FINANCIAL MANAGEMENT TIPS
An Old Adage (or Camwells First Law of Business)
Many entepreneurs succeed by spotting opportunities and actioning them very quickly. Great. However it is well worth considering two main issues before going ahead (in addition to routine
commercial and legal aspects) :
(1) How is the transaction accounted for?
How will it hit the P&L account? Will it effect on the balance sheet (and the ability to raise loan capital)?
For example, is it an activity that can be regarded as an asset, or will it need to be written off on day one?
Can we take revenue up front, or does it need to be spread over a long period?
Are there new accounting disclosures, such as related parties, we'd rather not make?
(2) What are the tax consequences?
Can we structure it differently (and legitimately) to reduce tax?
Will it trigger any tax issue, such as the capital gains tax relief position for directors?
If an EIS company, does the activity lose status, hitting the shareholders' pockets and the ability to raise further capital?
Why is this important?
It is far harder (if not impossible) to retrospectively sort a problem. Better to get it right in the first place.
Camwells has considerable experience, and when we suspect a problem we know how to check.