From April 2013, you should pay an increased salary of £641 a month (from £624 last year).  At this level, you will pay no income tax or national insurance.

 You will then also be able to take a dividend of up to £30,382 (net cash) without paying any additional income tax or national insurance (of course, this is dependent upon available company profits)

 This means a director of a limited company can withdraw a total of £38,074 during the 2013/2014 tax year, without having to pay any additional income tax or national insurance.

 Do be careful as this total amount is £902 less than it was in 2012/2013.  That means it could cost you £225 extra in tax if you pay the same amount as in 2012/2013!!

 You should seek our advice if you have other sources of income, such as tax credits or pension income and these additional income streams do impact on the figures above.

 For more information on how this all works, we’ve produced a video which you can watch by clicking here

This year’s budget was described as one for an “aspiration nation” and he wanted to declare that the country was “Open for Business”.

The top talking points as small business owners are:

• The main rate of corporation tax will reduce to 20% from 1st April 2014. This brings it in line with the small business rate. Great news if your profits are greater than £300,000, no news at all if they aren’t!!
• The biggest break is the announcement of a £2,000 reduction in “job tax” from April 2014. This essentially means that small businesses will be able to employ one person at £22,000 or 4 at minimum wage before they’ll have to pay any employers NIC. If you employ someone, or are thinking about it, this is great news!!
• The personal tax allowance will be increased to £9,440 from 6th April and up to £10,000 from 6th April next year. There’s no announcement as yet on what the changes to the NIC rates will be, so we don’t know just how much good news this is as yet (we’ll let you know when we do)
•  The introduction of a new childcare scheme, to be phased in from Autumn 2015. The first £6,000 of childcare will be tax free, saving £1,200. However, it will replace the current voucher/ salary sacrifice scheme. There will shortly be Government consultation of exactly how it’ll be implemented.
  An increase in the threshold of employment related loans from £5,000 to £10,000 from April 2014. As long as the loan balance doesn’t increase over £10,000, there’ll be no tax charge on the loan

Other areas of interest were:

• The introduction of a “help to buy” scheme for people wanting to move up the housing ladder. As long as the house purchase is less than £600,000 (which covers 90% of houses) and you qualify under normal affordability criteria, the government will loan up to 20% of the value of a new home and a mortgage guarantee on your mortgage.
• Fuel duty increase planned for later this year has been scrapped.
• Beer duty cut by 1p from Sunday.

As we get more detail on how these changes impact you, we’ll let you know

We’d love to know what you think……..

We’d be really interested in your thoughts about today’s announcements. If you have 2 minutes, please give us your views by clicking here
Click here to take survey
 

I’m sure at some point over the Christmas break you spent some time considering how to make your business even better during 2013?

One thing we’ve noticed about the super successful businesses we work with (and this observation is backed up by many business books, gurus and the like) is that they all set a vision and goals to work towards during the year.

So, how can you emulate them to ensure that 2013 is your most successful in business yet?

Well, I’d suggest following the 8 key steps below:

1.  Create a Vision – you want to work with and why customers should buy from you.  Talk to us about getting hold of a recording of our Seminar from last July, where we covered exactly this topic.
2. Map out some goals for the year – These can be around anything you want to achieve, but I’d suggest that they are likely to fall into just a few common categories – how much money do you want to earn, how many hours do you want to work etc.  Use our goal setting tool (the 24 hour action plan) to help you formulate your goals.
3. Work backwards – Use your personal goals to work out what your business needs to do in order that you can achieve those personal targets.  You know (roughly) what your costs will be for the year, so the balancing figure is your sales or turnover.
4. Convert the sales figure – chunk down your sales figure into “widgets”, i.e. what it is you sell.  If you’re a consultant, that’s your hourly rate etc. If you’re in retail, it’s the average price of your products.  Doing this gives you the number of sales you need to make in the year (approximately)
5. Create a sales & marketing plan – what activities will you undertake to achieve the number of sales you need.  What will you do, when will you do it by?
6. Create a Scoreboard – To record your achievements against these targets.  This can be as simple as a whiteboard in the office.
7. What’s the impact of “flexing” – what happens to your sales results if you change prices, if you get customers to return more often or if you can get them to buy more each time they visit?  Talk to us about a “Business Potential review” or our “Simple Stuff That Works” software where we can help you understand the impact of such changes.
8. Become accountable – One of the main reasons for not succeeding in hitting goals is Failure To Implement (FTI).  Those of you who have been to one of our events know this is a favourite topic!  Find someone to be accountable to – or even better, why not send us your goals and we’ll hold you accountable for reaching them

If you’d like some help mapping out your goals for 2013, especially working out the numbers, drop us a line – we’ll be only too happy to help

Here’s to a super successful 2013

Many small business owners work from home.  One of the most frequently asked questions is “exactly what can I claim for?”

