This Saturday I attended the Think Visibility conference in Leeds.  The conference covers subjects such as search engine optimisation, the use of social media and how to get great PR as well seminars on affiliate marketing and spamming!

The majority of the audience were from the digital industry and a couple of people asked me why I was attending, seeing as I run an accountancy practice.  Well, my attendance was down to three reasons:

• I work with a lot of clients from the digital industry, from freelancers to agencies.  Attending these events helps me understand their industry that little bit more and helps me add value to their businesses.
• Whilst the seminars did include some technical content, a lot of the content was delivered in plain english and my notepad is now full of great ideas that I can introduce into my own business.
• I may be able to share some of the ideas with my non digital clients and help them find the expert help to implement them.

What about the day

I’m not going to go into lots of detail about what I learned as the experience will be differant for every attendee.  One particular point did stick in my mind though…..One of the speakers discussed ROI on social media, but called it Return On In action, i.e. the measuring of not doing anything…a term I really like.  We often measure the return we’ll get from investing in a project or new piece of software, but seldom do we consider the cost of doing nothing.   It’s funny that during these tough times many businesses have chosen to do exactly that…..nothing.  I often here “we know we should do XYZ, but it’s going to cost us and we don’t really want to spend that much”.  

How often do Digital Agencies talk to their clients about the cost of doing nothing, I wonder?

Owning and running a business can be incredibly stressful. So we have decided to do something about it by producing a book called “Stress proof your business and your life”.

 You can find it on Amazon at £12.99 – but you are welcome to a copy with our compliments.

 But please don’t be put off by its title, since it is categorically not only for people who are stressed. In fact, one of the key benefits from reading it is that you’ll get dozens of excellent ideas for putting a great deal of extra cash into your business and personal bank accounts.

 There are four parts to the book.

 Part 1, Stress proofing the business stuff, looks at what people can do to reduce and prevent the stress caused by their business and its financial situation. And it provides simple yet effective solutions to common challenges such as:

• Not making enough profit
• Running out of cash and other similar cashflow problems
• Being forced to work more than you want to
• Having too many things on your to-do list
• Too much depending on you, and too many things that can only be done by you
• Not getting the right life-work balance
• Not having the information you need to make sensible decisions
• Losing too much of what you earn to the taxman
• Other people, especially customers and your employees, behaving unreasonably or unfairly

 Part 2, Stress proofing the money stuff, looks at what people can do to reduce and prevent the stress caused by their personal financial situation.

 In these first two parts much of the emphasis is on strengthening the financial and business fundamentals – since they are so often the primary sources of stress and anxiety for business leaders. But strengthening them is also extremely worthwhile for people who aren’t suffering from stress.

 Part 3, Stress proofing the personal stuff, broadens the discussion by explaining how to reduce and prevent the stress caused by the other things going on in people’s lives.

 Finally, Part 4 brings it all together into a practical action plan.

How to get your FREE copy 

So, would you like a copy?  We would be happy to send readers of the blog a complimentary copy….all you need to do is drop us an e mail or call the office on 01422 365981 and we’ll get one sent straight to you.

Here are three quick bookkeeping tips based on my experiences of working with successful small businesses over the years.

1. Do it Frequently

How often have you looked at that ever growing mountain of paperwork and groaned?  How often have you then put off processing the paperwork in favour of doing something “more interesting”?  Then, when you finally can’t put it off any more, you have to spend what seems like days processing it all.

Sound familiar?

Setting some time aside in your diary each week to keep your books up to date will vastly reduce the amount of stress you suffer trying to get it all done just before the VAT deadline/ year end deadline.  It will also give your accountant many more opportunities to undertake some tax planning work for you to keep your tax bills down!

2.  Use a System

Systems help you keep everything in order and track activity.  Without them it’s easy to lose track of where you are with your business numbers.  We recently saw a great example where the business owner didn’t really keep his books during the year and preferred to pass over a box of papers to us at the year end.  In the process of pulling together his accounts, we found invoices that he had issued to customers and had never received payment for.  they totalled over £20,000!

