February 25, 2020

How you can increase your productivity

We all wish we had more hours in the day, the question is where can we find them?

If someone said that it had been decided that the world would now operate on a 25 hour day, what would you do with the extra hour? It might only be an hour per day, but that equates to 7 hours in a week, which is actually nearly another ‘working’ day.

Birmingham-20121029-00114Would you use it to sleep, to work or to spend more time with your family? The answer may give you a view on how well balanced your life is. I know because I recently did the same exercise – the difference was that I was not being given an extra hour, I just wanted to fit more into my day without impacting on sleep or family.

The answer – review what you do each day by considering the outcomes, If you tend to lie in, does it leave you refreshed and inspired, or do you lie there because you are trying to avoid the inevitable? What could you outsource to free up time for the things you enjoy, and that bring in money. Whether this is meeting prospects or delivering your product/service. The chances are if you don’t like doing something it will take you twice as long – procrastination plus production!

Over the last three months I have outsourced two tasks and I am really grateful to those who have taken them on. The tasks are not yet concluded but nearing completion. Watching others progress them reminds me of how big a task they were and how much better it has been to outsource to somebody who enjoys doing it. To be given text to approve rather than write from scratch is quicker, more satisfying and I know it is moving off my to do list

gravatarSo, could you start work an hour earlier? Spend an hour less on Facebook or at the coffee shop? Could you set up standard templates for replying to emails, or could they even be automated?

Let me know below where you are going to find extra time and what you intend to do with it – even if it is only half an hour a day.

How to reduce your Accountancy bill

When you get actually pay your accountancy bill, do you know what you are paying for? Does your accountant discuss with you how it might be reduced either in total, or as a percentage of sales? Would you be happier to pay more to your accountant?

For some types of services you purchase, there is an element of flexibility in the price, depending what you are prepared to do so that the supplier does not need to. I know I tidy up before my cleaner comes so that I am not paying her to put things back in the room they belong. I mow the lawn, so that the person that helps with the garden can concentrate on the flower beds. My horse is at DIY livery so that I can look after my horse and the yard owner can look after the fields and fencing. In the last example, I could pay more and ask them to also look after my horse. The down side would be that I would not have such an intimate knowledge of how my horse was on a day to day basis. If I had a competition coming up, I would have to pay extra for the preparation – or I might not know if he was fit enough. This is also true of your business. You need to know what is important to you and your business. What you can outsource and what needs to be done or monitored by you.

If you outsource all your book-keeping and accountancy functions, they should be done to a high standard, but how do you know? Do you look at the results – or just keep paying the money? Have you ever thought about sitting down with your accountant and discussing what you need to run your business on a day to day basis?

The original comment was how to reduce your bill – or at least as a percentage of turnover or profit. My answer is to understand what you need to run a profitable business. Put systems in place to allow you to monitor this on a monthly basis (at least). Ensure that the figures you are relying on are accurate and complete. Then, when you get to the end of the year, the figures will all be there and ready for the accountant to produce the annual accounts and calculate your tax bill.

The added benefits are that you will be better able to manage your business allowing you to increase your turnover and profits. You will know your tax bill well in advance of the due date. Most importantly you will see what needs to change during the year while there is time to have an impact rather than getting to the end of the year and realising you should have done things differently. You will see and understand what your accountant has done to help you grow your business.

Want to discuss your options? Contact me for a consultation.

Poor Planning leads to..

Have you ever worked late into the night? When did you last feel you could have done a better job if you had had more time? Have you ever missed a deadline? Its all about planning.

Recognising what needs to be done and by when allows you to prioritise your tasks. Your finances should be planned in the same way. You have limited time and know it is down to you how you spend it. Treat your business funds in the same way.

You should have two types of plans which are different views of the same thing. One is a budget which sets out your planned sales, costs of sales and expenses. This may be by month in the coming year and annually for the next couple of years. In addition, you also need a cash flow statement. As it says, this is cash flowing in and out from the business with dates. This type of plan will keep you within overdraft limits, or indicate when you can take a dividend from the business (remembering to leave the money for the tax bill in the business).