If you only work from home occasionally, perhaps raising invoices or writing up quotes in the evening, then HMRC have a flat rate allowance of £4 a week (21012/2013).  Using this method means you don’t have supply any back up for your claim, which means it’s nice and simple!

However, if you spend a significant part of your working week working from home, then it’s likely you’ll be able to claim more by using the apportionment method.  It works like this…..

First of all, you need to add up all the costs you can claim for.  These generally are:

•  Gas
• Electricity
• Mortgage Interest (but not capital)
• Rent (if you don’t own the property)
• Council Tax
• Home Insurance

You then need to divide this by the number of rooms in your house, excluding bathrooms and the kitchen.

Finally, you need to multiply by the amount of time you use the room for business versus personal use.

 As an example….

 If your total bills come to £9,000, you have 8 rooms in your house and use the office 50% for business use, then you’d calculate your costs as follows:

£9,000 divided by 8 multiplied by 50% = £562.50.  This would be your claim.

To make this easy for you, we have created a calculator that you can use to work this out.  You can download your copy by clicking  here.

The method you use for claiming your costs varies, dependent upon the type of business you run.

Sole Traders

Sole traders can simply claim these costs in their accounts, against their income tax bill

Limited Companies

Directors of Limited Companies should set up a rental agreement with their company, where the company rents space off the director for the amount calculated above.  The charge will appear in the company’s accounts as a cost.  The rental should also appear on the directors self assessment tax return as income in the rental section.  However, it will be offset by the additional costs of running the home, so the personal profit made will be nil and no personal tax will be due.

 Some final warnings……

If you are using the apportionment basis, you need to make sure that:

•  You keep copies of all relevant bills claimed for.  HMRC will ask to see these in the event of an investigation
• You should not make a room in your house solely available for business.  Rooms should always have a dual purpose (e.g. somewhere to do the ironing, use a spare room for guests).  This ensures that you cannot be challenged that the room should be assessable for business rates etc.

Do you know what percentage of your total revenue your largest client brings into your business? (if you use Kashflow you can easily find out by using the “income by customer report”)

Could you cope if that customer decided not to work with you anymore?  What changes would you have to make to your lifestyle/ business/ team as a result?

All too often, small businesses land what seems at first a great client.  This client grows and with it, their demands.  This is great news for your business as you are getting busier and busier off the back of these demands and earning bigger and bigger incomes.  Eventually, they become an integral part of your overall business income.

But what happens when the relationship ends? – and it will (at some point!).  I’ve seen small businesses go out of business because of their over reliance on one customer.

The relationship could end for a number of reasons:

•  A member of your team could “tick” the client off
• The client could get bought out and the new owner wants to use their supplier
• The client could appoint a new “Head of” who has an existing preferred supplier
• The client could decide it’s going to be cheaper to take the work in house and hire their own team
• The client could decide that they are over reliant on one supplier and decide to “spread the wealth”

And probably many more…….

The key question is “What would you do if (when) this happens to you?”

Of course, the easiest answer is not to put yourself in that position in the first place.  Always ensure you have a diverse portfolio of clients.

However, that’s not always practical.  You may already be in that position or you may feel that the work is too good to turn down.  In that case, I’d always advise:

•  Know your position.  Just how reliant are you on this client
• What impact would the client leaving have on your financial results?
• What specific actions would you need to take
• What steps can you take now to lessen the impact
• What steps can you take to diversify your portfolio, so that you don’t become over reliant in the first place.

One of the most common questions we get asked by new business start ups is “should I register for VAT now”

In this video, we will share with you the rules about when you must register for VAT, together with some reasons why you may want to register voluntarily, even when you don’t have to.

Last week we saw the Queen celebrate 60 years on the throne – what an achievement!

