Study tips: Making connections when learning

Posted by & filed under Study tips.

Finance processes all have many applications and multiple interactions – so studying them in isolation can give a skewed view of how they all interact.

Looking at things synoptically – a “bird’s eye view” can be a good way of thinking of it – can help you apply knowledge and understanding to unfamiliar situations.

So how best to make connections – and what are the tips from the experts?

Apply the information to a real-life situation

“Interdisciplinary study can help students to make connections between ideas and concepts from across a range of subjects,’ says Teresa Folkes, Associate Director, Professional Development at the Chartered Institute of Marketing.

“Sometimes,” Folkes says, “connections between your topics are clear. But if it’s not, consider applying the information to a real-life situation.”

Using information in this way “can help you to visualise the links between subject matters, as it’s rare that a situation would only require thinking from a certain area of knowledge.”

When learning as a professional, Folkes adds, “it’s also important to remember that knowledge is not necessarily about knowing everything, but knowing who knows what.” To maximise this, Folkes suggests “building your knowledge network through other professionals who have expertise that can help you.”

Learn from your mistakes

Jenny Hulme, a journalist who co-writes books with academic educationalists, takes up this point. “Make the most of your tutor before you start to write. You can learn about what went well – or not – with the last assessment, and make sure you don’t repeat the same mistakes.”

If your challenge is to make connections between disparate subjects, there are two things you can do.

First is to put this directly to your tutor and ask them what kind of connections need to be made and how you would go about doing it.

The second “is to make sure you have a really good brief. Without that, you are always second-guessing. If you know what it is that you’re supposed to be looking for, it’s much easier to find it.”

To write well, you need to have that really good brief. “By building up a good relationship with your tutor – having the confidence to ask questions, saying if you don’t understand something, and feeling enabled to speak in your own voice – you are a good part of the way there.”

For Hulme, the best way to discover connections between things is to look for impacts, instead of feeling that you are passively researching a subject.

“Students can feel inhibited when they’re writing assessments. This sense of inhibition can transmit to your learning, and infect it with self-doubt. If you see the lecturer as someone who will tell you if you’re right or wrong, you will be going down the wrong path. Instead, have a discussion with them about impacts. What impacts on something else? How has this particular subject affected another? Be dynamic with your learning.”

Extracting insights

Making connections is thus a dynamic process. “You can’t just look at the data and expect the information to tell you what you want,” says Justin O’Brien, Co-Director for Student Experience at Royal Holloway, University of London.

“We tend to develop working hypotheses and look to prove or disprove an association between a small number of variables as a first step. Of course, often the question and to be honest the answer are already known.  The data analysis is to validate a preconception.”

This means that “critical time should be spent flushing out what is expected and the format of the ideal answer.” O’Brien’s advice “is not just to rely on looking at the numbers. Useful insight can be gained without necessarily doing deep analysis, but from sharp, wider contextual analysis.”

O’Brien points out that many of humanity’s greatest advances have come from making connections where none were expected.

“The inspiration supposedly for uncovering the structure of DNA came from jumping over a fence on the way home,” he says. “However – I think this was a dressed-up story that hid months of painstaking lab-based research.”

Knowing how to handle data is also important. “If you’re going to extract data, you’ve got to have a question in the first place,” says Dan Kelsall, Founder at Vonkel, a digital recruitment app.

“So work out what question it is that you’re trying to answer.”

If you look at a question, Kelsall says, “you need the ability to see which bits of the data answer the question.” Training your brain to have this ‘birds-eye view’ of the information in front of you is not straightforward, but can become second nature once you’re in the rhythm of it.

“90% of the data in front of you might not be relevant. Always have that question you’re trying to answer in the forefront of your mind,” Kelsall says. “How will that data get me there? If it doesn’t answer your question, it isn’t relevant.”

Additional techniques

Finally, create emotional connections between the areas you’re looking at. “As humans, we are programmed to recognise familiar situations from a young age – our brains automatically detect this,” says Teresa Folkes.

“Unfamiliar situations can confuse us and disrupt our thinking if not approached in the correct way. Creating an emotional connection with the people or project that you’re working on can help to focus your mind onto what matters in the situation, and where you can play your part.”

In an unfamiliar situation, Folkes argues, “it’s important to look at the things that are familiar and seek connections, rather than seeing the situation as entirely new.”

Beyond your studies, “this is a great professional skill to have – building a resilience to adversity, especially if you find yourself thrown into new and unfamiliar environments.”

Making connections – top tips

  • Look for the familiar in order to make connections. How does one area link to another? If different elements have a natural fit, this gives you clues.
  • Be open to seeing proof of the unexpected. “Often looking for outliers and exceptions and trying to understand why they are so – beyond the validity of the data – is important,” says Justin O’Brien.
  • Use exercise and mindfulness. Keeping the body as active as the mind is vital when studying. The brain needs oxygen to work at full capacity and spot connections when they emerge.

Read more on studying effectively;

Browse the full range of AAT study support resources here

AAT – ACCA – the path to financial accounting

Posted by & filed under Career-boost.

Many people progress from their AAT qualification to gain further skills and experience by becoming ACCA chartered.

Alternatively, you can start with an ACCA course if you have the relevant academic requirements.

Why become chartered with ACCA?

There are many professional benefits to becoming ACCA chartered. It is an internally recognised qualification, meaning you could work abroad if you chose to. It shows that you have studied and passed exams to a very high standard and that you have skills in finance, organisational management and strategy.

If you have passed AAT Level 4, you will get exemptions from the three papers under Applied Knowledge and start at Applied Learning and will pay no exemption fees. You may start by following either the traditional or apprenticeship routes.

