With the news today (November 21st 2012) that there has been a drop in the Treasury’s revenue from Corporation Tax, more focus is on management accountants to accurately forecast and plan for their organisation’s Corporation Tax bill.
The Office for National Statistics’ data showed that public sector net borrowing stood at £6.7bn last month, which was £2.3bn worse than in October 2011. Coupled with the recent grilling by MPs of senior executives from Google, Starbucks and Amazon over their Corporation Tax payments, this news highlights how important the tax is to the Treasury.
However, while it is important that the tax is calculated accurately, it is also vital for the business concerned that the correct amount is paid, which is where the management accountant comes in.
Since there is no legislation surrounding management accounts, some firms fail to produce them, as they can be time-consuming and expensive; however, having regular management accounts can help business owners plan more effectively and ultimately save money.
While annual accounts show where a business has been and how much it has spent, monthly or quarterly financial management data can show business owners where they are going and what they should plan to spend.
Since cash is king, it makes sense to plan the cash flow so that the full amount of Corporation Tax can be paid on the due date, for which management accounts are indispensible.
For one thing, the management accountant’s report might suggest that a business pays its Corporation Tax early in order to receive what HMRC calls ‘credit interest’, which is allied to commercial rates of interest.
Without these regular financial management reports, it would be impossible for businesses to conduct such detailed planning, which could mean getting into trouble with HMRC for late or underpayments.