30 days it will be nearer 45 days on average before you are paid. There are two techniques for monitoring debtors.

The first is to prepare a schedule by 'age' of debt. This method has the great merit of focusing attention clearly on specific problem accounts. The second technique for monitoring debtors is using the ratio debtor days. This ratio is calculated by expressing debtors as a proportion of credit sales, and then relating that to the days in the period in question.

This is a good control ratio, which has the great merit of being quickly translatable into a figure any businessman can understand, showing how much it is costing to give credit. If, for example A Limited is paying 9% for an overdraft, then giving £50,000 credit for 45 days will cost £554.79.

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