I’m sure you are all familiar with computerised bookkeeping systems such as Sage & Quickbooks, which are, in my opinion, far too complicated for a small business owner to use.  Instead, I’d suggest using a system more in tune with your needs.  This can be anything from a manual system, through to a full blown ledger system that stores details of all the customers that owe you money and all the suppliers you owe money to.  At Accountancy Extra, we recommend two systems.  For a cash based business (eg cafes, restaraunts, shops etc) we have a free cashbook system that we give out to clients which helps them record all their takings and outgoings.  For more complicated businesses that sell or buy on credit, we recommend Kashflow, an online system that does so much more than just keeping track of your expenses.

3.  Outsource

If all of this seems too much like hard work. Or, if you could be doing something else, such as selling more of your product, why not consider outsourcing the bookkeeping  to a qualified bookkeeper.  Bookkeeping rates vary between about £15 an hour up to £25 an hour.  Here, we charge £20 an hour for bookkeeping and generally find that we can complete the work in about 2/3rds of the time that it takes the business owner.  That frees them up to go and do what they do best, sell their own products and services.  they can also sleep easily at night, knowing that the VAT is taken care of and that they can spend their weekends with their friends & families!

I don’t think many will disagree that the last couple of years have been difficult for most small business owners.  The lack of readily available cash and customers has made some small businesses think hard about what they are doing, whilst some still seem to be content to “baton down the hatches” and await economic recovery.  During this period, the businesses I have seen perform the best have all  possessed similar traits.  They have applied the lessons below and all still talk positively about their business and it’s prospects.  Sure they admit it’s been tough but some of them are experiencing better periods of growth than ever before.  So what have the key lessons been?

 Lessons

Pre recession we were lazy with our finances.  If debtor days reached 90 days we didn’t bother too much as the banks would bail us out with loans and overdrafts.  Now we need to live on cash generated from our customers and the effective collection of cash has become a priority.  We didn’t concentrate too much on pricing as there was plenty of business to be had to make up for margin shortfalls.  Now pricing and margins are critical to business success.  We need to avoid models which are just centered around lowering prices and offering discounts, unless there is an infrastructure in place that backs this up.  Price wars rarely work as there is always someone who can do it cheaper than you.

We were lazy with our marketing.  In times of abundance there was plenty of business around and we didn’t have to fight very hard to get at least our natural market share of what was out there.  Now the markets are smaller and customers are more choosy where and how they spend their money.  I remember talking to a mortgage broker not long after the recession had started.  For many of the years prior to the recession he had had constant leads passed to him from estate agents.  He had never had to market his business and was making lots of money.  As soon as the housing market went “pop” he had absolutely no idea how to attract new clients.

 Innovation and creativity in small businesses wasn’t always considered.  There has been an explosion of “me  too” businesses in the good times, businesses which were essentially copycats of all the others in the same industry.  Even now, when we attend networking events, we see many businesses that look the same (apart from the name) and there is no differentiation in their promises or offers.  No longer is it acceptable for a business owner to say that their unique selling proposition is “great service” or “personal service” because that’s what they all claim to offer!  There needs to be clear difference in the service offering, tangible benefits to fit with consumer needs.

 We were lazy with our processes and systems.  We may have had labour intensive businesses, but it didn’t matter because the sheer volume of work available meant we still made a good profit.  Now, we need to think “McDonalds” and ensure that we have systems which help deliver better and more consistent service, which are much more cost effective and efficient than what we are used to.

 Customer service certainly wasn’t king.  How many times have you received poor service in a restaurant or shop?  How many times has it taken your website designer weeks to return your e mails?  Pre recession it didn’t matter as there would be someone else along tomorrow to take their place.  Keeping your customers happy and keeping them coming back for more is now vital to making a success of your business.

 The Frog and the Boiling Water

 I’m sure you’ve already heard the story….If a frog is dropped in a pan of boiling water it jumps straight back out.  It takes action!

