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We shared our checklist of tips and tricks while doing crypto accounting in our blog post - Crypto bookkeeping - our unmissable 6-point checklist We have taken this a little further and shared a video that explains what we mean by our unmissable checklist. These processes have been iterated by Evalua8 over a period of three years. Hopefully this video can drive the methodology home better. In summary our checklist says, Point 1 - Don't overhaul your legacy software like Xero and Quickbooks straight away Point 2 - Supporting documents and audit trail are important and needs care Point 3 - Transactions should be set to deduct the correct VAT % at source for UK companies Point 4 - Have an understanding of crypto specific events such as forks and airdrops Point 5 - Keep track of blockchain and transaction charges Point 6 - Conduct periodic internal reviews Happy listening!

As crypto adopters would no doubt know, staking is a lucrative process you can undertake for your excess crypto holdings. Whether you are an individual or a corporate that has assets earning staking rewards, it's worthwhile looking into available guidelines re how they are taxed. What is staking? Staking takes place when you use crypto currency such as Eth, Solana, ADA in the validation process of transactions on a blockchain. You essentially lock up a certain amount of cryptocurrency as collateral. This process is commonly associated with proof-of-stake (PoS) and delegated proof-of-stake (DPoS) consensus mechanisms, which are alternatives to the more traditional proof-of-work (PoW) used by cryptocurrencies like Bitcoin. That's the reason why some coins like Bitcoin doesn't have staking available. Why would you consider staking? Think of a scenario where you have excess funds in your bank account. You'd want to put it to some use assuming you'd like to retain them in the business. Staking is comparable, when you have coins in your asset base and you don't expect to use them, you could consider staking to earn some rewards. There is also a process by which you place crypto assets in yield bearing accounts, that's different to the process of staking. What are the risks of staking By far the biggest risk is a lock-in period for your staked assets. This could be a small period of time like 5-7 working days even. In the crypto industry, big price shifts happen really fast as we are all well aware. That means you would not have your staked coins to hand to quickly swap. It would be worth considering any vesting period requirements before you start the process. Now the real question, Are staking rewards taxable? There is no simple or straight forward answer here. A consultation was run by HMRC which addressed the taxation of decentralised finance (DeFi) involving the lending and staking of cryptoassets in April 2023 with results made available post June 2023. While there are many factors considered here, it points towards the fact that if there is a determinable income earned via staking rewards, a company or holder of the asset should consider it for either income tax (corporate tax for companies) or Capital Gains Tax (CGT). CGT generally occurs when you have disposed off an asset at a higher value than you bought it for. Staking could be deemed as disposal if you no longer have ownership or control over staked coins. Again general principle here is that, if you receive staking rewards consistently (like every month) that's likely "income" in nature rather than "capital gains". When we say income nature, it doesn't classify like "revenue". It simply means it's a profit and loss line item (other income) rather than a Balance sheet adjustment of value held (intangible asset). Points to consider There is ongoing government work in this area and more clarity regarding taxes is expected. With the increasing value of most digital assets in January and February, there is renewed investor interest in activities including staking and yield generation. It's important that you consider tax liabilities on an individual and corporate level for any activities before undertaking them with a long term view. Disclaimer - This article is for information purposes only and this is an area still undergoing changes. Please refer to latest guidelines and consult professionals before deciding on how staking rewards should be treated for your entity. References and notes https://www.blockpit.io/en-gb/tax-guides/staking-taxation#:~:text=Income%20Tax%20on%20staking%20rewards,are%20subject%20to%20income%20tax. https://www.dlnews.com/articles/regulation/uk-treasury-puts-out-comprehensive-crypto-reg-proposals/ HMRC Consultation paper

We've been working with holding companies since 2015; and can say with some conviction that yes the finance function for these can be incredibly complex. Regular book-keeping is much the same as for a regular stand alone entity but having other related companies in the mix brings the need for more diligence and process to get the numbers right. Multiple Subsidiaries Holding companies will have several subsidiaries operating in different jurisdictions. Coordinating and managing the finances across them required a set process that can be replicated across the board with minimal disruption. Of course the tax and compliance aspects of different places have to be taken into consideration for entities in each jurisdiction. There are also several geographies where they still don't accept reports prepared via an accounting software. There are sometimes language barriers where the financial reports prepared in English has to be converted to another language and certified by local accountants. These things should be considered when creating a centralised finance function. Consolidation of Financial Statements It goes without saying that holding companies need to consolidate financial statements, combining the financial results of all subsidiaries. This process involves eliminating intercompany transactions and ensuring uniform accounting policies across the group. With the amount of work involved, it makes sense to use a consolidation software where possible to make matters easier and more time effective. We usually recommend a quarterly consolidation to start with and once a proper process is in place, move to monthly summarised consolidated results. Financing and Capital Structure Management Holding companies need to decide on the capital structure for the group as a whole; there will be a mix of equity, debt and perhaps other forms of financing. While the parent company is the ultimate shareholder, complexities arise when the group structure is put into place after a few of the subsidiaries are already up and running. What then happens is the subsidiaries that are operational also end up playing the role of capital raiser and manager. Moving this across from one entity to another would then involve contractual corrections such as moving shareholder or venture agreements across entities. This is also expensive. It's always useful to consider whether you need more than one entity to manage all of the functions required to bring your product to the market. For e.g. certain countries around the have