Comments on: Why cash accounting is bad for business http://www.taxresearch.org.uk/Blog/2006/10/31/why-cash-accounting-is-bad-for-business/ Richard Murphy on tax and corporate accountability Tue, 06 Jan 2009 10:58:51 +0000 http://wordpress.org/?v=2.6 By: Chris Massie http://www.taxresearch.org.uk/Blog/2006/10/31/why-cash-accounting-is-bad-for-business/#comment-504368 Chris Massie Wed, 22 Oct 2008 07:39:32 +0000 http://www.taxresearch.org.uk/Blog/2006/10/31/why-cash-accounting-is-bad-for-business/#comment-504368 Richard You may as well say "Cash accounting is great until you fail to bill those debtors and go bust" This is just bad business management and does not justify using a complicated accountancy method which to many small businesses is nothing more than smoke and mirrors. Richard
You may as well say
“Cash accounting is great until you fail to bill those debtors and go bust”
This is just bad business management and does not justify using a complicated accountancy method which to many small businesses is nothing more than smoke and mirrors.

]]> By: Tax Research LLP http://www.taxresearch.org.uk/Blog/2006/10/31/why-cash-accounting-is-bad-for-business/#comment-504346 Tax Research LLP Wed, 22 Oct 2008 06:37:01 +0000 http://www.taxresearch.org.uk/Blog/2006/10/31/why-cash-accounting-is-bad-for-business/#comment-504346 Chris Cash accounting is great until you fail to count those creditors and go bust Richard Chris

Cash accounting is great until you fail to count those creditors and go bust

Richard

]]> By: Chris Massie http://www.taxresearch.org.uk/Blog/2006/10/31/why-cash-accounting-is-bad-for-business/#comment-504059 Chris Massie Tue, 21 Oct 2008 15:18:46 +0000 http://www.taxresearch.org.uk/Blog/2006/10/31/why-cash-accounting-is-bad-for-business/#comment-504059 Cash accounting would suit our business down to the ground. We are a small consultancy so do not hold vast amounts of stock. We have been in business for over 25 years so have a track record. But we need to keep our finger on the pulse so to speak and cash accounting provides an easy verifiable basis for knowing where we are (simple database and spreadsheet programmes). We became incorporated to limit liabilities but cash accounting should also apply to incorporated small businesses as well. Why should we have to pay Corporation tax on money that we have not received? If its good enough for VAT Tax then its good enough for Corporation Tax. There is a CASE for cash accounting for small businesses. Could it be that it is the Accountancy profession who are trying to prevent this occurring to safeguard their jobs? Cash accounting would suit our business down to the ground. We are a small consultancy so do not hold vast amounts of stock. We have been in business for over 25 years so have a track record. But we need to keep our finger on the pulse so to speak and cash accounting provides an easy verifiable basis for knowing where we are (simple database and spreadsheet programmes). We became incorporated to limit liabilities but cash accounting should also apply to incorporated small businesses as well. Why should we have to pay Corporation tax on money that we have not received? If its good enough for VAT Tax then its good enough for Corporation Tax. There is a CASE for cash accounting for small businesses. Could it be that it is the Accountancy profession who are trying to prevent this occurring to safeguard their jobs?

]]> By: Tax Research UK / Cash accounting - a non-starter http://www.taxresearch.org.uk/Blog/2006/10/31/why-cash-accounting-is-bad-for-business/#comment-2261 Tax Research UK / Cash accounting - a non-starter Tue, 07 Nov 2006 17:40:07 +0000 http://www.taxresearch.org.uk/Blog/2006/10/31/why-cash-accounting-is-bad-for-business/#comment-2261 [...] Why cash accounting is bad for business [...] [...] Why cash accounting is bad for business [...]

]]> By: Emily Coltman http://www.taxresearch.org.uk/Blog/2006/10/31/why-cash-accounting-is-bad-for-business/#comment-2182 Emily Coltman Mon, 06 Nov 2006 08:34:05 +0000 http://www.taxresearch.org.uk/Blog/2006/10/31/why-cash-accounting-is-bad-for-business/#comment-2182 Hi Richard, Yes, I'm a Quaker. I'm not yet a member of The Quakers and Business Group, though I was thinking of joining. I look forward to reading your blog. M Hi Richard,

Yes, I’m a Quaker. I’m not yet a member of The Quakers and Business Group, though I was thinking of joining.

I look forward to reading your blog.

M

]]> By: Richard Murphy http://www.taxresearch.org.uk/Blog/2006/10/31/why-cash-accounting-is-bad-for-business/#comment-2102 Richard Murphy Sat, 04 Nov 2006 18:02:45 +0000 http://www.taxresearch.org.uk/Blog/2006/10/31/why-cash-accounting-is-bad-for-business/#comment-2102 Dennis Sometimes we have a duty to lead the client in the right direction. That's the whole justification for the professions. Richard PS Emily? Are you a Quaker? If so are you a member of The Quakers and Business Group? I will blog re the standard I think desirable over the next week or so Dennis

Sometimes we have a duty to lead the client in the right direction. That’s the whole justification for the professions.

Richard

PS Emily? Are you a Quaker? If so are you a member of The Quakers and Business Group?

