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Archive for the ‘Finance’ Category

A guest post from Rosie Slosek at onemanbandaccounting.co.uk

You started your business – so exciting – you’ve done the graft, the emotional roller coaster, the have-I-done-the-right-thing worries, the achievement of your first client and your second, third and tenth.

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You’re more established now, you don’t feel quite a newbie any more. You know what you’re doing and you know where you’re going. You’ve built a consistent income and you have money left over at the end of the month after essential bills.

You know now’s your time to take your business to the next level.

But how?

You started as a sole trader because the tax return was easy, or easier than a limited company, and you could do it yourself. If you’re honest, you don’t really understand limited companies and when you’ve asked questions or searched Google, you’ve left more confused than you started.

Is a limited company the next step?

You need to ask yourself 4 questions so you know if you’re ready to take your business to the next level and if a company is right for you now.

Who are your clients?

Do your plans for business growth include bigger clients who will require you to be a company? Corporates for example. Even something simple like diversifying into app building (for example) can mean needing to be a company as businesses like Apple won’t work with sole traders.

What is the risk?

When you grow your business, sometimes the risk you take grows too, and only some of that can be covered by insurance. Working with corporates, organisations or executives can be higher risk as there is less you personally control. You need to look at the risk and decide what’s appropriate.

Your personal circumstances

When you have a mortgage and dependents, you have ‘more to lose’ than if you rent and it’s only you. We don’t need any ‘you’ll lose your house if you’re a sole trader’ scaremongering but you do need to consider how comfortable you are with your clients, risk and your circumstances.

Tax

This is the last factor to consider in my opinion, not the first. Although having a limited company can save you money on tax, tax laws can change which the Chancellor has done very recently.

You need to uplevel because it’s the right decision for you and the future of your business.

Taking time to explore whether a limited company is right for you is a great way of bedding down your strategic planning for how you’re going to take your business to the next level.

You’re even paid differently as a limited company, so you need to get sorted on your business and personal finances too.

It forces you to seriously think who your clients are going to be, how you’re going to expand, your financial responsibilities and goals and how your want the future of your business to look like in the next 5 years.

I know you can do it and it’s always such an exciting time growing your business. Take a moment to celebrate this step!

rosie-slosek-1353-lres-300x240Rosie Slosek helps cake-loving UK freelancers to become unstuck about accounts & tax so they can feel free to grow their business.

Join her on 14 April on a gorgeous day retreat to demystify limited companies and learn everything you need to know about company accounts & tax in 1 day.

Learn more: http://bit.ly/ltdretreat  | 07989 945918 | http://onemanbandaccounting.co.uk/blog

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Guest post from Fiona McKenzie at Blue Note Solutions Ltd – Part 2 of ‘Growing your business? What you need to know about your sales’

You probably follow your sales figures closely and of course you realise that sales must be priced so as to cover all your costs of doing business. However it is worth checking if you have priced different products or services so as to cover all costs related to those sales. Some costs which may be overlooked are:-

  • Costs related to selling perishable or delicate goods.

The element of wastage due to damage or decay should be factored into prices, so if on average 10 percent of such items are damaged you should consider whether your unit prices need to compensate.

  •  Sales/marketing costs related to a product or service.

Say a service takes 3 hours to discuss requirements and prepare a quote then only 1 in 3 customers buy that service. You need to include this cost when deciding whether that service is a profitable item to offer.

  •  Costs related to specific customers.

Some customers are more demanding and therefore costly to service. Service X may cost an average of 10 hours labour but 12 hours for customer Y. Or customer Y may demand a 60 day credit period. Are these costs reflected in the price? Or might you be more profitable if you sacked your ‘demanding’ client?

Failure to consider all the costs related to sales may not always turn a profit into a loss but it could convert a good profit into a much smaller one. The above are some examples of extra costs, others may be travel time or delivery costs. What (overlooked) costs has your particular business encountered?

About the author: Fiona McKenzie is the founder of Blue Note Solutions Ltd based in Oxford. A Finance Director with many years of commercial experience, she now helps SMEs gain clarity and control of their financial performance. She offers a complimentary Profit Improvement Review to SMEs based around Oxford and the Thames Valley.

Website:  www.bluenotesolutions.co.uk  Email: fiona@bluenotesolutions.co.uk

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A guest post from Fiona McKenzie at Blue Note Solutions Ltd:  

When you began your business I’m sure that each sale was a triumph, imprinted on your memory as being one step more towards business success. As business activity expanded you might find that various details about your sales become less clear. However certain information can help you direct your business more effectively.

At least monthly you should look at your Sales Revenue:

  • Sales breakdown by product or service

Knowing what your customers are buying, what is popular and how demand is changing over time enables you to adjust stocks or types of services offered. Perhaps you have not sold a previously popular service. Why? Is it now too expensive? Have you stopped marketing actively?

