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Finance Directors Turning SME's into Profit Leaders

Directors must know business depreciation & leasing costs

So directors can measure business performance, most small businesses produce regular monthly accounts, yet exclude depreciation costs and true leasing costs until the accountants' annual reconciling exercises. This practice is not good. After all for my ski trip I look at costs of flights, accommodation, ski hire, lift passes otherwise I am fooling myself; how can you manage something without knowing all the costs involved?

 

How to:
Depreciation calculations: download a list of all assets (maybe form nominal ledgers or Fixed Asset registers), their date of acquisition then use Excel's function YEARFRAC, plus annual depreciation rate for each relevant fixed asset class and it is a simple monthly exercise to see accumulated depreciation at month end by asset. Use SUM or SUMIF to see the figures for a monthly journal by fixed asset class.


Leasing costs: Every lease payment includes an interest and a capital part to the repayment. For each payment, just debit the supplier loan account (separate account for each agreement please) with the capital proportion and debit the P&L lease cost line item with the interest charge. No need to wait for annual reconciliations; do this regularly and it takes only a minute.

Let me know what other tasks you would like to manage more closely.

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