Finance Funding

Long gone are the days of the shadow accountant. The one who lurks behind the scenes and only appears once a year to handle the taxes. Accountants in London are taking on a much larger role in the corporate world. Financial management and risk management weigh heavily on the minds of business owners because of set backs that have occurred in the past. The modern accountant is an extremely important piece of the puzzle and for that reason you must take extra care when choosing yours.

Whether you're new to the business world or have been doing this for years, finding accountants in London is equally important. It's a good idea to have an accountant before your business has even started. This way they can help you throughout all of the planning as well, but it's never too late.

Not all accountants are created equal, in terms of experience, qualifications, certifications, specialties, and friendliness. All of these factors must be considered before committing to any one accountant or accountancy team. Ideally, you want an accountant that excels in all of the areas mentioned above. It can be difficult, but here are some tips for choosing the ideal accountants in London that will make the selection process easier.

Know Your Needs.

It's going to be impossible to find an accountant with the right credentials if you don't really know what you need them to do. Different accountants tend to have expertise in different areas. By knowing exactly what you need from them, you know exactly what expertise and history to look for. Whether you need an accountant with experience dealing with leases, taxes, or franchising, there is someone for everyone.

Start With Some Referrals.

The majority of business for accountants comes from word of mouth. Referrals are the perfect place to start your search for an accountant. You can get referrals from a variety of different sources. Friends are okay, but only if you can trust their business sense. Business associates and financial institutions are often a better source of referrals.

On that same note, there's nothing necessarily wrong with getting a bad referral because as long as you do your research you'll avoid the accountant all the same. That brings up the next point: research.

Always Do Your Research.

Even if you've gotten referrals from top notch institutions, you need to do as much research as possible. The internet is the best place to do your research. You can look for the accountant's website, check with sites that specialize in accounting reviews, and find forums where previous clients are discussing their work.

There are a lot of great sites online that target businesses and individuals looking for accountants. They let previous and existing clients share their experiences to help out future clients. It can also be a great tool for finding local accountants in London if you weren't able to get any referrals that you liked.

Take Your Time.

You don't have to rush your decision. You might feel pressured by time, but this is an extremely important decision. Get referrals, do your research, check their credentials, and ask for references.

Interest rate options allow businesses to protect themselves against adverse interest rate movements whilst allowing them to benefit from favourable movements. They are also known as interest rate guarantees. Options are like insurance policies:

You pay a premium to take out the protection. This is non-returnable whether or not you make use of the protection. If interest rates move in an unfavourable direction you can call on the insurance. If interest rates move favourable you ignore the insurance.

Options are taken on interest rate futures and they give the right, but not the obligation, either to buy the futures or sell the futures at an agreed price at an agreed date.

Using options when borrowing

As explained above, if using simple futures the business would sell futures now then buy later.

When using options, the borrower takes out an option to sell at today’s price (or another agreed price). Let’s say that price is 95. An option to sell is known as a put option (think about putting something up for sale).

If interest rates rise the futures price will fall, let’s say to 93. Therefore the borrower will buy at 93 and will then choose to exercise the option by exercising their right to sell at 95. The gain on the options is used to offset the extra interest that has to be paid.

If interest rates fall the futures price will rise, let’s say to 97. Obviously, the borrower would not buy at 97 then exercise the option to sell at 95, so the option is allowed to lapse and the business will simply benefit from the lower interest rate.

Using options when depositing

As explained above, if using simple futures the business would buy futures now then sell later.

When using options, the investor takes out an option to buy at today’s price (or another agreed price). Let’s say that price is 95. An option to buy is known as a call option.

If interest rates fall the futures price will rise, let’s say to 97. The investor would therefore sell at 97 then exercise the option to buy at 95. The gain on the options is used to offset the lower interest that has been earned.

If interest rates rise the futures price will fall, let’s say to 93. Obviously the investor would not sell futures at 93 and exercise the option by insisting on their right to sell at 95. The option is allowed to lapse and the investor enjoys extra income form the higher interest rate.

Options therefore give borrowers and lenders a way of guaranteeing minimum income or maximum costs whilst leaving the door open to the possibility of higher income or lower costs. These ‘heads I win, tails you lose’ benefits have to be paid for and a non-returnable premium has to be paid up front to acquire the options.

See more at http://www.accaglobal.com/ie/en/student/exam-support-resources/fundamentals-exams-study-resources/f9/technical-articles/hedging.html