What sort of role does it prepare me for?

In addition to being a chartered accountant, the qualification also opens career doors in banking, audit, law and tax advice. When you are qualified you could specialise as a financial controller, business strategist, forensic accountant, or in the public or financial services sector.

Mike Lloyd, managing partner of Haines Watts Chartered accounts in Swindon, says he chose the AAT-ACCA route because he wasn’t a graduate. He applied for a full time CAT (Certificate of Accounting Technicians) course, gained a Grade A pass, and his first job.

“ACCA  gave me the technical skills and self-belief to join and progress in the profession,” he says. “Now I am managing Partner and my role is to work with my clients and identify opportunities to help them get from where they are to where they want to be. I am an FCCA and this qualification and accreditation allows me to practice as an accountant and auditor. I have had a successful career in the profession for over 35 years. Without AAT that wouldn’t have happened.”

What does the course involve?

The ACCA qualification is the equivalent to studying for a university degree and is composed of a number of different modules which are tested by exam. Most people work in an accountancy firm or in industry while they are studying – either online or by applying to be on a course. It is common to start the course which you are in a relatively junior role and work your way up as you study. If you work and study at the same time, you could complete the course in three to four years, although many students take up to five years.

Emma Skinner, the Audit & Accounts Manager at Haines Watts, says she got her first job when her future employer came to college looking for a trainee to take on.

“My first qualification was AAT and my college tutor recommended me for it. I then went on to ACCA asap to qualify as young as possible. The qualifications help to prepare you technically in order to provide the best service for clients. Strong relationships with clients rely on trust, studies have given me a strong foundation so I can advise and support clients and their business – without this knowledge, clients cannot trust what we do.”

Don’t forget:  If you go on to study for chartered accountancy as a full or fellow member, you can apply for a reduced annual subscription and receive a discount on your AAT membership fees while you study. As an AAT full or fellow member, you’ll also receive generous exemptions.

What is the ACCA Qualification?

According to ACCA, there are three stages of exams, plus an Ethics and Professional Skills module and a Professional Experience Requirement.  The exams consist of:

  • Applied Knowledge including accounting techniques
  • Applied Skills – develops strong, broad and practical finance required of future strategic professional accountant in any sector or industry.
  • Strategic Professional – to develop strategic thinking

There are also options to specialise in areas like tax, audit, or financial management. As well as completing exams and the ethics module, you need three years’ practical experience in a relevant role to qualify.

Will Atkins is Audit & Accounts Senior at Haines Watts. He became an accountant after initially training as a chef. “I trained with AAT and it was my first exposure to accounting and accounting techniques. It helped to build my confidence and general knowledge. Then I progressed to ACCA, because I wanted to do advanced level accounting building on AAT. I chose this course because I wanted to make personal and professional progression in my career.”

Key points:

  • You can take the Fast Track option if you are already AAT qualified
  • In order to qualify fully, you will need to have three years of industry work experience
  • You can study flexibly in a way that suits your family commitments and time constraints
  • AAT is a fast track route to chartered accountancy and can be combined with an ACCA qualification

Case study: Steph Rickaby

Sunflower is a Chartered certified Accountancy practice for Wiltshire in south west England.

Why did you take the AAT-ACCA route?

“I started training in 1996 and I signed up for a book keeping course but it ended up being ACCA and six years later I became qualified. I decided to study with ACCA because I loved the way the course equipped me to understand financial accounting on a deeper level.  I was able to do the course as a mature student.”

How has taking this route benefited you?

I didn’t go into the workplace until the third year of my course and I needed that practical experience. My employer also sent me on a one week intensive book keeping course which gave me a great grounding and helped me to start applying the practical skills in real time and real life scenarios.

AAT gives a real grounding in the skills you will need and it is particularly helpful if you don’t have a lot of qualifications from school and you want to start from a basic level. It is a fantastic qualification that can be really encouraging for someone who wants a good grounding.

Then you can progress to ACCA which really deepens your knowledge. The ACCA qualification opens doors all over the world and gives you lots of career options. At Sunflower Accountants we now have four employees and two associates in India working with us who are ACCA qualified, so it truly is a global qualification.”

Advantages of dual AAT-ACCA membership

If you go on to study towards chartered accountancy, there are important advantages to maintaining your AAT full or fellow member status.

  • Keep using your internationally recognised designated letters, which recognise MAATs as accountants.
  • You can apply for a reduced rate subscription on your AAT membership while you study.
  • Retain access to exclusive user-friendly AAT technical resources and support services.
  • If you hold MAAT status, dual membership also means you can continue to work towards gaining your FMAAT status, the mark of senior technical knowledge and skill.

In summary

An ACCA qualification is highly respected and can give you the opportunity to work in banking, finance, public and private sector, tax planning, audit and business strategy.

There are real advantages in remaining with AAT or sustaining dual membership.

Further reading:

A day in the life of… Claire Carter

Posted by & filed under Career, Inspiring stories.

In the second of our new monthly “day in the life” series, we spend the day with one of our members to find out what a typical day for them entails.

Name and job role: Claire Carter MAAT AATQB, Accountant/Financial Controller at Speedwell Honda, Speedwell Kia and Speedwell Online

I get up at…

The great thing about working for a car dealership is that I get to try out all the latest models. So I can take my two daughters to school almost silently in a hybrid e-Niro one day and then from a luxury, elevated seat position of a Sportage the next. I live close to work so I’m usually at my desk before 9am (although I’m sometimes tempted to do a few more laps if I have a Honda Civic Type R or Kia XCeed!).