restrictions around private limited companies issuing tokens (ICO); and you will need to consider the best structure for an entity to be able to do this. Regulatory and tax compliance This is straightforward to understand, subsidiaries would have their own tax and compliance matters to attend to in host jurisdictions. The regulatory landscapes can be tricky to navigate especially with items like inter-company loans and payments made to related companies / parties such as Directors. The nuances of transfer pricing (i.e. determination of arms' length pricing for related party transactions) are central to determine ahead of getting into these. A lot of times, companies thing about these aspects retrospectively which simply doesn't work due to transaction trail being present. Some jurisdictions also require group level audited results to be presented and this can be costly and time consuming if not planned ahead of time. Payment of dividends Another aspect that needs careful consideration is the dividend payment policy. It's always important to have the correct paperwork in place when a parent company makes dividend payments. Generally for holding companies, it's best to pay dividends annually; either at calendar year end or at the end of the financial year end. A calendar year end is a popular choice as that corresponds with the closure of the individual tax year in many countries. Your shareholders will have their individual tax obligations if the country of their residence has dividend tax rules. A resolution passing the dividends are mandatory in most jurisdictions as well as the necessity of supplying dividend vouchers. The overall complexity of running a finance function for holding companies stems from the fact that there are multiple layers of entities and their corresponding compliance involved. It can quickly get out of hand if transactions are not captured accurately within a reasonable period of time. Our experience working with holding companies are nearing a decade now, so if you have a pressing question on whether they might be right for you, pop in a quick call on our Calendly link. Comments and notes All pictures are from pexels.com and are allowed for commercial use https://www.investopedia.com/terms/h/holdingcompany.asp

When we first got introduced to crypto back in 2018, we admit it was novel. There wasn't a lot of information easily available - especially for things like tax laws and crypto related accounting standards. In the last 3 years, this has changed massively. Our clients got more structured in their approach to how they deal with crypto (digital assets) in their company. They also started looking for professionals who "get" what this means. A client specifically approached us because he said he wanted to work with someone who had a basic understanding of the industry and at least some interest in the sector. Collating the feedback from various clients, here's what is considered essential for a crypto accountant, Personal interest or investment in crypto One of the early questions we were asked is whether our personnel have an interest or have invested in crypto. In our case, yes the founding team and Senior staff you'd interact with have had their personal wins and losses in the sector. This immediately puts most people at ease that we can speak their language and they don't have to explain crypto and DeFi jargon to us. It also means we understand the fundamentals of a client's business model and can derive on knowledge from personal experiences to help work with their internal team. Ability to adapt to new and emerging tech The crypto industry is inherently digital, and transactions occur on blockchain networks. An accountant who is tech-savvy and understands blockchain technology will be better equipped to handle the challenges from crypto assets. When looking to recruit a finance professional, always go with someone who is familiar with the day to day nuances of how they work. Such as; they should know what are wallets, exchanges, and have an understanding of blockchains. If they know the technical aspects of how transactions occur on a blockchain, that is great but this is not absolutely essential for some one to be effective as a finance professional in the space. Timely communication This is definitely not crypto specific, but so critical for anyone in the finance field. The most common complaint from any client (industry agnostic) is that they don't hear enough from their accountant through the year. Accountants have moved on from being merely people who pull together tax reports at the end of a financial year. They are trusted advisors who are close to changes in the compliance and tax landscape and can advise people on upcoming changes in real time. This is even more sensitive for this particular industry as changes happen often and are pivotal. Bing able to advice clients consistently on things they should watch out for is highly regarded and indeed a coveted quality for any accountant in this field. Working knowledge of accounting standards and tax laws in the jurisdiction of operation While this point should be high up on the radar, this is more difficult to gauge as most business owners are unfamiliar with them. There are more and more entrepreneurs that actively seek this knowledge for the sake of their businesses and that's always welcome. The best way to check if someone has experience with the relevant accounting and tax rules are to ask them questions. If they've had experience specifically with investigations such as with HMRC that is always a plus. You can ask them to share non confidential details about the process and the outcome of the check. As recent as December 2023, FASB the American accounting standards setting body issued it's first direct accounting standard aimed at crypto assets. Many accountants are still unaware of this. Yes; this may not impact them directly if a client jurisdiction is outside the US but it' should be seen as a forerunner of standards to come to effect in other jurisdictions. Connection or network maintained in the industry While networking is personal to a professional, it's a good sign if the accountant attends or takes interest in industry relevant events. This could also mean they are well connected and able to contact other professionals when needed for a client specific matter. It also shows an overall interest in understanding the trends within the industry and a genuine desire to connect with other people with similar interests. While there no one specific kind of advisor or accountant that will serve the purposes of every crypto business out there, seeking out someone who works with other similar companies is a great starting point. We have been working with companies in the sector across UK and Singapore since 2018, if you have a question, please drop us a note and we'll try our best to guide you. Notes and references https://tax.thomsonreuters.com/news/fasb-publishes-its-first-direct-accounting-standard-for-reporting-crypto-assets/ https://www.forbes.com/sites/shehanchandrasekera/2020/04/08/thinking-of-hiring-a-crypto-cpa-read-this-first/ All pictures have been sourced from pexels.com and are creative commons licensed.