 During the last two years I have seen many business experience fantastic growth.  These businesses weren’t necessarily business built up to deal with particular recessionary issues.  They had been around well before the recession started.  However, they realised what was going on around them and took action….they did something.  By considering the above points and taking action they have not only survived, but some have experienced some of their best years of growth.

 What lessons have you learned over the past couple of years?

If the Taxman calls you and suggests he should visit your business as part of their Business Assurance programme, should you agree?

The Taxman is offering to visit new businesses to help them understand what sort of business records they should be keeping. During the visit the Tax Officer will ask the business owner how they record sales, purchases and expenses, how they handle cash, and how they calculate and record drawings or remuneration.  Your answers to these questions will be recorded by the Taxman and amount to a “Compliance check”, which is another way of saying “enquiry into your tax affairs”

What may not be recorded is any advice given by the Taxman in answer to your own questions. For example, you may ask: ‘Is this expense tax allowable?’ If the taxman gives the wrong answer, and you act on it, you could be penalised in the future for getting it wrong. There is no comeback on HMRC for these errors!

Penalties for errors in tax returns are now dependent on your behaviour, so it is crucial that the Taxman does not form the impression that you have a careless approach to keeping business records.

 If you are offered a business assurance visit, we suggest that you either politely decline, or ask us to be present to ensure you are not tricked into saying something that may incriminate you in a future tax investigation. For any advice you need, talk to us, not the Taxman!

Today’s first coalition budget was a mixed bag of good and bad news.  We still need to await the detail on exactly how a few of the initiatives will impact on your business.  In the meantime, we’ve highlighted below the changes to the major business taxes and how they will affect your business

 Personal Income Tax Allowances

 From April 2011, the personal allowance will be increased by £1,000.  This means that for an individual aged between 18 and 65 they will be able to earn £7,475 per annum before having to pay any income tax.  The Chancellor also stated that it is his longer term aim to raise the threshold to £10,000 per annum before an individual pays tax.  This increase will be worth around £200 a year to a basic tax rate payer.

 The higher threshold for income tax (the 40% rate) remains unchanged.

 Corporation Tax Rates (Tax charged on Limited Company Profits)

 The headline rate of corporation tax (For Companies making over £300,000 profits per year), will drop by 1% in 2011 and then by a further 1% per year in each of the next 3 years.

 For companies making less than £300,000, the rate (known as the small companies rate) will be reduced to 20% from 21% from April 2011.  This is an important change as in the previous Labour budget the rate was set to rise to 22%.

 Annual Investment Allowances (AIA)

 AIA allowances were introduced two years ago to encourage business to spend on capital.  Up to £100,00 of equipment can be bought in the 2010/2011 tax year and be written off in full against the businesses tax liability in the year.  From April 2011, this level will be reduced to £25,000 per annum.  So, if you are planning a major capital project, such as moving premises or introducing new machinery and it’s likely to cost more than £25,000 then you should consider ensuring that the project is complete before next April.

 Capital Allowances

 Any capital expenditure not covered by the AIA rules is written off against tax bills under capital allowances rules.  The current rules state that this type of expenditure is written off at a rate of 20% per annum.  From April 2011, this rate will change to 18%, meaning that it will take additional years for you to get full tax relief on any capital expenditure that falls under these rules.

 Furnished Holiday Lets

 The previous budget indicated that the favourable tax rules for owners of furnished holiday lets would be removed.  Today’s budget reverses that decision.

 VAT

 VAT rates will increase to 20% from 4^th January 2011.  There is no change to the items that are exempt from VAT.

This will particularly impact businesses who are not VAT registered or who work directly with consumers.

 Capital Gains Tax

 The rate of Capital Gains Tax (CGT) will remain at 18% for basic rate tax payers, but will increase to 28% for higher rate tax payers from midnight tonight.  The annual exemption allowance of £10,100 will remain in place.