The first thing I do when I get to the office is…

Check the bank balance to see what has been paid in or out and transfer money between accounts according to what needs to be paid that day. With such high-value sales, we have to carefully monitor our cash flow throughout the day.

My responsibilities are…

  • Supervising the purchase ledger, sales ledger, vehicle sales admin and payroll departments.
  • Production of monthly management accounts.
  • Submission of manufacturer composite information for Honda and Kia performance monitoring purposes.
  • HMRC filing and payment of PAYE, VAT, P11ds and Corporation Tax.

I’ve been working here for…

Only eight months but the previous accountant was here for 15 years and retired in his 70s so I’m not expecting to go anywhere for a long time! It’s been a steep learning curve as the Dealer Management System is a bespoke platform used only by the motor trade so has missed out on more recent cloud accounting improvements. Procedures have to be carried out in strict order and aren’t intuitive like Xero or Quickbooks but luckily the previous post holder was generous in sharing his experience and I managed to make many books of notes to refer back to!

This is my first position in industry after more than ten years in practice. I learnt a lot from practice but I’m much more in control of all the variables now. I monitor the input which helps to ensure a good quality output without the hassles that client involvement can bring. My accounts are all reconciled and stay reconciled!

I’m qualified in…

I’m MAAT and AATQB having studied at South Devon College. I started by organising my own apprenticeship for Level 2 and loved it so much that I haven’t stopped studying since. I even took all the options at Level 4 (except auditing which wasn’t taught) just for fun.

I’m now two exams away from being chartered certified with ACCA, so I should finish in 2020. I self-studied to keep costs down but only managed to do this because of the firm foundation I gained with AAT.

A typical day in the office is…

A lot more operational and hands-on than working in practice but that makes it more interesting and fulfilling. The accounts team is centralised but deals with banking and purchase invoices from sales, servicing and parts at three different geographical locations so it can be a challenge to get all the information we need and we do have to be detectives sometimes.

My most memorable work moment is…

Being Father Christmas. We’re having a special promotion at Speedwell at the moment, giving every customer a £500 gift of a cheque signed by yours truly, so I’m very much in the Christmas spirit! (I must check whether a Santa outfit is an allowable business expense and if my staff will agree to dress as elves when they bring me the cheques to sign!).

The best part of my job is…

The cars! And the people are great; most have ten plus years service and the company really does feel like a big family (corny but true). But I’m afraid it is mostly about the cars!

The worst part of my job is…

Deadline time. It can get a bit tense and busy in those last few days every month but it’s always a big relief when everything is finally filed.

When I’m not at work…

I own (a share of) a narrowboat and enjoy travelling around the canals. I like the history, the stunning countryside views and the slower pace of life. A maximum speed of 4mph means you can see kingfishers, dragonflies and herons. We once rounded a corner early one morning to see a deer swimming across the canal right in front of us in the mist.

If I wasn’t in this job I’d be a…

An F1 driver for the Honda Red Bull Racing Team (of course!).

Become an AAT Member today

For more inspirational career content:

Study tips: Percentages, proportions, ratios & fractions made easy

Posted by & filed under Foundation Certificate, Students.

When I told my family and friends that I was going back to college to study accountancy, they all thought it was a joke. Let’s just say I wasn’t the best at maths. 

Percentages were my pet hate and I was still phoning my Dad, years after I’d left home, to check whether I needed to multiply or divide by 100. Then a fantastic tutor told me about the word ‘of’ and how it can be substituted for ‘divide’. In effect, she translated maths into English for me and I’ve never looked back.

Percentages, proportions, ratios and fractions are subtly different, but related enough for the same techniques to be applied and manipulated, as long as we understand the connections.

So here’s how it works.

Percentages

First we have to know that ‘per cent’ means ‘out of 100’ and that percentages are a way of working out part of a number ie. 66% means 66 out of 100.

We might need to calculate a percentage of a number, say for example 8% of £26,500. The easiest way is to calculate 1% first and then scale that up to 8%. 

As £26,500 represents 100% and we want to calculate 1% of it, we change the word ‘of’ to ‘divide’ and the calculation becomes:

£26,500 ÷ 100 = £265.

As £265 represents 1% of the whole 100%, we can ‘multiply’ it by 8 to calculate 8%:

£265 x 8 = £2,120   

So 8% of £26,500 is £2,120

Calculating an amount as a percentage of another

We might also need to calculate an amount as a percentage of another, for example £30 as a percentage of £600.  We can turn the maths into English here too, as we want to know what 30 is as a percentage of 600.  When we substitute ‘divide’ for ‘of’ the calculation becomes:

£30 ÷ £600 = 0.05

However, this is where a connection comes in, as we’ve calculated a decimal, and now need to ‘multiply’ that by 100 to convert it back into a percentage:

0.05 x 100 = 5%

We can check our calculations by re-working it the opposite way, using the first technique, as now we could reasonably expect 5% of £600 to be £30.  

But is it?

It’s worth noting that we can convert between percentages and decimals:

  • Divide by 100 to change a percentage to a decimal

eg. 15% ÷ 100 = 0.15

  • Multiply by 100 to change a decimal to a percentage

eg. 0.46 x 100 = 46%

Proportions and ratios

Let’s now look at how this relates to proportions and ratios. Firstly we need to know that when we talk about proportions, we simply mean a ‘part’, ‘share’, ‘bit’ or ‘number’ of a whole. 

In effect, 80% is a proportion of 100%.

Proportions can be described in general terms; a small proportion of enquiries are generated by referrals.