Cashflow forecasting and getting it right is a real art. When you have more than one company in the mix, the complexity increases naturally. This is when you need to create a consolidate cashflow statement and forecast. Business owners cannot gauge runway for cash held or maintain a good treasury function unless they get into good forecasting habits. Start where you're at There's no perfect place to start. If you don't have software that produces cash floe forecasts on a consolidated basis (Eg - Fathom, Spotlight), use a google sheet. A google sheet is better than excel simply because real time save can happen on it and collaboration if needed is easier. When capturing cash movements in a group, eliminate cross company movements. Eg: A parent loans cash to a subsidiary, you can eliminate that. Consider any exchange rate losses/gains however as it could be significant for large movements. Cash outgoings are for the group When you don't have a central finance function that has visibility of expenses across a group of companies, you'd likely miss outgoings, That's simply because most of time, you're focussed on that group company that has the most volume of payments. The payments, however small made from less active subsidiaries and related companies can spiral and cause imbalances in your cash planning. Specific emphasis here on taxes. Depending on jurisdictions, different companies in the same group may end up having varying VAT / sales tax or corporation tax payment dates. Adding that to a consolidated cash flow would help determine the amount of cash needed in a particular company at a particular time. This is long winded when done manually. If all of your group companies use the same accounting software, it's easy to get a consolidated report that provides a group view using the right reporting software. Adjustments under tax laws for group companies Inter-company adjustments that may be important under tax laws of specific jurisdictions is another area to be careful of. When a parent provides a loan to a subsidiary for example, some jurisdictions would attach an implied interest on it under transfer pricing rules. In certain cases a physical movement of funds need to happen to fulfil this obligation before the company's financial year end. Without plotting this out on a cash flow forecast, it can be easily missed and can lead to non-compliance. Use the right tools to save time and cost In a survey conducted by Amex and published in April 2023, they found that 50% of small businesses believe cash flow management tool consolidation positively impacts profitability. The time that can be saved using the right tool is huge. A finance department spends hours of their time monthly to produce a right fit cash flow statement. Using a good tool can not only save this time but the loss of resources and therefore costs associated with man hours. A consolidation software can also present the facts more clearly as they have the capability of inbuilt reporting templates. Dividend pay outs for the group For group companies, dividends are declared from the parent company essentially once or twice a year. Before the Management decides on the dividend pay-outs, they'd critically analyse the cash position of the group. Unless group level cash position can be reliably estimated for the year-end it's very hard for the Management to determine a pay-out level. They would also need to see cash requirements for the ensuing quarter and possibly the year to be able to ensure there is enough cash preserved before a dividend id declared and paid. Cashflows are a critical financial metric and one that's aggressively sought by investors and other stakeholders. Once you start the process of forecasting cash consistently, decision making becomes faster and more effective. You are relying on accurate information to be able to drive those business decisions. Check out our youtube channel for short videos that talk about a few hacks relating to cash flows for SMEs. Notes and references Amex Survey link - https://www.americanexpress.com/en-us/newsroom/articles/amex-for-business/new-survey-finds-that-more-than-three-quarters-of-small-busi.html Cash Flow Statement: Analyzing Cash Flow From Financing Activities

Happy New Year everyone and as our first blog of 2024, we want to highlight a few points relating to multijurisdictional accounting for SMEs. If your small company has related companies or key stakeholders or even suppliers in places apart from the country of incorporation, this blog would be relevant for you. There is hardly an SME that doesn't have some kind of overseas business relationship. It could be as simple as having a set of customers in another country. At Evalua8 we've been long involved with SMEs that have a presence in more than one country. Most of our clients are set up across 2 or more jurisdictions which makes it super important to have a finance set up that captures this accurately Here are some areas we pay attention to; Relationships between the companies When there are multiple companies in a corporate set-up, it's important to understand the relationship between them and specifically how money flows between them. There maybe loans between related companies. We will address transfer pricing as a separate point as it's always central for inter-company transactions. From a finance perspective, inter-company transactions should be captured on your accounting system when they occur. Leave it loo long, they become difficult to unravel sinking precious resources who then go back in time to track these. Additionally, maintain proper inter-company account reconciliations. Reconciliation notes are important for the professional to track back to exact status at a point and time if needed, especially for audits or in the event of Transfer-pricing Transfer pricing is the determination of arms' length, independent pricing between related parties, Any inter-company transaction should be set up as if you were unknown parties in a commercial arrangement. It's a complex area and may have issues that arise from interpretation of tax laws across