I will blog re the standard I think desirable over the next week or so

]]> By: Dennis Howlett http://www.taxresearch.org.uk/Blog/2006/10/31/why-cash-accounting-is-bad-for-business/#comment-1968 Dennis Howlett Thu, 02 Nov 2006 13:38:52 +0000 http://www.taxresearch.org.uk/Blog/2006/10/31/why-cash-accounting-is-bad-for-business/#comment-1968 Emily - that means 70% do asgree doesn't it? more thasn enough to get a merger done :) The main problem is this discusson only really takes the accountant's view. Where is the client in all this? Emily - that means 70% do asgree doesn’t it? more thasn enough to get a merger done :)

The main problem is this discusson only really takes the accountant’s view. Where is the client in all this?

]]> By: Emily Coltman http://www.taxresearch.org.uk/Blog/2006/10/31/why-cash-accounting-is-bad-for-business/#comment-1967 Emily Coltman Thu, 02 Nov 2006 13:33:59 +0000 http://www.taxresearch.org.uk/Blog/2006/10/31/why-cash-accounting-is-bad-for-business/#comment-1967 Thanks Jason. Looking at the latest results on Taxation's website, 30% of respondents aren't in favour of cash accounting, and that seems to be the general picture here, too. The Quaker way of doing business is, if not everyone agrees on a particular idea that's been suggested, to take time out to have a think and look for a possible alternative that'd be acceptable to everyone. Richard, you're a vehement opponent of cash accounting, and you've suggested a vastly simplified accounting standard for small businesses as an alternative. Could you expand on what simplifications and safeguards you'd be looking for in this standard please? M Thanks Jason.

Looking at the latest results on Taxation’s website, 30% of respondents aren’t in favour of cash accounting, and that seems to be the general picture here, too.

The Quaker way of doing business is, if not everyone agrees on a particular idea that’s been suggested, to take time out to have a think and look for a possible alternative that’d be acceptable to everyone.

Richard, you’re a vehement opponent of cash accounting, and you’ve suggested a vastly simplified accounting standard for small businesses as an alternative.

Could you expand on what simplifications and safeguards you’d be looking for in this standard please?

M

]]> By: Richard Murphy http://www.taxresearch.org.uk/Blog/2006/10/31/why-cash-accounting-is-bad-for-business/#comment-1938 Richard Murphy Wed, 01 Nov 2006 15:56:05 +0000 http://www.taxresearch.org.uk/Blog/2006/10/31/why-cash-accounting-is-bad-for-business/#comment-1938 Thanks to Jason and David (neither, I think, my natural allies) for concurring on this one. I was beginning to wonder if I was the only accountant left who believed in the credibility of what we really do. Thanks to Jason and David (neither, I think, my natural allies) for concurring on this one. I was beginning to wonder if I was the only accountant left who believed in the credibility of what we really do.

]]> By: Jason Holden http://www.taxresearch.org.uk/Blog/2006/10/31/why-cash-accounting-is-bad-for-business/#comment-1937 Jason Holden Wed, 01 Nov 2006 15:45:40 +0000 http://www.taxresearch.org.uk/Blog/2006/10/31/why-cash-accounting-is-bad-for-business/#comment-1937 It’s amazing, I have had my nose to the grindstone and missed all the fun. This is really going to hurt me, but, I find I agree with Richard, I am not in favour of ‘CASE’, bye the way catchy name Emily. The accruals concept is not something clients have to deal with anyway, small clients have always dealt with income/expenses and at the end of the year the accountant has asked the question ‘who and how much is owed to/from you’ to deal with the accruals side. Those using software for invoicing etc already do accruals accounting without realizing it. If you have another methods i.e. CASE then when starting in business it is yet another choice/decision to make. Further down the line when either their business structure changes or the business grows, how is the leap into accruals accounting to be dealt with. However, more importantly, you need accruals accounting to know where the business has been and is going, ‘cash accounting’ is okay for cashflow purposes but it’s not a way to run a business. I know Emily would fight the corner of the little guy who wants to earn enough to keep heart and soul together, but I would say again he really doesn’t have to deal with accruals side of things that is the accountants job. I am sure the debate will rumble on …… It’s amazing, I have had my nose to the grindstone and missed all the fun.

This is really going to hurt me, but, I find I agree with Richard, I am not in favour of ‘CASE’, bye the way catchy name Emily.

The accruals concept is not something clients have to deal with anyway, small clients have always dealt with income/expenses and at the end of the year the accountant has asked the question ‘who and how much is owed to/from you’ to deal with the accruals side.

Those using software for invoicing etc already do accruals accounting without realizing it.

If you have another methods i.e. CASE then when starting in business it is yet another choice/decision to make.

Further down the line when either their business structure changes or the business grows, how is the leap into accruals accounting to be dealt with.

However, more importantly, you need accruals accounting to know where the business has been and is going, ‘cash accounting’ is okay for cashflow purposes but it’s not a way to run a business.

I know Emily would fight the corner of the little guy who wants to earn enough to keep heart and soul together, but I would say again he really doesn’t have to deal with accruals side of things that is the accountants job.

I am sure the debate will rumble on ……

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