Or they can be described specifically using ratios, for example, the proportion of enquiries between newspaper advertising, the website and referrals is 10:5:1 respectively.

The word ‘respectively’ means that the order of the numbers in the ratio (10, 5 and 1) relate to the ‘parts’ in the same order. For example, newspaper advertising is 10 as a proportion of the whole, the website is 5 and referrals only make up the small proportion of 1.

Next we need to understand the relationship of each part or proportion to the ‘whole’ and for that we need to calculate what the whole is.  We do that by adding all the numbers in the ratio:

10 + 5 + 1 = 16

So in this case 16 represents the ‘whole’.

Finally, we can apply this knowledge and understanding to answer a question such as:

If we had 12,000 enquiries in total, how many were generated by each source?

We can use the same thought process as we did with percentages to find 1/16th of the total enquiries and then scale it up to the number of 16ths needed for each part. 

As 12,000 is the total and we want to calculate 1/16th of it, we change the word ‘of’ to ‘divide’ and the calculation becomes:

12,000 ÷ 16 = 750

As 750 represents 1/16th of the total, we can ‘multiply’ it by 10 to calculate the proportion generated by newspaper advertising:

750 x 10 = 7500

Again we can check our answer, in this case by calculating the other two ‘parts’ and ensuring that when all three ‘parts’ are added together the answer is the total.

Newspaper Advertising 750 x 10 7500
Website 750 x 5 3750
Referrals 750 x 1 750
     
Total    1200

Fractions 

By using the technique to calculate 16ths , we have in effect used fractions to help us calculate the proportions in the correct ratios. This is because, like percentages, proportions and ratios, a fraction is another way of expressing ‘a part of a whole’.

10/16th’s is a fraction which means that the ‘whole’ amount has been split into 16 and we are looking at 10 of those 16 bits!

Instead of using a ratio, we could have been told that the website is the source of 5/16 of total enquiries. Even if we only had this information and knew nothing about the newspaper advertising or referrals, we still could have performed the calculation above. 

Alternatively, we could read the fraction as 5 divided by 16, which would be:

5 ÷ 16 = 0.3125

As we now have a decimal we could turn it into a percentage if needed, but in this case we are trying to calculate the actual number of enquiries that 0.3125 is as a proportion of the 12,000 that were made in total. 

Therefore, we can just multiply the decimal by the total:

0.3125 x 12,000 = 3,750

This brings us full circle back to the first calculation we started with for percentages, and that’s because all of these basic maths concepts and calculations are related. 

It’s also why the techniques we’ve looked at can be applied to them all. The trick is to understand the connections and turn the maths into English or a fraction into a percentage.

Read more on the AAT Foundation Certificate in Accounting;

Browse the full range of AAT study support resources here

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Study hacks to help you slay your final assessment

Posted by & filed under Students, Study tips.

The final weeks leading up to your assessment are some of the most important. 

Planning your revision will give you the best chance of success. Aim to manage your time using a calendar so you are utilising the days as efficiently as possible. Nisar Ahmed, Head of AAT programmes at BPP has some tips to ensure you are well prepared.

When is the assessment?

Confirm exactly when your assessment will be (this may be chosen by you or set by your college of study). Then work out how many days there are between now and then to get an idea of how many hours you are able to devote towards final revision and prepare a timetable of study.

Start your revision as soon as you can and don’t procrastinate.

What to study?

Identify three to four topics you find difficult, and give them priority. But try not to just re-read all of your text or notes, as application is more important at the revision phase. When time is limited, you have to be selective with how you spend it.

The most essential revision resource will be sample assessments.

Aim to do your first practice paper in your own time – with the aid of your text and notes if necessary. But in the real assessment you will be up against the clock, so your final practice should be unaided.

If you don’t feel confident about a particular topic then talk to your tutor. You are not alone. Lead examiners produce feedback reports and these are often published giving extremely useful information to teachers and students.

They look at areas covered within the assessment and identify where students perform well and badly, so can be a very useful resource for guiding your revision.

Take a Green Light Test

Do a quick test of your knowledge now with a green light test from AAT. We’ve pulled out the tests for each level of the AAT Accounting Qualification below, but if you’re doing a different qualification, just follow the link to study support and navigate to the relevant qualification.

Search Study Support for your qualification

Where to revise?

Try to find an ideal revision camp. It should be quiet with minimal distractions. Try to avoid the internet if possible and tell others you are revising so they don’t distract you. This ideal revision camp may not be at home – it could be at work or a library.

Bite-sized revision can be done in your lunch-break or on the commute to and from work, so try to utilise this time wherever possible. This may be best suited to memorising mnemonics or learning formulae. You could also use BPP passcards, which provide short summaries in an easy to digest format, for quick recap of topics.

The actual assessment

When sitting the assessment, make sure you take advantage of any reading time allowed and familiarise yourself with the questions and tasks.

The mind is an amazing tool and will subconsciously start to filter through information before your first keystroke.

Look for key words in tasks. For example if a task asks for an explanation, make sure you explain your answer properly. If numerical answers are asked for, always give the number requested to the right number of decimal places.

Always use the information you’re given in any scenarios. The small things matter when sitting assessments.

Don’t expect ‘red herrings’ or trick questions as any information given is there to aid you.

If you do become stuck, note or flag the question number and return to it later. Be flexible in approaching tasks. When completing your revision, you may be expecting a particular task to come up in the same way that you have practised. It may do, but be aware this might not always be the case. You will have the knowledge but may need to apply it in a task that’s formatted differently to what you’re used to.