jurisdictions. However, it can't be ignored, even if all the companies involved are in the same country/place of business. Companies often misunderstand that transfer-pricing is a stand alone concept. But it's terms that are built into a normal agreement such as royalty agreements or licensing arrangements which addresses the fact that the parties to the contract are related. It's important for your accountant to understand what's the basis of costing/pricing agreed between companies in a group and apply that consistently when inter-company invoicing or transactions take place. Corporate and tax compliance When you have group companies across different jurisdictions, how do you handle the compliance and tax requirements of each of these different places? If there are established relationships with professionals or networks in other countries, that's a great starting place. For SMEs going to a large practice might prove difficult cost and process wise. However many smaller professional firms now have affiliations with like-minded entities in other countries. The finance departments (if not centralised) of different group companies need to work seamlessly together to achieve efficiencies for the year-end close process. This is where we find a central finance function to be of incredible value. A one-source of truth is maintained through out which makes compliance and tax reporting that much simpler and faster. Standard accounting SOPs Standardisation for group reporting is key for Management to get a summarised view of key matters that need attention. While most companies produce monthly reports, getting them in a standard format that shows group level results is imperative for users. When you're a group CEO or a COO, the idea that you need to piece together different pieces of financial information to get an overview of company performance is not appealing. Multijurisdictional SME accounting will not produce decision making results if not for standarisation. As dull as it sounds, reports that have a neat layout that's done month on month will help a reader grasp issues quickly. This in turn aids faster and more efficient decision making. We hope this blog has helped in understanding some key areas of concern when companies are spread across countries. If there are specific questions, feel free to send them to us via our Contact Us page. Notes and references All pictures used are from pexels.com and are allowed for commercial purposes.

It seems appropriate to pull together a post that captures our learnings from the very up and down 2023 we have seen so far. This was an interesting year in which we attended more Web3 events, understood that community is very important in the sector and also that there is more mainstream interest in crypto. Here are our top learnings on crypto accounting from 2023 ~ Company structuring is important This is one of our big take-aways from 2023. More of our clients had to seriously think of structuring their corporates in a way that makes sense for the project as a whole. Some projects are clearly all DAO and parent company based whereas some others need very specific layered approach. Doing this withour after thought can be counter-productive and expensive to fix. When thinking through introducing more corporate structures, talk to your accounting team to understand how that will affect cash and transaction flow between related entities. ~ NFTs and their accounting treatment is very nuanced There is no easily available guidance on how NFTs should be treated in accounting neither under the US GAAP or IFRS so far. There is greater interest in this area however and more people understand that they are of an intangible nature. While IAS 38 (Intangible Assets) could provide some basic insights, the unusual characteristics of NFTs pose challenges in categorizing them within any singular classification. We expect more clarifications regarding these in the years to come. ~ Crypto custody and treasury management is of paramount importance With the ups and downs in the industry for the longest time, we are once again seeing the importance of having a solid treasury management strategy for companies that have a crypto-fiat asset split. It's important for companies to have a start point for this. It definitely will not be perfect but unless you have an entry and exit point defined, holding and managing digital assets become more and more difficult to get right in the long run. ~ More banks and traditional financial institutions will have a clearer stance on crypto We've seen this happening first hand all through 2022 and 2023. Some banking institutions are moving to a favourable view of companies that have a clear product and vision. It's possible that most of your revenue is still coming from a traditional source and there are banks that are happy to deal with that part of your business as long as you are transparent about what's crypto's role in your business. They still prefer that the majority of your operations are "non-crypto" but with large institutional interest in DeFi, we may yet see some positive and welcome co-existence. ~ Be on top of your numbers With everything, numbers are a top priority. We always believe that companies should have a one source of truth to the extent possible such as a robust accounting system that investors, the management and a wider stakeholder group can tap into. Financial literacy is so important for companies specific to the sector especially due to the high volatility of assets you hold. As we draw a close to 2023, we hope that DeFi and crypto will scale more heights in 2024 and beyond. A word from the Evalua8 team! We've been very busy during December so we've been less active with our blog than usual.We hope to bring you more blog posts and white papers in the new year. As we wrap the year, we hope our articles have informed and educated. Happy holidays! Notes Guide to accounting for NFTs https://www.pwc.com/us/en/tech-effect/innovation/digital-assets-predictions.html All pictures used in the article are from pexels.com are are Creative Commons licensed.