  • Sales by customer

Knowing who your best customers are and what they are buying helps you to give customers extra attention and perhaps a little nudge to re-order. Sometimes existing customers can be overlooked in the drive to expand business and find new customers. Be aware also of becoming too dependent upon one or two large customers. I have known several businesses fail when their main customer ceased trading.

  • Sales by period

Knowing what time of year you sell which products or services helps you to plan ahead by ordering or preparing before you obtain the actual sales order. You can also identify ‘quieter’ seasons and perhaps offer alternatives. If you don’t sell many umbrellas in summer perhaps stock sunhats from May to August.

Your most useful information will of course vary according to your business. For example a retail shop is unlikely to know the customer breakdown. A different business may find an analysis by geographic area helpful.

I’d be interested to know what other information about your sales has helped your business?

About the author: Fiona McKenzie is the founder of Blue Note Solutions Ltd based in Oxford. A Finance Director with many years of commercial experience, she now helps SMEs gain clarity and control of their financial performance. She offers a complimentary Profit Improvement Review to SMEs based around Oxford and the Thames Valley.

Website:  www.bluenotesolutions.co.uk  Email: fiona@bluenotesolutions.co.uk

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A guest post from Business Improvement Consultant Susie Collings at Exilia Ltd:

Whenever I say ‘Every business needs an Organisation Chart’ in a presentation, I immediately follow it up by telling the solopreneurs not to switch off, because this applies to everyone and that really does include you!

I’m not talking about an organisation chart that shows the people in your business and what they do, because that would look like this:

org chart1– and that would be silly, right?

What I am talking about is an Organisation Chart that describes all the work that has to be done in your business and who has the responsibility and accountability for it. That might look like this:

Org chart 2Three good reasons to have an org chart:

  1. It defines what your business looks like
  2. You are clear about everything that needs to be done and what you are responsible for as a business owner – even the things you don’t like doing
  3. It gives you the basis for growth. When you want to hire in some help you can see where to do it. (Hint: start with the things that you don’t like doing)

Susie bioAbout the author: Susie Collings runs Exilia, a business consultancy focusing on identifying and removing barriers to growth for small and medium sized businesses. http://www.exilia.co.uk  Email: susie.collings@exilia.co.uk

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A guest post from Fiona McKenzie at Blue Note Solutions Ltd:  

When you love the service you’re providing and want to deliver the best it may seem crass to say it’s all about the ‘numbers’. But ultimately you will have no business if the numbers generated do not add up to a profit. If you find your numbers do not help you assess and manage your business that is probably because you are not receiving accurate or sufficient information!

An analogy suggested to me recently is weight control. Effective weight control would be difficult without the right numbers or rather measurements.

However if I tell you someone is 10st, that is a number, but what does it mean? Over or underweight?  Well you don’t know, you need additional information such as height and if you also know sex and age you can make an even better judgement.

To begin weight control you need some idea of your weight; where you are now. So you probably need scales. Not only would you need scales but you’d need to ensure that the measurement is accurate i.e. scales are correctly calibrated. Inaccurate measurement may mean dieting unnecessarily or ineffectively – disaster!

You may have accurate scales but they may not be providing you with the most useful measure. So your weight may be generally OK but you’re accumulating a little fat around the middle. In this case the best measure may be waist size. So a tape measure and inches rather than scales and pounds.

Knowing your weight/waist size is of course only the beginning. If you feel unhappy about your weight then you will want to reduce or increase that weight. Knowing the measure you can then formulate a plan – a diet or exercise regime. Here you will need more measures such as numbers of calories, portion sizes or exercises. And then you’ll measure (weigh) again to check and adjust your progress.

So it is for your business as for weight control:

·         Get accurate, appropriate and meaningful measures (numbers)

·         Based on initial measures formulate an action plan (business strategy)

·         Measure your actions/outputs/inputs

·         Measure the result (progress)

·         Adjust your plan as required to reach your target

As Brad Sugars, founder of ActionCOACH, says, “One of my main business mantras is ‘Know your Numbers’ and because numbers are the language of business, it is numbers that will ultimately determine your success!”

About the author: Fiona McKenzie is the Director of Blue Note Solutions Ltd based in Oxford. Fiona helps SMEs gain clarity and control of their financial performance. She offers a complimentary Profit Improvement Review to SMEs based around Oxford and the Thames Valley.

Website:  www.bluenotesolutions.co.uk  Email: fiona@bluenotesolutions.co.uk

 

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A guest post from Rosie Slosek at onemanbandaccounting.co.uk.

Use this checklist to help you get together the documents you need for your tax return. It covers what applies to most one man bands & freelancers in the UK.

Check if there is anything else you need to include in your personal circumstances.