Finally, have confidence in your ability. Being confident that you will be able to succeed is very important. Provided that you’ve followed the right revision approach leading up to the assessment, you should be well placed to pass your course.

Good luck!

For more on preparing for your AAT assessments;

Browse the full range of AAT study support resources here

21 things I learnt about budgeting in my first year of business

Posted by & filed under Run your business.

We spoke to a variety of small business owners to get their advice for budgeting in your first year of trading, and talk about the mistakes that they made so you don’t have to.

Take care of your cash-flow

1. “Sending an invoice is not the same as cash in the bank.” Andrew Jarvis, Eximo Marketing

2. “Consider using credit cards for cash-flow ‘insurance’ by buying everything you can on them but don’t spend more than you’re earning. You are just using them in case an invoice gets paid late.” Stuart Bruce, Stuart Bruce Associates

3. “Clients will normally take longer to pay than they say they will.” Adrian Ashton, Business Adviser

4. “Make sure you do a very detailed cash-flow forecast three to six months in advance, showing all projected revenue and costs (guaranteed and potential). Check it daily to see if it balances against what’s in the bank and update your projected revenue and income regularly against your sales pipeline. In my cash-flow spreadsheet, I mark things green when they have come in or gone out and highlight things in red if they are still uncertain.” Catherine Dhanjal, TheAnswer Ltd

5. “Be sure to have your payment terms set out with fees for late-payments and send regular reminders. I didn’t and got stung!” Lydia Berman, Creative Stripes

Keep your costs low

6. “Keep your costs as low as you possibly can until you can realistically predict your future income.” Michael Beer, SEO Consultant

7. “If you need to upgrade on a piece of software (like Canva) see if someone would like to share it with you.” Catherine Gladwyn, Delegate VA – Virtual Assistant

8. “Create a list of your living and working costs and see which ones you can reduce.” Lydia Berman, Creative Stripes

9. “Get a team of other freelancers or self-employed folk together so you can share items, costs and advice. This helped me massively when I started out and still does.” Chris Evans, Evans Creative

10. “If you’re not careful when you’re out and about, your ‘subsistence’ costs can soar (especially when ‘hot-desking’ in cafes).” Adrian Ashton, Business Adviser

11. “Meet clients for breakfast meetings or coffee – not lunch, dinner or drinks if you’re picking up the bill.” Sarah Croft, Recruitment Consultant

Need help with budgeting?

Book an online AAT Essentials course

12. “At first, I drastically reduced my household budget and expenses (having beans on toast for dinner a lot in the early days) while the client work and bank balance built up.” Adrian Ashton, Business Adviser

13. “Try out some free networking events to start with. Make genuine connections and the rest will follow!” Lydia Berman, Creative Stripes

Plan your spending

14. “Make sure to allow yourself some money to live. I felt guilty about going out and not working and didn’t look after myself.” Lydia Berman, Creative Stripes

15. “Always move tax and National Insurance money into another account on the same day that you’re paid by a client (and don’t touch it!). No one needs a tax bill panic.” Lara Davis, Charity Marketing Communications Consultant

16. “I allow myself around £100pcm for subsistence.” Catherine Dhanjal, TheAnswer Ltd

17. “Base your budget on what you could afford in your worst month. The investments that you make in the business (like software, office space and staff) can quickly become liabilities if business slows down.” Michael Beer, SEO Consultant

18. “You don’t need to do everything in year one! Make a wish list and decide what’s a priority. I wasted too much money in my first year thinking I needed to do everything at once. In reality, I spend far less now because I’m more considered with all my decisions. It helps to run ideas and costs past friends or people in your network who can often suggest better or cheaper ideas.” Lydia Berman, Creative Stripes

Project your sales 

19. “I managed to predict my income well but I earned it from different areas than I expected so prepare to be flexible. As a VA I had anticipated taking on some personal projects as well as work for businesses but it turned out the demand was mainly from businesses. I’d planned that I could work 40 hours a week and that 50% of those would be spent on marketing and running the business so there were 20 hours left to sell at £25/per hour (my rate when I started out).” Caroline Wylie, Virtually Sorted

20. “If I had a six-month contract with a client, I’d mark on my spreadsheet what month we were in and a note at month three to talk to them about their ongoing plans and extending the contract.” Catherine Dhanjal, TheAnswer Ltd

Have a backup plan 

21. “Having a partner that works full-time always helps. I also already had a zero-hours job in security, which was great for picking up more shifts when business was slow. Personally I feel more secure having multiple sources of income.” Toks Adebanjo, Virtual Assistant

In summary

There you have it, 21 ways to look after the pennies so the pounds look after themselves.

Cash-flow is king in the world of business and doing your cash-flow forecast should be an absolute priority. Ask someone for help if you don’t know where to start and then keep a close eye on all costs, income and chase those invoices early.

Read more on running your own business;

Study tips: Advanced aspects of Financial Accounting

Posted by & filed under Advanced Diploma, Students, Study tips.

The second article of our series on some of the trickiest areas at Advanced level.

Study Tips: Advanced Level series

We’re working through a business scenario to illustrate how the AAT Advanced Diploma in Accounting can be applied, in practice, to the typical day-to-day tasks of a part-qualified Accounting Technician.

In the last article Lewis was completing some management accounting tasks. Today he’s working on the year-end accounts for Gorgeous Threads & Co, the clothing manufacturer he works for, which is owned and run as a partnership by Mel and Chris.

Producing year-end accounts

Lewis’s colleague normally produces the final accounts but has called in sick today and Lewis has been asked to take over. He finds the spreadsheet on the organisation’s shared computer drive, and discovers that the accounts have been prepared up to the extended trial balance (ETB).