When we speak to people within Web3, it's a given that most people understand some or the majority of community jargon. However, thinking beyond that space, people might be confused about what's a DAO or a Foundation and what purpose do these companies actually serve. Here's a beginners guide to the common structures within a Web3 framework DAO A DAO, or Decentralized Autonomous Organization, is a type of organization represented by rules encoded as a computer program that is transparent, controlled by the organization members, and not influenced by a central government. DAOs are typically associated with blockchain and cryptocurrency technologies, particularly on platforms like Ethereum. Not to be confused with formal organisations like a private limited company, a DAO as per its name is decentralised, meaning it doesn't have a legal structure. They are often implemented through smart contracts i.e. directly written into code. The most famous example of a DAO as created by Ethereum in 2016 saw a massive data breach which caused a third of assets held to be lost. Foundation Unlike a DAO, a Foundation refers to a legal entity established to support and oversee the development, promotion, and governance of a specific cryptocurrency or blockchain technology. If the company is thinking about an ICO for an own token, it will most likely have a foundation somewhere along its company structure A Foundation is often used by companies to rally support on Discord and Telegram channels as an example and educate interested parties on a specific blockchain's use cases and major milestones. They also offer grants to developers, researchers, and projects that contribute to their native ecosystem. These grants can support innovations and advancements within the project that the Foundation supports. Private limited companies Like you'd have in normal corporate structures, crypto entities have traditional needs like employing personnel, conducting R&D and commercialising goods and services. In that sense, they'd have an overarching parent company or a for-profit entitiy/entities that develop, maintain, and commercialize blockchain projects. They may provide services, and operate in a traditional corporate structure. DEX (Decentralised Exchanges) DEXs are platforms that facilitate peer-to-peer trading of cryptocurrencies without relying on a central authority. They operate through smart contracts and decentralized protocols. The definition by Coinbase is perhaps best suited to understand what they are, A decentralized exchange (better known as a DEX) is a peer-to-peer marketplace where transactions occur directly between crypto traders. DEXs fulfil one of crypto’s core possibilities: fostering financial transactions that aren’t officiated by banks, brokers, payment processors, or any other kind of intermediary. It's fairly normal for Web3 and crypto entities to have one or more combination of these structures as part of their corporate set up. Most will start with a private limited company to facilitate having employees and setting up departmental functions such as a finance function. If you're looking to set up a series of entities within your crypto structure, do read through the which will provide a few thinking points for anyone venturing into this world. References https://www.coindesk.com/consensus-magazine/2023/05/09/coindesk-turns-10-how-the-dao-hack-changed-ethereum-and-crypto/ https://www.coinbase.com/learn/crypto-basics/what-is-a-dex All images are Creative Commons licensed and sourced from pexels.com

Ok, we've made that sound dramatic, but hey! in the fast paced world of Web3 and DeFi, some drama is merited? That apart in the rapidly evolving landscape of Web3 and DeFi, navigating crypto bookkeeping for your company can be challenging. Unfortunately, there is a noticeable gap in accessible ideas online. Recognizing this, we've taken the initiative to share our unmissable 6-point checklist. Point 1 - Don't overhaul your legacy software like Xero and Quickbooks straight away While not the most popular opinion out there, we are firm believers that you just don't overhaul your entire current system because you have crypto assets in your business. For most of the clients we work with, fiat and related compliance is still the chunk of their business. Whereas a smaller portion is digital assets. There are newer software in the market that caters to crypto currencies, their ongoing valuations and presentation but we can never be sure whether it can handle traditional accounting just as well. Then there is VAT which is completely digital now and the requirement to show a clear audit trail for all types of transactions. We've successfully continued to use Xero for our clients that have exposure in the sector. It requires meticulous attention to maintain back workings and supporting documentation, but our bookkeeping practices have evolved over the years to ensure this is taken care of (psst...we have a blog on our methodology if you'd like a read) Point 2 - Supporting documents and audit trail This is absolutely critical for companies in the sector. You do need to maintain back up workings and documentation for values shown in the books for crypto assets. As an internal practice, we maintain screenshots and reports generated from each different wallet provider. A "point and time" value is otherwise quite difficult to justify. Koinly is great in that it captures all buy, sell and transfer transactions but again when crypto currencies are represented on a balance sheet you need to be able to clearly show a value as of a particular date. Point 3 - Transactions should be set to deduct the correct VAT % at source The VAT aspect is crucial. Most companies we work with are not a 100% crypto only. They have very traditional revenue models (such as SAAS subscriptions) with a variety of payment methods built it. VAT for these transactions need special attention as that follows the already established VAT directives. Just because you maybe accepting payments in BTC, ETH, stable or other forms of crypto currencies, it doesn't change your VAT liability for particular transactions. When transactions are captured, it has a VAT rate added to it. Some could be missed out which may then lead to penalties if there is ever a VAT review from HMRC. A good practice to follow is to ensure a quarterly VAT report is generated and