Personal details

  • UTR – Unique Tax Reference. You can find this on most HMRC correspondence
  • Tax ref/NI – Your tax reference or National Insurance number
  • Self Assessment Online log-in – Find it or apply in good time if you’ve lost or didn’t receive it, or the activation code ran out. Even if you have an accountant, it’s wise to have the log-in

Income

  • Employment – Payslips & P60 or P45 for every job/directorship-with-salary
  • Self Employment – Bookkeeping for every sole trader business (bank statements, receipts, diary, mileage, home working records/statement, bills, stock take etc
  • Partnerships – Keep the partnership return handy & the record of your drawings (income received)
  • Property/lodger – Income records from having a lodger, and/or income/expense records for every property you rent out
  • Foreign- Income from abroad. You’ll need details & checking there aren’t any complications is sensible (income from another country to your business isn’t included)
  • Trusts – Records from trust income, e.g. from a parent or grandparent’s will
  • Capital Gains – If you received a lump sum in the past year (e.g. legacy, redundancy, sold a business/shares/asset) check whether you need to declare it on your tax return
  • Interest – Details of interest paid on all bank accounts (except ISAs)
  • Dividends – Details if you receive dividends from shares (in your own company or another)
  • Pensions & Annuities – You should be sent a record of income & how much tax you paid
  • Benefits – Some benefits may need to be declared (check with Department for Work & Pensions)
  • Other Income – Include other/casual income here (e.g. affiliate/advertising income on a personal blog). Have a look at HMRC’s notes for the relevant year for help

Self employment

  • Accounting Date – Most sole traders choose 6th April – 5th April the following year as their accounting year because it’s the same as the tax year & makes life easy
  • Turnover/Sales Income
  • Other Business Income – E.g. sponsorship, affiliate, advertising on your website
  • Allowable Expenses – Expenses that are tax-deductible (come off your profits)
  • Check if you aren’t familiar with what’s allowed as it can change with each business & circumstance. It’s often not what you’d expect. You could be pleasantly surprised at expenses you didn’t know you could claim & stop yourself from claiming what you can’t
  • Capital Costs – E.g. Longer lasting items, such as equipment or a business use laptop
  • What is owed to you & what you owe others
  • Identify transactions outside of the tax year in which they were received. Payments to you/by you need to be allocated to the tax year in which the service/goods were received

 Other

  • Previous Year’s Tax Return – Helpful for reference (e.g. claiming a refund from tax paid last year if you made a loss this year, or to carry out any actions from the previous year, such as carrying forward a loss)
  • Previous Years’ Income Details/P45/P60 – Helpful for reference if it’s your first return. If you made a loss (which is common) you may be able to claim back tax paid previously
  • Student Loan Repayments – If you have a student loan that comes out of your salary automatically & included on your tax return you’ll need those details & your pay slips/P60
  • Charitable Giving – Details of any donations to charities under the Gift Aid scheme. This only applies if the amount donated is less than the amount you have/will pay in income tax.

Good to know

Payment on Account. When you file your first tax return, you may be asked to pay 18 months of tax at once (12 months of tax for previous year & 6 months for the coming year).

31 January deadline is to file your return & pay your tax. When you submit your return earlier, it does not mean you have to pay tax due at the same time. You still have until 31 January. If you are due a refund, you don’t have to wait until 31 January to get your money although it may take several weeks or months. Woohoo!

Most important items

Cup of tea or glass of wine

Piece of cake or chocolate brownie

Accounts Time is You Time. Crank up that music!

Any questions?

Email Rosie via our website at onemanbandaccounting.co.uk

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A guest post from Rita Adams at A.R.M. Credit Control:

It feels so good when after months of hard work, relationship building and negotiation the large order finally arrives. But getting on with the job and leaving the paperwork for later can have serious consequences when it comes to obtaining payment!

The new client obviously likes your product or service and although any genuine business owner/director will be happy to provide relevant information, we don’t ask.

A few years ago, a spokesperson for the British Chambers of Commerce commented in the wake of the Barclays Local Business annual Late Payments Report, which suggested that small and medium-sized firms in the UK are owed more than £10 billion on any given day. They suggested to ask for payment in advance but in reality this isn’t always possible.

So if you are one of those businesses who have to give credit in order to stay competitive don’t feel embarrassed to ask the new client for…

  • the exact name and legal status (watch out for franchises with many different legal entities or Jo Bloggs trading as B Smith)
  • the customer’s headed paper to verify the company details
  • the billing address and trading address
  • the ordering process and who authorises purchase orders
  • references from other suppliers, run a credit check or at least check companies house (which is free)

It might feel like additional time spent on administration but it will pay off later on when it comes to payment, trust me! But if you still feel uncomfortable asking the questions above think of credit to a new customer like lending him money – would you lend money to a total stranger?

credit-control-teamRita Adams established A.R.M. Credit Control in 2004 and  provides credit control services to SMEs and large organisations.

(The above post was first published in 2009)

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