A simple example of the difference is sales in a budget may show as £50,000 per month for three months. If your terms are 30 days, the cash flow would show nothing coming in during month one, £60,000 in months two, three and four and cash out of £20,000 also in month four. Where do these figures come from?

The nil in month one is down to £50,000 of sales but no one has paid you yet. Months two, three and four are £60,000 per month being £50,000 of sales plus 20% VAT) paid by your customers for sales in months one, two and three. What about the £20,000 out. This is the VAT you have collected on behalf of the taxman and received in months two and three. That is what I mean by leaving some money in the bank. Don’t forget, you have another tax to save up for as well, being the tax on business profits. Although not due yet, this would be another £30,000 due to go out. (being say 20% corporation tax on £50,000 for 3 months).

With these chunks of money due out, it is important to know, not only what you current bank balance is, but what you need to keep money back for. Even if it is only a rough idea, planning is better than penalties.

Need any help? Contact me.

How much are your customers worth to you ?

This may be a question that a marketing person asks you, but do you know how to calculate it?

The first element will be how much does a ‘typical’ client add to your turnover in a year? This then begs the question, what is typical? So, you might wish to group them and do a calculation for each type. That’s fine as you are already identifying that not all clients are the same.

Tax return sooner rather than laterHaving decided contribution to turnover, the next element is contribution to profit. You may have some clients where there is only a small contribution, but it is regular and there are no hassles involved in these types of clients/customers. They do what they are told, give you plenty of notice and always pay on time. You may also have a group who seem to apply the 80/20 rule. They use 80% of your time for 20% of the rewards. If you are accurately measuring profit, have you included enough follow up and administration time to answer all their queries and spend days on the phone and writing trying to collect payment.

The next element is how many purchases do they make from you? Have they driven you down on price, purely to move on next time to the next special deal they can find. Do they value consistency and may even be prepared to pay more for the knowledge that you will charge them a fair price and offer a quality service rather than skimping to keep within budget?

The final element, which is what made me choose this topic, this week, is how much marketing do they do on your behalf? Sometime this may be a direct referral, sometime it may be that several of your clients/customer have spoken positively about their experience of your service/product, or it may be that you have signage on your car/van and others have seen you in the area and built up a certain trust. If you had not been in the area for a particular customer, others would not have seen you.

So, I have not given you a precise formula for how to work out the answer, but hopefully food for thought.

Your Books Under the Microscope

Last week saw a letter from HMRC asking for all the information that had gone in to the accounts for the tax return to 5th April 2012. I wrote and asked what format, as the letter said they had technical people that could help with computer system.

I had a pleasant phone call from HMRC to say could we print everything out and bundle it up for him. I explained the invoices were Word documents filed per month, the payments were in a spreadsheet per month so would he like a CD with the information. No, we needed to print out each sheet and send everything in a single package. Everything includes my year end adjustments for own use and disallowed items, bank statements for the period as well as the signed accounts.

I have spoken with the client and I think they are going off to Tesco to get some more reams of paper. We have agreed to meet up in a fortnight to make sure we have everything required and box it all up. HMRC have given us a month to get all the information to them and the member of staff at HMRC admitted he was in no rush to receive it as he had a plenty there already. I didn’t ask what the turnaround time would be!

How well would your records stand up to such scrutiny? When the accountant returns your books and says you need to hold onto them for current year plus six, do you know exactly where you have stored them? I have previously had a client who’s garage was flooded some years ago so he binned the soggy papers. He ended up with a large tax bill as he couldn’t produce proof of some payments. Do make sure your storage facility is waterproof and mouse free.

It is possible to get insurance against such investigations. This will cover the extra time your accountant has to spend in talking to/writing to HMRC. It does not cover lost papers or invented figures so make sure you can justify your payments out and be able to demonstrate the completeness of your sales.

It is not just HMRC who may want these figures, I had to produce 3 years sales invoices to an insurance company to justify my claim for loss of earnings against the other party after a road accident some years ago.

Need guidence on your record and data keeping ? Contact me for more information.

Read the Small Print !