Click here to download the spreadsheet: Advanced Synoptic Series – Part 2  and replicate Lewis’s tasks.

Gorgeous Threads expects all the finance team to demonstrate competent accounting knowledge and precise spreadsheet skills simultaneously, to ensure that spreadsheet functions used achieve the accounting tasks required. This means that Lewis has to precisely follow instructions regarding formatting and using formulas. 

He must be very methodical in his work and think about the accounting principles he needs to apply, to help him work out how to use spreadsheets to prepare the accounts accurately.

The ETB

Lewis can see that there is a problem with the ETB as the Trial Balance (TB) columns do not match, and neither do the Statement of financial position (SFP) columns ones. He hasn’t really got time to check every cell, so decides to start by checking those that are most likely to have errors:

  1. ledger balances linked to other sheets
  2. addition and subtraction of adjustments
  3. extension of the balances

He enables show formulas (discussed in part 1) so he can quickly and easily see the cells that contain formulas and links. The extract below shows him that both sales and purchases are linked to the Workings sheet.

Lewis knows:

Net sales = sales less sales returns

Net purchases = purchases less purchase returns plus carriage inwards

In the Workings sheet he selects the net sales cell, and uses trace precedents from the formula auditing section of the formulas tab to show which other cells have been used to calculate the value:

By looking at the formula bar he can see that the sales returns have been correctly deduced from the sales.

He does the same for the net purchases:

This time he can see the formula is incorrect as B9, carriage inwards, has been deducted instead of added.

Balancing the trial balance

He amends the formula and then checks the corrected figure is reflected in the ETB, making the TB columns balance. 

It is, and as Lewis knows a change to the net purchases will alter the profit, he decides to see whether if he recalculates the profit the ETB will balance. 

Firstly, he thinks about how he would calculate the profit or loss manually on an ETB – he would simply find the difference between the two Statement of profit or loss (SPL) columns and enter it on the smaller side, just as if he were manually balancing a T account.

He can see that the debit column has the smaller total so writes the following formula in F31:

However, this gives him an error notice for a circular reference as the net profit figure he is trying to calculate would be included in the column sum formula that is already adding up the debit column. 

Lewis’s colleague had manually typed in the profit figure to get round this problem but Lewis uses the formula =G32-SUM(F5:F30) to remove the need for manual inputting and achieve the correct accounting calculation:

The two SPL columns now balance, however, the two SFP columns still do not, even though the spreadsheet was correctly formatted to enter the profit figure into the credit column.

Manual double entry principles

Therefore Lewis turns his attention to the adjustments and notices that cell F25 has a little green triangle in the corner:

When he clicks on it, he gets an inconsistent formula warning, meaning the formula is different to those in cells around it.

Lewis’s understanding of manual double entry principles means he knows that if you have a credit adjustment to a debit balance, it should be deducted. He can see from the figures, and when he looks at the formula bar, that this has happened, so he is not worried by the warning in this instance.

Has the ETB been extended correctly?

Lewis doesn’t find any errors in the adjustments so finally checks that the ETB has been extended correctly. He draws on his knowledge and understanding of accounting principles to help him check that all the income and expenditure accounts are on the SPL and everything else is on the SFP.

Inventory doesn’t quite fit this rule, so he pays it particular attention:

The ledger balance of £63K must be the opening inventory as closing inventory is calculated as a year- end adjustment. 

Opening inventory goes on the SPL as part of the cost of goods sold (COGS) calculation along with closing inventory. Closing inventory is shown on the SFP as well as the SPL as it is the value of what the organisation has left at the end of the year and therefore Gorgeous Thread’s owns, in other words an asset.

As the inventory is in the correct columns, he looks at accounts which can have debit or credit balances such as the Bank and VAT:

In this case, the bank balance is overdrawn but has been correctly extended to the credit column on the SFP as it is a current liability. The VAT is correct as well so he moves onto prepayments and accruals as they are a common sources of confusion:

Lewis now spots an error as he can see that the accrual row has not been extended correctly. There isn’t a ledger balance and the adjustment is in the credit column so the figure should be extended to a credit column as well.  It’s correctly in the SFP, as other payables are current liabilities, just in the wrong column.

The prepayments are correct so Lewis adjusts the accruals figure and can see that this change has balanced the ETB:

In summary

Lewis has dealt with a number of tricky accounting areas whilst correcting Gorgeous Thread’s ETB. More detailed articles are available on accounting adjustments in ETBs, which focus on the fundamental accounting theory needed to inform all accounts preparation whether using spreadsheets or not.

In the next instalment Lewis will not only have to prepare the appropriation account now he has the correct profit figure, but he will also have to effectively communicate his understanding of this integral partnership report.

Read the next article now: Advanced aspects of appropriation accounts and effective communication.

 

Browse the full range of AAT study support resources here

Why becoming a MAAT and utilising membership resources might be the best career option for you

Posted by & filed under Career-boost.

AAT full membership (MAAT) is an internationally recognised professional status in accounting and finance.

It demonstrates a high standard of education, skills and experience to employers and clients, and a commitment to your professional development.

The benefits of having MAAT status

Jo Wilkinson FMAAT, finance director at Northbar Limited & North Brewing Company Ltd, says there are a number of useful benefits and resources available for MAAT’s. “The training resources provided are very helpful to my role, as a finance director in industry, and allow me to evidence my CPD (continual professional development),” she notes. “Last year, for example, I attended a full day financial reporting update course at a discounted MAAT rate.”

