Most of the income that you receive from providing accountancy services will not be paid to you immediately. Instead, your clients normally pay you during the course of, and following the conclusion of the work you are doing for them, after you have sent them an invoice. Income that is not received immediately is referred to as 'Cash from debtors' and is dealt with elsewhere in the cash flow forecast.
You might receive some income from other sources - for example for giving a talk to a local association. It is up to you to decide whether the fees you charge for these services will be payable immediately or later (that is, when you send an invoice). Any income of this nature that you receive there and then should be entered under Cash sales.
Cash sales also includes any subscription payments you receive in advance from clients to whom you provide an online package of accountancy services.
To prepare your cash flow, you will need to estimate how much fee income you will receive over the next 12 months. To do this you'll need to estimate how many clients you will have, how much you will charge them, including VAT, and when you will be paid.
There are a number of things to consider when you make your estimates:
- where will your premises be. Will you be able to work from home or, possibly, share a building with another professional firm, such as an independent financial adviser (IFA). You might decide to team up with a legal firm now that alternative business structures (ABS) are permitted for solicitors. Alternatively you might decide to offer online accountancy and business services so that you don't need to have an office at all
- will you operate as a sole practitioner, a partnership, a limited company or a limited liability partnership
- how many productive and support staff will you employ
- who will your clients be. Will you specialise in offering accountancy services to a particular trade or profession, for example, the medical profession
- will you become a training practice
- what range of services will you offer? Don't forget that audit work, insolvency work, probate services and investment business are reserved areas and you will need to be authorised by your professional accountancy body or the Financial Conduct Authority (FCA) to undertake them
- will you specialise in a particular type of work, for example, taxation
- have you established contact with the range of other professional consultants whose services you are likely to call on such as lawyers, tax and VAT experts
- how will you keep up-to-date with developments in tax, accountancy and auditing practices and so on
- how will you set your fee scales (don't forget, you must be able to cover your costs, overheads and drawings)
- how will you work out your staff charge-out rates
- will you charge on a time basis, or on a fixed fee basis
- will you offer discounts, for example to housing associations or charities
To help with your decisions, click on the checkpoints for guidance. Once you have worked out a Cash sales figure add it to the relevant field in your cash flow forecast.