reviewed thoroughly before submitting to HMRC. Point 4 - Have an understanding of forks and airdrops Forks and airdrops are very native to crypto currencies. A fork occurs when a blockchain splits into two separate chains, usually due to a change in the protocol or community disagreements. This results in the creation of a new cryptocurrency, often with similar transaction history up to the point of the fork. This is of course talking about a hard fork. If you have new tokens to what was held before (which may not always happen), it's value may need to be recognised separately in the books. Similarly airdrops can mean you have more tokens in your wallet which may need to be recognised on equal or comparable value in your accounting records. Having an understanding of what they mean to start with would help a in recognising or flagging these transactions for greater clarity. Point 5 - Keep track of blockchain and transaction charges While very similar to bank charges, these can get lost in translation as it can be minimal per transaction on some blockchains . As an example, Algo blockchains and some native blockchains can have very small transaction charges. It might even be hard to calculate them per transaction. In such a case it's better to capture them monthly as it would be faster and better value of peoples' time. In any case, you must have a system in place to check if relevant crypto charges have been recorded Point 6 - Conduct periodic internal reviews This is a key point for us here in Evalua8. Regular monthly or quarterly internal reviews, particularly for smaller exposure levels, are a simple yet effective way to catch and address issues promptly. This routine check helps identify missed transactions, incomplete records, or any inaccuracies in how items are treated. We recommend that business owners or their finance teams generate variance reports for the Profit and Loss statement and Balance sheet each month. This allows for immediate identification and correction of any discrepancies. Leave it too long and you might have to sink significant time in backtracking to identify and rectify the source of problems. We hope this checklist has helped to form a basic structure around your crypto bookkeeping function. If you are having trouble setting up a proper finance function for your crypto company, talk to us and we could help you. Notes and references HMRC's crypto assets manual specifically talks about taxation on different scenarios All pictures used in the article are from pexels.com and are Creative Commons licensed.

Book-keeping often tends to be thought of in terms of reconciling bank accounts. In the times we live in, where everyone uses AI and tech, getting your bank reconciled shouldn't be the only goal for a great SME book-keeping function. That's only a part of the function, not all of it. At Evalua8 we like our book-keeping to be great. This post has been inspired by this very question asked by a prospect. This is a great question and one that all SMEs should ask their respective book-keepers or check internal processes to see that it ticks all the right boxes. We acknowledge that methods across firms differ. Here's how we approach book-keeping for our clients Setting up transactions that flow into your monthly or quarterly reporting What most small business fail to implement is a system where your books are set up in a way that it flows into a reporting structure without friction. Changing the reporting to suit what has been set up transactionally will always be more time consuming and difficult. When financial entries are entered into your software, ensure they sit in the right chart of account item to start with. This gets them to go into the correct line item on your financial reports such as revenue, cost of sales, opex, asset or liability. We prefer FathomHQ for monthly reporting and any change in reporting layout required has to be made via the base feed which is normally Xero for us. So we spent time on preparing Xero layouts in a good way to ensure that it connects well to Fathom in turn. Maintaining an audit trail Most SMEs are not audited, but there should be set up in an "audit ready" manner. This means that a supporting document trail should be consistently maintained. Then there is VAT reporting to consider. In the event of a VAT audit or a GST audit (Singapore), HMRC (or IRAS) will ask to see the supporting documents for input and output VAT. If you use the likes of Dext, it'll be easier to maintain a robust document trail. You also cannot claim VAT on any expenses that are not backed by supporting bills. Apart from these very good reasons, you are also required to legally maintain company documents as a director to support financials for sales, expenses, assets and other documents like bank statements. Please see link here from HMRC that explains this in more detail. Book-keeping should ensure the trail of documents are kept and can be easily accessed. Dealing with accounting nitty-gritties A book-keeping function is never complete without the "journal entries" (JE). When you try to pass a JE on Xero, it rightly cautions you to only make an entry ONLY if you are an Accountant or professionally trained. This is a true sentiment as setting up JEs incorrectly in the books can cause your numbers to be badly skewed. For SAAS, the likes of deferred income and prepayment JEs are necessary to ensure compliance with accounting standards as you want to capture revenue and expenses in the period they fall into. Sadly without a basic knowledge of accounting standards, it's not recommended that you deal with this area. If you don't have a book-keeper consider getting an internal audit done once every year before making a tax filing. Numbers that are true and fair A great book-keeping function focuses on providing a "true and fair view" of the company financials. In my opinion, true and fair doesn't always have to mean 100% accurate. True and fair is financial information presented in such a way that it allows a consumer of that information to take a realistic commercial decision. The numbers presented shouldn't lead to a misunderstanding. For e.g. a $500 expense gets missed for a company that has an overall expense of $100k per month will not cause a director to take a decision that's fundamentally flawed. In the same instance, if an expense worth $5,000 is missed, it