Wilkinson says the free webinars, on everything from time management to effectively communicating financial information, are also useful because she can watch them with her team.

Joe Knott, MAAT, managing director at Birkett & Co accountancy firm, says he has found the local branch meetings really useful. “I can fit these in around work and they provide a manageable amount of information,” he notes. “In addition, the annual conference is hugely beneficial for me as I can cover a large amount of CPD and tailor it to my role.”

The conference also provides good networking opportunities, says Knott. “It enables me to meet other individuals in practice to discuss the challenges we face and learn another perspective or another approach,” he notes. “It also gave me access to people with decades of experience, something you couldn’t teach in a classroom.”

Career progression

Wilkinson believes being MAAT qualified has helped her career progression. “The company were looking for a qualified individual to overhaul their current systems and processes, after hiring a string of unqualified bookkeepers,” she notes. “An ability to understand the fundamental principles of accounting was definitely required for the role, and I think this is what the letters MAAT represent.”

Experience versus qualifications

Steph Rickaby, director of Sunflower Accounts, says having an ACCA qualification really helped her confidence and career. “I first started as a trainee in practise, as a single parent with very little confidence,” she notes.

“I felt that there was an imbalance between my studies and my lack of practical experience. However once I got to grips with the experience, which was a steep learning curve, my career progressed rapidly.” Having the ACCA qualification showed prospective employers she had reached a certain standard, Rickaby adds. “This does, however, need to go hand in hand with experience which is, arguably, just as important,” she says.

Having chartered status

Having chartered status has, says Wilkinson, helped validate her credentials to the company stakeholders. “However, now that I have a good deal of experience working both in practice and in industry I have extended my membership and gained FMAAT status. This signifies to contacts, and to the finance teams of suppliers and customers, that our finance team has a high level of skill and knowledge. Even without going on to study for a chartered qualification, there are ways that you can continue to build your personal brand with AAT,” she says.

Rickaby says having chartered status provides a number of advantages. “For me as a member and fellow of ACCA, we have access to engagement letters and free CPD in the form of articles and videos. The ACCA roadshows are also useful, as is the access to a helpline for professional guidance on things like money laundering.”

A clients’ perspective

Rickaby says, however, that she’s not sure having chartered status makes that much of a difference to clients. “To clients, an accountant is an accountant and they put complete trust in us as professionals, regardless.” Sometimes, says Rickaby, clients are shocked when she explains that they are an ACCA firm of accountants as opposed to unqualified accountants. “They don’t realise that the profession is unregulated.”

Recruitment and job skills

Wilkinson says that if she was looking to recruit, she would view someone with MAAT as a more valuable and credible candidate than someone who has gone direct into chartered accountancy training.

“Training for AAT requires you to work within a business and learn real ‘on the job’ skills. I have seen the benefits that this route has had on our finance assistant who is working through his AAT apprenticeship at the moment,” she says. “Those first few years learning the basics of accounting, and having a real understanding of all the different building blocks of the role, were really very valuable for me and I would definitely look for that experience in a candidate.”

Growing your business

“For me, what’s really important is the CPD,” says Rickaby. “It’s about developing myself as a business owner and director. It’s about looking at new products that would benefit my client, to help them streamline their businesses as well as keeping up to date with the latest tax and accounting legislation.”

Key takeaways

  • Having MAAT status gives members access to a number of resources including webinars, branch meetings and CPD tools.
  • MAAT status gives an accountant a credible, recognisable qualification which may have the edge over those that have gone direct on to Chartered.
  • According to the AAT’s annual member survey, 97% of MAATs and FMAATs are likely to recommend AAT full membership.

In summary

Having full AAT membership status and/or chartered status can open up a wealth of benefits, resources and opportunities. It’s particularly beneficial for accountancy professionals who are interested in CPD.

Further reading:

Study tips: Valuation of raw materials – part 1

Posted by & filed under Foundation Certificate, Students.

In this three part series we’re going to review valuation of raw materials for the AAT Foundation Certificate. 

Study Tips: Valuation of raw materials series

We’re specifically going to focus on raw materials and how they are controlled and can be valued as part of a manufacturing process.

The first point to make is that raw materials are one of three types of inventory.  The manufacturing process starts with raw materials, which are then used to make a product that is known as work in progress/part-complete goods, until it gets to the end of the process and is then categorised as finished goods.

All three types of inventory will need to be valued at year-end in order for an overall figure for closing inventory to be included in the financial accounts.  However, from a management accounting point of view, the cost of inventory needs to be managed and valued on a regular basis because it is included in the calculation of how much a product has cost to produce.  This is important as it must either be controlled to enable a fixed selling price to be achieved or be marked up to determine the selling price.

Steps involved for the production process

Let’s start thinking about making a stainless steel toaster and start with the steps involved in getting the sheet of metal into the production process. 

Sheets of metal are:

  1. purchased from suppliers
  2. kept in stores
  3. issued to production

The paperwork that accompanies this process is really important as it informs the record keeping which is used for inventory valuation. 

The first step will result in a purchase invoice containing details of quantities and the cost per unit of the sheets of metal purchased. 

This information is transferred into the inventory record when the delivery is received and the metal placed in stores.  Finally, when some of the metal is needed for production the inventory recorded is updated, to record the issue and details of the sheets that remain.

Finally, when some of the metal is needed for production the inventory recorded is updated, to record the issue and details of the sheets that remain.

This is the inventory record for raw material SSt14, which are sheets of stainless steel:

We can see that currently 5,000 sheet are being held in stores and that their total value is £112,500.  If we divide the cost by the quantity we can calculate a cost per unit of £22.50.  However, we don’t know whether the balance is the result of a single or multiple orders. 

