Over the last 10 years ago, there's been a drive in government towards making accounts and tax returns easier to submit. On the face of it, you'd think that was a good idea, but in fact in many cases it really isn't.
The purpose of accounts is to be useful. They tell you how your business is doing, how different parts of it are doing compared to other parts, what the trends are in different areas, how much you're spending on key costs, what margin you're making on your products and services, and an endless list of other things. Ultimately, they tell you if you're wasting your time. Maybe you should really be running a different business or getting a job. Accounts tell you that. They're very, very important.
If accounts can be useful AND easy, that's great. But if they can be useful OR easy, then useful wins.
The problem is that many changes positively make accounts easier to prepare, but less useful. For example, since 2013 unincorporated businesses have been able to prepare accounts on the cash basis. Proper accounts identify what income a business has truly earned in a year, and what costs it has really incurred, regardless of exactly when the related cash comes in or goes out of the bank account. If a customer pays you one day late, on 6th April 2016 rather than 5th April 2016, that doesn't somehow make 2015-6 a worse year, and 2016-17 a better one! But that's what accounts prepared on the cash basis will show - that the 24 hour payment delay has made one year worse and another better.
This can render accounts totally meaningless, in order to make them marginally easier to prepare. Your accounts no longer tell you anything useful about the business, and whether you're wasting your time, they just make it slightly easier to fill a form in later on. It also actively encourages people to delay seeking payment from their customers! It'd be great business practice to get a deposit up front on a big job, but on the cash basis you're encouraged not to. Total, total madness.
We've written before about how a big red flag for us with a potential limited company client is when they say they've done their accounts for Companies House, and need help with the company's tax return, or that they've done the tax return, but need help with the accounts. It's two bits of one job - you can't competently do one without considering the other. But the government-provided submission systems for both make it possible to keep sticking numbers into a template until you get a green tick, and then submit whatever it is you've done. A large number of limited company owners seem to be under the impression that sticking numbers into a template until a green tick appears represents accountancy.
Of course, in parallel to successive governments trying to make the submission of returns easier, the tax code has become more and more complicated every year. So we've got an absurd situation where the "correct answer" is harder and harder to work out each year, but submitting your answer to the authorities is easier and easier.
Anyone who knows us at all will know that this is not sour grapes in the slightest - we're not concerned at all that more businesses are having a go at doing their own accounts and returns; there's an unlimited amount of business out there still and we do just fine. We just think it's genuinely a risk that accounts and tax returns are being framed more and more as red tape, and that the point of them is being forgotten. Accounts aren't red tape. They really matter.
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