 National Insurance

 Both the planned employers & employees 1% increases will still be introduced from April 2011.  To mitigate the employers increase, the threshold for paying employers NI will be increased by £21 above indexation.  Some of the employee increases will be offset

 Regional Employer NIC Holidays

 The Government are keen to encourage employment outside London.  They are looking to implement a new scheme, at the latest by September that will allow new businesses which start up in these areas to get a substantial reduction in their employer National Insurance Contributions (NICs).

Within the qualifying period, these employers will not have to pay the first £5,000 of Class 1 employer NICs due in the first twelve months of employment. This will apply for each of the first 10 employees hired in the first year of business.

 Whilst  this scheme won’t be in place until September, any new business set up after 22^nd June will qualify.

 The regions which will benefit will be Scotland, Wales, Northern Ireland, the North East, Yorkshire and the Humber, the North West, the East Midlands, the West Midlands and the South West.

 As we get more details of the scheme we will issue an update.

 Summary

 As always with budgets, more details are issued over the next few days.  We will issue any relevant updates as we receive them.

If you’d like to discuss how today’s budget will impact on you in more detail, please give us a call

Most businesses sell their products and services on credit.  The length of time it takes your customers to pay you, after the issue of your invoice, is called debtor days.

Debtor days are calculated as your trade debtors figure (from either your management accounts or bookkeeping system) divided by the total sales for the same period multiplied by 365, or

Trade Debtors/ Total sales x 365

The figure produced from this calculation will tell you, on average, how long it takes your customers to pay you.  If the figure is greater than your credit terms, you could be acting as a bank for your customers.

When banks lend customers money, they charge interest – you can too!

Since November 1998, Government legislation has been in place which allows businesses the right to charge interest on late payments from customers.  The legislation is called “The Late Payment Legislation” and the interest you can charge is called “statutory interest”.

The Late Payment Legislation website contains some background information and a great statutory interest calculator, which will help you calculate how much your customers owe.

Of course, instead of charging statutory interest, it would be much better if the cash was in your bank account on time!

This is where we can help.  This post covers six key ways to ensure you get paid on time and if you visit our free resources section, you can download our cash management toolkit which should help you round up the money on time, every time!

At a networking meeting yesterday, all the members were asked to make an elevator pitch about their business.  As part of the pitch, each member had to include “who would be an ideal referral for your business”.  It was surprising, how many members responded to this with “anyone” or “any small business owner”.  From attending these meetings regularly I have learned that the more specific I am about asking for referrals, the more I seem to recieve.  For example, one week I asked to speak specifically to hairdressers, the next business owners looking to buy commercial property (as we can help them reduce their stamp duty).  Now the reason most others don’t do that is that they are frightened of missing out on other potential introductions.  However, the reality is exactly the opposite – I know, I’ve tried it!

Why the “anyone” strategy doesn’t work

The “we’ll take anyone” strategy doesn’t just apply to asking for referrals at networking events.  It’s often present all the way through a company’s customer acquisition drive.

By using this strategy, you attract all the wrong types of customers, who don’t help you move towards your end business goal.

Typical examples include customers who are fee sensitive, non profitable, are a drain on your resources, don’t take your advice or who constantly scope creep projects.

If  your business is full of these types of customers, will you ever reach your goals of profitability or being happy in your work?

Ok, it’s easy to say don’t accept just anyone, but it’s not that easy when you are trying to build a business quickly.  However, if you can accept that the business will grow a little more slowly, then there is no doubt that you’ll see the benefits – both in terms of profitability and hassle.

How to get that ideal customer

First things first, do you know what your ideal customer looks like.  What industry do they work in? How big is their business? What age group are they in?

Take time out and draw up a list of all the differant attributes that your ideal customer should possess, and take note, the list should be longer than “anyone with cash!”

You may already have some ideal customers on board.  What characteristics do they have in common?

Think like the big boys here – Supermarkets, Banks and other major players all use this type of method.  Once they have identified their ideal customer, they target them through marketing.