It’s well known that the majority of small businesses only survive for 5 years before closing.  However, there are ways to ensure that your business achieves the same levels of longevity as the Queen.  Here are our three top tips:

1. Keep up with the times

We live in ever changing times.  The rapid development of technology and the recession has seen shifts in customer demand and how they want to buy.  The smartest businesses constantly review their products and services to make absolutely sure that they are supplying exactly what customers want in exactly the way customers want to buy.  It’s simply no good supplying in the same way you did 10 years ago – your customers now have so much more choice available via the internet.

 2.  Never take your eyes off the prize

When you set up your business, I’m sure you did so with a goal in mind.  Maybe it was financial freedom or the ability to spend more time with your family.

Now is a great time to revisit those goals and make sure what you are doing on a daily basis is moving you towards them.  Revisit the mission and vision for the business to make sure it’s still “current”.  If you need any help with goal setting, drop us a line and we’ll let you have a copy of our recently recorded DVD, together with our goal setting tool.

 3.  Build great measurement systems

Measurement systems help us monitor how we are progressing towards our goals.  Understand the critical success factors (CSF) in your business success and create a measurement system to monitor them.  Make sure that your system uses leading indicators.  Review your CSF’s each month to ensure you remain on track to hit your targets.

What other tips do you have for business longevity?

Just in case you missed one of our previous communications, we thought it’d be a good idea to remind you of the most tax efficient way to get paid as a company director in 2012/2013.

From April 2012, you should pay an increased salary of £624 a month (from £589). At this level, you will pay no income tax or national insurance.

You will then also be able to take a dividend of up to £31,488 (net cash) without paying any additional income tax or national insurance (of course, this is dependent upon available company profits)

This means a director of a limited company can withdraw a total of £38,976 during the 2012/2013 tax year, without having to pay any additional income tax or national insurance.

You should seek our advice if you have other sources of income, such as tax credits or pension income and these additional income streams do impact on the figures above.

We are just over half way through 2011 and the summer (and hopefully good weather) is with us.  It can be easy to lose focus at this time of year as thoughts drift to holidays etc.  So at Accountancy Extra, we’ve created our top ten tips to making sure your summer is a resounding business success.

 Review your goals, targets & aspirations

 Take time out to take a look at why you do what it is that you do.  What do you want from your business? What do you want from life? Summer is a great time to review what you want to achieve.  For some reason the sunshine helps with clarity.

 Review your Products & Services

When was the last time you looked closely at the products and services you supply to your customers? Are they still relevant in today’s changing marketplace? Are you delivering what your customers want in a way that they want?  Today’s marketplace is more demanding than ever, and it’s essential that you keep completely up to date with what those demands are.

 Get Rid of Nightmare Clients

Now is the time to take a good look at your client list and get rid of those clients who are a nightmare to work with.  We’ve put together our own guide on nightmare clients, together with some top tips on how to avoid them here

 Focus the right type of clients

As opposed to the nightmare clients, focus on getting hold of the clients you really want to work with.  Start by listing your top 10 existing clients and then write down why you love working with them.  After a while, you will see some common characteristics appearing across most or all of them.  Use these characteristics for identifying prospects and opportunities.  Why not create a list of the characteristics and share them with your team?

 Create a dashboard

What are the key numbers in your business? I’m not talking here about just your profit and turnover (which are lagging indicators), but the key numbers that drive the success of your business – your profit drivers.  How do you measure and record them?  Having a visual dashboard really helps focus the mind – I’m not necessarily talking about a fancy software solution with dials etc. (although there are some really good ones), as a simple spreadsheet or wall board may give you all you need to know

 Get a marketing plan

Don’t leave your marketing to chance – plan it.  Take a good look at what activities have been successful in the past and work out a plan to concentrate on those things going forward.  Ensure you think about your customers and what you can do to make you even more attractive to them.  Book time out of your diary to work on the marketing of your business.

 Invest in yourself & your team

Motivating a team is one of the hardest tasks a business owner faces.  Take time to invest in the development of your team and the relationships within the team.  Perhaps take them on a development day, share with them the vision for the business or just take them out for a bit of fun!

 Understand what’s happening with your cash

We all know that lack of cash is the number one reason small businesses go bust.  Make sure you are closely monitoring the cash position of your business.  Forecast ahead over the next 6-12 months and identify pinch points (including the payment of future tax liabilities).  Use our guide here for ideas on how to improve your cashflow

 Review the first half of the year

Take a look at the successes you have already had this year and replicate them.  Similarly find the failures and stop them happening again.  Be proud of your achievements and celebrate your successes – you’ll feel great for doing so and there hasn’t been too much for small business owners to shout about this year so far!