can provide an inaccurate picture of the company's financials. A person taking a decision looking at these numbers would assume the company is $5k better off than it actually is. The only way to mitigate such an occurrence is to ensure your book-keeper has checks and processes in place to avoid mistakes. But human errors will happen. A monthly check which helps is to ensure a balance sheet reconciliation is carried out as it helps to catch any errors early. Do it right As you can see, a great book-keeping function ensures that the numbers that flow into reports used consistently by a business has enough accuracy to ensure you can take better decisions faster. At Evalua8, our professionals have been trained in the art of maintaining books well. We have finessed this over a long period of time and have necessary checks to ensure errors are caught and dealt with early. Have queries regarding book-keeping? Reach out and ask us direct. References Pictures are courtesy of Pexels.com and are allowed under creative commons license https://www.frc.org.uk/library/standards-codes-policy/accounting-and-reporting/true-and-fair-concept/

Sure we all know cash is "the" most important asset to look after for your small business. But there's no education around it that exists formally. Most of us learn to deal with cash from experience and trial and error. As we work across industries and clients of different sizes, there are common areas that most SMEs can focus on to get better at cash management. It will help you adapt a financial model that can withstand sudden changes and pivots. Here are the six we want to highlight in this weeks' blog; Having a firm grip on company expenses Understanding your own expense patterns and how often you pay something is crucial. Most expenses in an SME is monthly (rent, payroll, regular expenses) and then there are subscriptions. These are a real problem in many SAAS companies. In bigger companies, employees sometimes sign up to tools they need and it continues even when the said employee has left. As quoted on an article from USA Today - The growing list of monthly fees can be frustrating for consumers, but experts don’t expect companies to back off any time soon. The global subscription billing services market is set to more than double in size between 2020 and 2026, from $5.1 billion to $12.5 billion, according to a report from IBM. Critically question subscriptions and cancel any that are on an annual renewal. The other area to look at is your hosting costs, for SAAS this is inevitable and it has to be reliable + safe. Cast your net wide and check for alternatives that may be cheaper. Planning for VAT Most businesses pay VAT every quarter. You get a period of 90 days between 2 VAT payments normally, so it's a consistent payment to be planned for each quarter. If you have a business account with the likes of Monzo Business, it's best to put away a flat 17-18% of your sales value into a rolling deposit account. Monzo is currently offering 1.6% interest on any "spare" money you put into an instant access savings pot. While this is not exactly spare money, you can still benefit from having a little extra with the peace of mind that the money is accessible when you need it. If you're really small and don't have enough VAT to put through each quarter, consider shifting to an annual VAT plan. We did this for a very small client of ours; he was never told this was an option and was incurring £300 penalties each quarter for not filling out a VAT return on time. These penalties are now under new rules but it's still time and energy that's required in submitting them each quarter. Another one which people often overlook. If you're under £1.3 million in sales you can opt for a "cash-basis" VAT. So you pay VAT on invoices you have been paid already for and on bills you have actually paid. This is useful for companies that have a long credit period for receivables. Get an overdraft facility with your primary bank account When you need a line of credit, your first and easiest source is your current corporate bank account. With your transaction history available to them, it's usually a faster process of approval and fund release. However, it's hard to set up an overdraft facility with your bank when your cash balances are low. You should negotiate an overdraft facility when cash flow is strong within your company. With certain high street banks, you also get a Relationship Manager when you actually have an overdraft with them. Just don't use it when not needed. Overdrafts can be massively useful for quick access when under financial pressure. They do come with the pitfall of higher interest rates, but it'll be lower than taking out loans from a complete third party Learn customer payment patterns Most SMEs suffer from late payment issues. We have a complete blog on the topic which you can access here. Learning your customer's payment patterns will help to cultivate conscious actions that will help your business. I had a client's customer that would always pay if we called and reminded her. This was a busy entrepreneur juggling many things and she would only remember to pay with multiple reminders. What we discovered was that reminders over phone; even sometimes leaving a voice message does the trick. If they have a certain payment pattern they follow, learn to adjust your own payments around that when you can. Building and maintaining a cash reserve Good companies are cash positive. Great companies are cash reserved. We encourage all clients to maintain a 3-month runway at a minimum. Running a cash basis P&L (on Xero for example) will tell you very quickly what you're spending month on month in cash. The only items outside of a P&L that you need to think of is payments to Directors which can be significant to small companies, VAT and PAYE payments, any other capital commitments you have. Simply multiply the gross spend amount x 3 to reach a very rough value to hold in reserve. When able, save more. Once you have a lumpsum you're happy with, try to find options to place that into a long term deposit account. We're aware of providers like Flagstone that looks at various options for your money to earn interest. However, research before taking any steps that places money outside an organisations immediate corporate accounts. We don't have direct experience with Flagstone or similar though extensive research was conducted for a client. Hopefully this has given you enough to mull over. With the end of the calendar year just round the corner, there is no better time to get a cash forecast in place for the coming year. Reach out to us if you need a hand or simply want to talk over options. We don't charge by the hour at Evalua8 unless it's a very specific project we have committed to. So don't shy away from booking a slot to chat. Notes and credits 1. Flagstone - https://www.flagstoneim.com/ 2. Subscription fatigue 3. All photos in the article are from pexels.com and allowed for commercial use