Once you have your list, you then need to work out how your service will benefit them and how you can get to speak with them.

A great example I saw of how not to do this was some time ago with a company that wanted to target Accountants.  He approached me at a business networking event where I was the only accountant present (and always would be due to the exclusivity “deal” you get with the networking group when you sign up).  So, by attending this meeting he got to talk to just one Accountant.  Sure, he’d done his homeowrk on his ideal client type, but then had put no research into where he’d get to meet them.  If he continued in this manner, it’d probably take him the rest of his business career to speak with only a small proportion of his intended audience!

Do you know what your ideal client looks like?

Here at Accountancy Extra we are huge fans of Michael Gerber and the book E Myth Revisited.  So much so, that we provide new clients with a copy of the book.

In the book, one of the concepts discussed is “working on your business, rather than in it”, but what does that really mean?

Working on the business includes activities such as

• Networking meetings
• Researching a new product
• Working on your cashflow
• Putting together a business plan
• Reviewing your gross margins, or
• Systemising your business

How often do we start to do one of the above and then abandon it as a customer calls wanting something, or we need to attend to an urgent e mail from a client?

I often think about running a business a bit like preparing for the World Cup.  A top class footballer doesn’t just turn up 10 minutes before kick off and expect to be brilliant on the pitch.  Instead they invest years of training for their big moment, and, once they’ve made it into the international team, they continue training in between matches.  If they don’t, their performance will not improve – in fact it’ll probably go backwards and their place in the team will be taken by another player.

So what does that mean for your business?

Well firstly, it’d be great if you could do your preparation before starting your business.  Sadly, this is rarely possible.  However, constant investment in improving your business should be high on your list of priorities, if for no other reason than to stop you slipping backwards!  A lot of business owners start off with the right intentions and then let them slip as they get busier, i.e. they revert to Technician Mode.

You should set time aside each week to work on your business, think about the footballer in training each day.

Working “on” your business is exactly that – setting time aside each week to do all of the things mentioned above and more. Taking the time to look at how your business is performing and how you can improve. The main reasons why most Business Plans and Budgets don’t work for you is because they have no clear action plan broken down into what you need to do on a monthly and weekly basis (We’ll cover this area more in future posts).

 How much time have you scheduled into your diary in the next few weeks to look at how your business is performing?

The new electronic VAT regime has brought with it a number of changes to the ways and dates that VAT payments can be made to HMRCE.

From 1 April 2010 all VAT payments made by cheque will be treated as being paid on the day the cleared funds reach the Taxman’s account. Previously the VAT was treated as being paid on the working day the cheque reached the VAT Office. A cheque will normally take at least three working days to clear. Where VAT payment is received late more than once in 12 months you may have to pay a default surcharge (a penalty).  Of course, there is no guarantee that the cheque will be banked on the same day that it’s received either!

The Taxman will exercise his discretion not to charge a default surcharge for VAT periods that commenced before 1 April 2010, where the paper VAT form and the cheque payment are both received on time. VAT cheque payments for periods that begin on and after 1 April 2010 will have to clear the Taxman’s bank account by the due date, or surcharges may apply.

Where the VAT return is submitted online the payment for any VAT due must also be made online. However this can cause problems where the VAT due for the quarter exceeds £10,000.

Many banks impose a daily limit of £10,000 for electronic payments for both business and personal accounts. Larger electronic payments can be made by CHAPs but this may involve bank charges of up to £35 per transaction. You should also be aware that unlike normal business transactions, it takes HMRCE two days to clear, faster payments.

If your business is not already VAT registered but your sales are edging up towards the VAT compulsory registration threshold, (£70,000 from 1 April 2010), you need to be particularly careful about when you register. From 1 April 2010 there is a new set of penalties for failing to register for VAT on time. The penalty is based on the underpaid VAT. The minimum penalty will be 10% of the VAT due, and the maximum penalty 100%. The highest penalty will be charged where there has been deliberate concealment of the need to register for VAT.