If you repeat this exercise in 6 months time, what would you like your biggest achievement to have been?

 Have some fun

 Take some time out, relax and have some fun.  It’s hard to run a small business and relaxation helps refocus your mind.  Turn off the email alerts on your smartphone and kick back once in a while – after all, you deserve it!

No matter what industry you work in, you will meet both good and bad clients.  Of course, to make the absolute best from your business, it’s important that you attract as many good clients as possible and avoid the bad ones at all costs.

 But how do we know what makes a bad client?  Thankfully, they are pretty easy to spot and also (on the whole) fairly easy to deal with.  Here is my list of the most common types:

1.  We all want to make it easy for new clients to pick us, so in a lot of industries it is now the norm to have a free initial consultation.  This gives us the opportunity to showcase our talents and convince the prospect that we are his/ her best choice for the job.  However, occasionally, we will meet “Mr Something for Nothing”.  This is the guy who uses the free meeting to gain the absolute maximum amount of technical information as possible, often with no regard for the cost of your time.  If you are a lawyer, he will possibly want all his legal working discussed in that first  meeting.  Luckily, this guy is easy to avoid by setting out the “rules” of your first meeting, and sticking to them (however tempting it might be to give more in order that you can “seal the deal”)
2. The “Dreamer” prospect has unrealistic expectations of what can be achieved and what the budget should be for doing so.  I’ve had many conversations with digital clients who tell me similar stories of prospects who ask them to “build the new Ebay/ Facebook/ Google” with a budget of £500.  The secret to avoiding this guy is to create a list of high quality questions that you can ask before agreeing to a meeting with them.  These could be around project timescales, overall framework, background to the idea and the prospect, maybe even budget.  It will save you a lot of time!
3. The Scope Creep client often agrees to a project specification and a price and then starts adding those little extras in as you go along.  For example, the guy whose laptop you fix for a pre agreed price who then expects you to fix his printer as well, for free! Or the bathroom you fit for a customer, who then expects you to do half a dozen extra plumbing jobs around the house “whilst you are there”.  Be careful, these extras, soon mount up.  To avoid scope creep, document what is included in the price and maybe even include a list of what isn’t and typical prices for doing these tasks.
4. Have you ever been told “XYZ down the road are cheaper than you”? Then you’ve met the Discount Seeker prospect.  He’ll often low ball your fees with promises of loads of future work (which never materialises!).  His cheapness is often seen to match his ability to be ever demanding of your time.  Know your worth and stick to it!  If he wants a cheaper price, then take something out of the deal to match his budget.
5. The Discount Seeker is often morphs in to the Time Vampire.  This is the client who e mails you regularly, often without reason and who expects an instant response.  If you don’t provide one, he’ll be calling you within the hour to ask why not! He may want regular meetings “just to stay in touch”.  Ask their expectations up front and agree a support package to suit them and their project and then price properly for it!
6. The High Profile Client often will lowball your fees in the same way as the Discount Seeker, but will justify his move by claiming “As a high Profile client, my XYZ project will be great for your portfolio”.  Unless you are planning a targeted strategic move and need this client’s testimonial in your portfolio desperately, avoid his ploy. It’s just his way of getting his work done cheaply!  Try telling him that you provide first class service to all your clients and it would be unfair on the others to subsidise him.
7. The Impossible to Please client will constantly bombard you with complaints, changes, queries, price objections and will almost never say thank you, even if you have really gone “the extra mile” to make them happy.  Stick to the script and refer back to your brief wherever possible.
8. The Can’t Pay, Won’t Pay client.  These are a difficult beast to spot!  All starts well when they agree the scope of the work you’ll be doing and even agree the price.  You then do the work and start the waiting and excuses game! Weeks or months will pass and they’ll make no attempt to contact you to discuss the invoice.  When you do speak with them, there will be a raft of excuses for non payment, including the infamous “the cheque is in the post”.  Structure your contracts so that you get paid up front (in part at least) and include milestones and payment milestones within the contract.  That way, even if they default, you’ll only be ever down one stage payment.

 By avoiding these types of clients, you can concentrate your efforts on the good ones, the profitable ones and above all, the ones are that great to work with.

What other stories of bad clients have you got?