A mid-calendar-year financial review can be crucial for business – not only does it coincide with the beginning of the fiscal year and let you reflect on insights from your own annual statements and reports, but it also lets you review progress in line with the latest market conditions. We previously posted a popular step-by-step guide to conducting a mid-year financial review which covered common strategies relating to cash flow and tax planning, and now we’re going to expand on these topics and talk more about the services that a Chartered Accountant can provide (especially compared to regular accountancy services).
What Is The Difference Between An Accountant And A Chartered Accountant?
The term “accountant” is an umbrella term that can include entry-level and more experienced accountants, whereas a Chartered Accountant is a specific type of qualified professional accountant. A Chartered Accountant will undergo extensive training (equivalent to Master’s level postgraduate education), pass a series of exams, and must additionally prove they have relevant work experience, for example, ICAS requires prospective Chartered Accounts to work a minimum of 450 days for a ICAS-authorised employer. Therefore, Chartered Accountants are usually sought after for more in-depth advice and financial analysis, whereas regular accountants are more likely to handle day-to-day accounting tasks, bookkeeping, and tax filing.
Chartered Accountants will also hold membership with a professional accountancy body such as The Institute of Chartered Accountants of Scotland (ICAS), The Institute of Chartered Accountants in England and Wales (ICAEW), Chartered Accountants Ireland, and/or international equivalents depending on the locations where they are practising. These organisations help provide additional professional development opportunities, set the bar for standards and ethics in the industry, and provide support and resources to keep Chartered Accountants up-to-date with modern approaches, trends, and more to ensure they can provide the best possible service to their customers. This means that Chartered Accountants are better equipped to handle complex financial situations and possess more in-depth and hands-on knowledge of accounting principles, financial reporting, taxation regulations, and auditing.
What Should Your Financial Mid-Year Review With Your Chartered Accountant Include?
While there will be variations depending on your exact business needs and stage of growth, most mid-year review meetings with your Chartered Accountant should include the below list:
1. Financial Performance Analysis
Example Scenario:
You run a small retail business in Perth and sales have been fluctuating over the past six months.
Discussion Points:
- Profit and Loss Statement: Reviewing your income and expenses with your Chartered Accountant can help identify trends and changes, allowing you to pinpoint where unexpected expenses are coming from.
- Balance Sheet Analysis: Examining your assets, liabilities, and equity and will additionally let you understand your business’ financial position.
- Cash Flow Statement: Lastly, you can look at your cash inflows and outflows to narrow down the largest expense categories as well as identity areas not giving a good return on investment, e.g. marketing campaigns, purchase of materials, delivery fees, etc. This can lead to conversations around adjusting inventory levels, renegotiating payment terms with suppliers, and more.
2. Budget vs. Actuals Comparison
Example Scenario:
You own a tech startup in Montrose and your budget projected a significant increase in revenue from new product launches, but your actual end-of-year accounts didn’t reflect this.
Discussion Points:
- Variance Analysis: Comparing your budgeted figures with actual performance can identify areas where you overspent or underspent as well as begin to outline where the budget changes occurred so you can figure out why they occurred.
- Revenue Analysis: Discussing the reasons for any revenue shortfalls or peaks can help you plan for similar instances in the future to achieve favourable outcomes, e.g. were new products not successful in attracting customers or did you have an overwhelming number of customers and what steps were taken? This can lead to conversations around marketing and onboarding strategies as well as new channels for revenue growth.
3. Tax Planning
Example Scenario:
You run a construction business in Forfar and face significant expenses and tax obligations.
Discussion Points:
- Tax Liabilities: Reviewing your estimated tax liabilities and ensuring you’re taking advantage of all available deductions and credits can significantly improve your cash flow and bottom line.
- Capital Expenditures: Planning your major purchases or investments ahead of time can also optimise your tax benefits so it’s important to share these with your Chartered Accountant. For example, buying new equipment before the year-end could provide significant tax relief compared to purchasing after. This can lead to conversations around claiming R&D tax credits for innovation in construction techniques you’ve implemented (for both commercial and residential building processes) or improvements you’ve made through materials and structural designs that show advancements on current methodologies.
4. Cash Flow Management
Example Scenario:
You’re a small manufacturing firm in Dundee that has experienced irregular cash flow due to delayed payments from clients.
Discussion Points:
- Accounts Receivable: Reviewing your accounts receivable and putting together a report of ageing invoices can identify clients who consistently pay late (or even those who have missed invoices).
- Cash Flow Forecast: Creating a cash flow forecast for the next six months can help to predict potential cash shortages and the months they may occur in, as well as lead to conversions around stricter credit control, or even discounts for upfront bulk payment to entice buyers to pay more promptly.
5. Financial Forecasting
Example Scenario:
You own a jewellery shop in Brechin and you want to expand your services to new markets.
Discussion Points:
- Growth Projections: Developing financial forecasts based on different growth scenarios (especially in different locations) can help you estimate the impact of your expansion on revenue, expenses, and cash flow. This is something your Chartered Accountant can support you with to ensure you are covering all bases when exploring new target locations.
- Investment Needs: After a location has been identified, determining the financing required for the expansion will lead to conversations around funding options including investments, business loans, and more which will support you through this period of growth in a way that aligns with your business and doesn’t impact your bottom line.
6. Technology Integration
Example Scenario:
You run an e-commerce business from Crieff and are considering investing in new accounting software.
Discussion Points:
- Technology Assessment: Evaluating your current accounting system(s) and identifying areas where technology can improve efficiency, accuracy, cost, and time spent on administrative tasks.
- Implementation Plan: Your Chartered Accountant can help you analyse the costs, benefits, and implementation timeline for new accounting software as well as ensure a smooth transition (something our teams are well accustomed to!).
Thinking Of Switching To A Chartered Accountant? Contact MMG Chartered Accountants For Services Across Dundee, Perth, Crieff, Montrose, Brechin, and Forfar!
Make MMG Chartered Accountants your trusted partner for comprehensive accountancy services in Scotland. We are committed to helping you achieve your financial goals and secure a prosperous future. Contact us today to schedule a consultation and discover how we can empower you to take control of your financial well-being. Contact our team at mail@mmgca.co.uk or call your local branch.