I read a report recently from Simply Business that headlined "SME Insights Report: UK small businesses owed £32bn in late payments". Even at a fraction of this; the amount is staggering. But working with small businesses across the globe, this is such a massive problem and compounded by other cash flow mistakes. Often this is because there is a lack of education at an entrepeneurial level about general cash awareness in the business. Getting real about late payments Most businesses irrespective of size want to do the morally right thing and pay people on time. Our own personal experience is that businesses priortise small companies for payments once they pay employees and key suppliers. It's when they don't have enough to spare after paying employees and key suppliers, there is a real issue. How do we best manage this? While there is no easy answer, here are a few pointers that can be easily managed by most SMEs. The invoice submission process expected should be followed to the "T" This is not so prevalent with small companies but worth a mention. If you're dealing with a larger company and they ask to follow a certain process, such as submitting your invoice to a specific portal they use (very common for US companies to request this); do it. You can chase all you want but you won't get paid unless it passes through their system. If they ask you to attached a PO or a reference like a job number, do it. Because without these, your invoice won't move through their system and you won't get paid on time. This is a painful process and time consuming for most small businesses but better than waiting endlessly on payment for a small admin issue that could've been avoided. Explaining consequences Most small businesses have this issue. They DO NOT explain the consequences of non-payment clearly. You need to spell this out in as many clear words as humanely possible. - Include this in the invoice itself: Non-payment would attract late payment penalties of xxx or interest @ xxx - Include this in the body of the email that goes with the invoice itself. You can automate this message in almost all invoicing software - Reiterate this in every formal email / communication you have with the debtor when asking them for a payment date if already late - If you're still getting no response at all, define clearly the actions you have in your debt collection sequence such as handing it over to an external debt collection agency, reporting to the likes of credit agencies etc. - The important thing is to follow these actions through so that a level of seriousness is attached to your debt. There are a number of debt collection agencies that work on a no win no fee basis. You could also otherwise try the MCOL process with HMRC. Understand credit terms If you have an agreed credit term with a client, adhere to that when you fill in a due date on your invoice. In circumstances where you cannot afford to wait more than a certain period don't agree to payment terms that are detrimental. I know that's easier said than done. Sometimes the sale itself is too important and you simply don't have negotiation power. That's all right, try to extend the same terms then to suppliers so you're not compromised on both ends. A client had a large company come onboard who negotiated a 60-day term. The standard was 30 days. In this case, the client could afford to wait the extra 30 days but no more. We are hot on their heels even if it's a day overdue. And as standard good practice, we send a gentle reminder of invoice becoming due in 7 days a week before. This has worked well and we've not suffered late payments from this arrangement. Work around their payment patterns If you know a supplier's payment patterns - such as they adhere to a weekly or bi-weekly payment make sure you send reminders with enough time for them to get your payment on an upcoming run. There is no point sending a reminder on the 14th if the 15th is their payment date. You've already potentially missed the window to be on their mid-month payment run. Look for indications in their communication to you where they might allude to when payments are made. As a thumb rule, the month-end is a bad time to ask for payments as most companies have to prioritise payroll and contractors. Escalation When you're not getting responses from your general finance contact, escalate to the next available senior person. That could be a CEO / COO themselves for small companies. If larger, it could be your product contact there. This can be an effective strategy in the sense that more people from a supplier's company is pulled into an admin matter. Most companies like to avoid this. Get on the phone This is a simple but effective strategy. People are less evasive on the phone. You'll get to the heart of the matter faster when speaking with someone. This is also one of the most effective escalation methods. A client had a late payer with over £20k across 3-4 invoices pending for over 30 days. There was no response to the emails, we tried her on the phone just before 9 AM on a weekday morning. She was very apologetic and mentioned it was overlooked due to other priorities. She paid 50% the very same day and the other half within the next 2 weeks. We don't always know why people don't pay. If they haven't raised disputes or product issues, we recommend this 5-step plan to get to the heart of the matter fast. Struggling with payments, we provide one-off consulting to deal with late payments in your small business. Please don't hesitate to speak with us. References and notes All pictures used are either proprietary or courtesy of pexels.com https://www.simplybusiness.co.uk/knowledge/articles/sme-insights-report-2023/ https://www.gov.uk/make-court-claim-for-money/after-you-make-your-claim