If it is the latter, the cost per unit is unlikely to have remained the same for each as purchase prices usually fluctuate with market prices.  So, if production now requires 500 sheets, how do we know what value to attribute to them?  Do we assume they were purchased for £22.50?  What if prices have increased?  Should the price paid for the oldest inventory in stores be used or the most recent price paid? 

The dilemma caused by fluctuations in purchases prices is the reason why we need a method to value inventory when we issue it to production.

There are three common methods to choose from:

  1. First in First Out (FIFO)
    • Values issues to production at the price paid for the oldest inventory
    • Therefore the balance of inventory remaining is valued at the most recent price paid
  2. Last in First Out (LIFO)
    • Values issues to production at the most recent price paid
    • Therefore the balance of inventory remaining is valued at the price paid for the oldest inventory
  3. Average Cost (AVCO)
    • Values issues to production at the average cost of the all the inventory held at the time of the issue
    • Therefore the balance of inventory remaining is valued as an average as well

Each method has advantages and disadvantages and each will result in different valuations.  However, for cost accounting purposes, all three are equally valid and organisations are free to decide which is the most appropriate to use.* 

This is because they are based on theoretical assumptions about how inventory is issued, as opposed to the reality of how inventory actually is used.

Cost accounting

This is a key point to take on board in order to successfully grasp this area of cost accounting.  For example, metal is not perishable and therefore it doesn’t matter which 500 of the 5,000 sheets in stores actually gets issued to production.  However, if we were issuing 500Kg of strawberries for the production of jam, then we would actually want to issue the oldest fruit in the stores so that it doesn’t spoil. 

In neither case though, are we likely to issue an average of the raw materials available.  The point is, that the order in which the metal or strawberries are used in reality, is irrelevant to the assumptions made about the order in which they are issued for valuation purposes.

In part two we’ll have a look at how we put this theory into practice and see how we calculate the cost of issues and the value of closing inventory, using each of the three methods.

* Please note that under ISA2, LIFO is not an acceptable method for financial accounting purposes.

Read more study tips for Foundation Certificate in Accounting:

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4 accounting trends that will shape 2020

Posted by & filed under Future of accounting.

This content is brought to you by Xero.

The year ahead will undoubtedly involve a lot of change and uncertainty, but how can you prepare? 

Accountants and bookkeepers will need to closely track the trends to stay ahead of changes in industry, regulation and policy.  Don’t worry, though; we’re here to help with four trends that we think will influence you and your clients over the year ahead.

1) Brexit: bring certainty with cash flow management

Following the result of the latest UK election, it seems like some form of Brexit will go forward in 2020.

One thing we ​can say for sure is that Brexit will mean significant changes to business and financial processes. This leaves your clients looking for strategic advice, and as their most trusted advisor, it’ll be up to you to guide them and help them plan for a variety of outcomes.

One certainty that your clients will benefit from is cash flow forecasting and management. The Xero ​cash flow resource centre has all the tools you’ll need to help you nurture healthy cash flow for your clients.

2) Open Banking: embrace the new and achieve more

New EU standards are due to take effect from 14 March, changing the way banks connect to third parties such as Xero. Known across Europe as PSD2, but more commonly in the UK as Open Banking, businesses and consumers face yet another change come 14 March.

Open Banking changes the way banks connect to third parties such as Xero, which means the way we provide bank feeds is changing.

While the change may feel burdensome for some, we think it’s a positive step forward – providing greater competition and innovation in the world of financial services. Already thousands of Xero subscribers have moved from bank feeds using Yodlee and are now enjoying the benefits of Xero’s new, free and secure direct feeds using Open Banking.

With March just around the corner, businesses that haven’t changed to a new feed should check whether their feed is available and switch now.

So to learn more about Open Banking, and see which banks have new feeds ready to connect to, ​see the Xero dedicated Open Banking resource centre​. You’ll also find our FAQs, plus guidance on how to get new feeds set up.

3) AI and machine learning: no more pesky admin tasks

Another trend that we can confidently extrapolate into 2020 is the continuing growth of machine learning and AI.

These technologies are ushered in behind the scenes, and they already power many Xero products you use every day, including data capture tools such as Hubdoc. With Hubdoc, we’re on a mission to automate pesky administrative tasks so you can spend more time running your practice.

Using machine learning and AI, Hubdoc automates tasks like bill and receipt capture, data entry and bank reconciliation. So you and your clients get that time back – plus the accurate data you need – to do beautiful business together.

We’re excited to include Hubdoc, which has a retail price of £15 a month excluding tax, as part of all Xero Starter, Standard and Premium plans in the UK from 18 March 2020. ​Find out more about Hubdoc here.

4) App integration: the Netflix of Xero

Many of you have discovered the power of the Xero ​app marketplace​ featuring over 800 third party apps that connect to Xero. Through the power of our API, these apps share information seamlessly with Xero, helping you and your clients solve workflows.

From managing people and processes, to inventory and everything else. But with so much choice, how do you know which apps are most fitting for your clients? Now, when you and your clients sign in to a full version of the marketplace, we can use our insights to offer you smart recommendations on apps most likely to be suitable for your clients’ business needs.

And with the app trend looking to go even bigger in 2020, this new update will undoubtedly help you stay ahead.

If you’re an accountant or bookkeeper in practice, sign up to the Xero partner programme, where you’ll get the tools, resources and dedicated account management to help get your practice and clients set up. Visit their site here.

This content is brought to you by Xero.