Understanding the figures with Cloud Accounting

1. Understanding the figures with cloud accounting
Breakfast Briefings – Autumn 2018 Welcome: Tom Roach, Francis Clark
6 November 2018

2. pkf-francisclark.co.uk
Administration

3. pkf-francisclark.co.uk
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Presentations followed by discussion
Presenter Topic
Andrew James
Manager, PKF Francis Clark Making the figures work for you
Ian Hughes
Manager, PKF Francis Clark
Cloud Accounting and demos

4. 4
Andrew James, Business Services
Manager
Making the figures work for you

5. Peter Drucker
"If you can't measure it, you can't improve it."

6. Management vs Statutory
• Statutory accounts – historic information
• Format driven by statutory requirements
(i.e. accounting standards / HMRC /
Companies House)
• Deadline driven
• Management accounts – real time
• Your figures, your format
• A business tool
• No deadlines?

7. 7
The Profit and Loss
See example set of accounts in slide pack
• revenue vs capital
• day to day trade
• Accruals - recognise the service (or products)
provided inline with the costs to incur them
• Sales
• Less Cost of sales
• Equals Gross Profit
• Less Overheads
• Equals Net Profit

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The balance sheet
Assets – Liabilities = Equity
• A snapshot at a certain date
• Assets (future income)
• Liabilities (future outgoings)
• Fixed and current assets
• Long term and current liabilities
• Equity
• Net profit
• Plus capital introduced (or share capital)
• Less drawings (or dividends)
• Plus previous year’s equity

9. Double entry bookkeeping
For every action there is a re-action…

10. Double entry bookkeeping
For every debit there is a credit…
Debit (DR) Credit (CR)
Assets Income
Purchases / expenses Liabilities

11. Double entry bookkeeping
“Sorry I gave you the wrong closing stock
figure, it was actually £10,000 higher…”
“Why am I paying more tax now?”
• Accruals
• DR Asset (stock) on the balance sheet
• CR Purchases on the profit and loss
(reduces the purchases figure thus
increasing the profit)
Can’t look at one item in isolation

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The Profit and Loss – key ratios
• Year to year comparison
• Gross profit percentage
• Net profit percentage
• EBITDA
• Wages vs revenue
• Why is this helpful?
• Track performance
• Over a set period… yearly / quarterly /
monthly

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The balance sheet – key ratios
• Positive net assets
• Increased ‘retained profits’
• Current liquidity
• Debtor/creditor days
• Why is this helpful?
• Track strength
• Formulate plans

14. 14
Benchmarking
• Comparison of data
• Internal benchmarking
• Gross profit percentage
• Previous year
• Various jobs / projects
• External benchmarking (sector specific)
• Could also be gross profit percentage
• Could be average occupancy rates (hotels)
• Is it just me?
• Accuracy of data

15. 15
Benchmarking - HPR
• Database of key information
• Blended information
• Hotel Performance Review
• Sales mix (accommodation vs restaurant)
• Revenue per room
• Food gross profit % / Bar gross profit %
• Wage as a % of turnover
• R&R as a % of turnover
• Spend per room
• Average occupancy rates
• Always a direct comparison?

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KPI (Key Performance Indicators)
Measuring key metrics to see how a business or
organisation is achieving it’s goals
• Already spoken about a lot of them
• Do not need to be financial
• Define your goals (SMART)
• Accounts – output of information
• What is driving this output? What are the
inputs?
• Track a few (less is more)

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KPI (Key Performance Indicators)
Restaurant breakfast example
• (KPI) Number of visitors (covers) between 7am-
11am
• Revenue generated for breakfast
• Average spend per cover
How to increase sales?
• Increase average spend?
• Increase covers? (limited capacity)
• Sales per staff?
• Returns?
• External factors - Weather? Footfall? BREXIT?

18. www.website.com
KPI (Key Performance Indicators)
• Useful ones to track
• What drives your sales
• Key costs
• Waste / dead time
• staff
• Limits?
• What are your goals? Customer
service?
• A way to incentivise staff?
• … bad KPIs… making sales at a loss!
• Needs to be balanced

19. Financial Covenants
• What are financial covenants?
• LTV (Loan To Value – say 60% of value)
• EBITDA cover (EBITDA covers say 175% of
loan repayments)
• Interest cover (say PBT must not reduce
below 200% of interest charges)
• Send quarterly management accounts
• Breach? Payable on demand? Talk early
• New finance? Check forecasts met them

20. Summary
• Statutory accounts – historic information
• Format driven by statutory requirements
(i.e. accounting standards / HMRC /
Companies House)
• Management accounts – more up to date
• Your figures, your format, your business
tool
• Cloud accounting…
• Looks after the double entry
bookkeeping
• Over to Ian…

21. 21
Ian Hughes, Business Services
Manager
Cloud Accounting and demos

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What is the cloud?
Cloud technology is
simply to host, or store,
data remotely rather than
on a machine at your
premises

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Who?

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Cloud accounting
Ready for Making Tax Digital…
• Make business decisions based on real time information:
• Dashboard summaries / management accounts
• Tax planning advice based on your actual results
• Save time and cost with automated bookkeeping:
• Automate the entry of bank transactions via daily bank feeds
or file uploads
• Automate the entry of purchase invoices by taking a picture
on a smartphone

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• Protect your data: Secure hosted service provides automatic,
continual backups
• Share selected information anywhere, with anyone:
Bookkeeper, accountant, consultant
• Automate bookkeeping: Bank feeds, invoice scanning,
machine learning, reminders, alert
• Low cost: Service not a product
• Most importantly: Work with us.
Cloud accounting (continued)

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The rise of cloud software
• Better relationships
• Accessibility
• Reporting
• Machine learning
• Integration

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Xero
Starter (RRP £10.00/m)
• Limited bank rec
• 5 sales & 5 purchase invoices per month
Standard (RRP £22.00/m)
• Full product without multicurrency & payroll
Premium (RRP £27.50/m)
• Multicurrency
Payroll
• First five employees (£3.50/m)
• Additional employees (£0.70/m)

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QuickBooks Online (QBO)
Essentials (RRP £15.00/m)
• 3 users
• Invoicing
• MTD Ready
• Employee Time
• Multicurrency
• Payroll (+£1 per employee/month)
Plus (RRP £25.00/m)
• Budgets & purchase orders
• Manage stock
• Track costs by project, location & budget

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Sage
Sage Business Cloud Accounting
• Accounting Start £10.00/m
• Accounting £22.00/m
Sage50cloud Accounts
• Essentials £20.00/m
• Standard £60.00/m
• Professional £125.00/m
Sage Business Cloud Financials
• Quotes on request

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Third-party applications
• ReceiptBank/AutoEntry
• Float
• Expensify
• Timely
• Workflowmax
• Insightly

31. Understanding the figures with cloud accounting
Breakfast Briefings – Autumn 2018 Wrap Up: Tom Roach, Francis Clark
6 November 2018

32. Next…
Q&A and/ or discussion
• With opportunity for Q&A for presenters
• Discussion
Future breakfasts – 1st Tuesday of the month
• Exporting (Tax and Duties) post Brexit – 4th December (FC Boardroom)
• Sustainable business – 8th January (FC Boardroom)
Other dates for the diary
• Finance in Cornwall – 25th June 2019 (with British Business Bank and
Institute of Chartered Accountants in England and Wales?)
And do not forget our blog, which contains details of new funds/ sources of
SME funding that come to our attention, and our Finance in Cornwall
factsheet.
pkf-francisclark.co.uk

33. Q&A and/ or discussion
pkf-francisclark.co.uk

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