When you sign up to ‘something’. Do you actually read the small print, or do you just press agree/sign here?

A client recently accidentally spent over £700. Over the last few years, the annual renewal of some software she had to use to for a customer (to enter the invoice into their system) asked her to pay by credit card before the end of January – with countdown warnings. The details were entered and the invoice paid. That was fine.

Tax return sooner rather than laterThe customer has now changed systems, so when the invoice came through this year, she chose not to pay it. As she didn’t need to use the system, she did not bother to log in. I am sure we have all been in that situation. However, last year they changed their small print to say they would retain the card details and automatically renew if you did not cancel within 30 days of getting the invoice. Unfortunately, she and I did not appreciate we had to log in and remove the retained credit card details and unsubscribe in order to cancel the contract. They have also given up issuing the countdown warnings so even if we had of logged in, we would not have been reminded.

The payment was spotted when the February card statement came through after 28th February (the money being taken 1st February). When we phoned, we were told it was too late to complain and they did not do refunds, even pro-rata refunds. She has now cancelled that card so any other organisations that have the details, will need to contact her for new card details if they would like to be paid.

So, when you sign up for something, check if it is automatic renewal. I am happy for 1 & 1 to take automatic renewal for my web site hosting. And I appreciate their reminders in case I want to cancel one. What do you pay once a year? Do you still use it? You do check your card statements, including PayPal, don’t you?

How to reduce your Tax Bill

As we approach the end of the tax year – 5th April 2013, what can you do to reduce your tax bill? Although you have left it a bit late, you still have a couple of days to act.

If you have a pension scheme and some money to spare, you could pay some extra money into your pension scheme. Just remember to tell your accountant that you have made extra payments. If you do your tax return yourself, you need to include this extra payment.

Another option is to invest some money in an ISA. Although the rates of interest are not high, you will not have to pay tax on the interest earned, so if you are a higher rate tax payer, this could almost double the actual rate of interest.

If your year end is 31st March, have you declared all the dividends the company can afford to pay? This is where you need to monitor your profits as there is no point putting yourself into the highest rate of tax, when this is due to reduce from 6th April 2013. If you are not sure, speak to your accountant and tell them you need to know whether to do something before 5th April.

Other lesser ways to reduce your tax bill is to ensure that your business is being charged for all the amounts you pay out on its behalf. A client today, realised that she hadn’t charged the company for the mobile phone she used for business for the last 6 months. I personally know I need to put a mileage claim in for last month and this. How up to date are you with such claims? If you do not put your claims in, not only will your business pay more tax, but the costs you consider for your business will not be accurate and may distort your planning and cash flow plans.

If you haven’t done so before, sit down this weekend and make sure that you – and any other member of staff eligible – have caught up with your expense claims

Should I buy a Company Car ?

If you are a director of your own company, there is the opportunity for you to put the purchase, running costs and fuel for a car through the company. The down side is that HMRC will view this as a perk of the job and tax you on the benefit received, on their calculation. This calculation is linked to the full retail price of the car plus accessories (not the purchase price you paid) multiplied by a percentage based on the CO2 emissions. There is then another benefit of the fuel with the same percentage used on a prescribed figure for fuel for the year. If you then multiply this benefit by your highest rate of tax, you may appreciate that it will depend on the amount you use the car and the CO2 levels as to whether you wish to pay the extra tax.

 

Other considerations are that you cannot claim the VAT back on the purchase of the car unless you are a taxi or a driving school i.e. it is a tool of the trade. You may have to pay extra for insurance as if owned by the company, it must be insured in the company’s name. The company may not yet have any no claims discount. Insuring it through the company may also affect your no claims. If you have company insurance for a number of years, your personal no claims discount may expire. Depending on how you intend to finance the vehicle, leasing companies and finance houses may want to have a close look at the accounts for the last three years.

 

When I had a company car, my company took out a bank loan to fund it and my insurance company (NFU) looked at real life so there were no insurance implications. They did not just tick boxes on a form/computer screen. Any car used for business should have appropriate cover, particularly if you are using it to deliver goods to customers as the goods need to be insured ‘in transit’.

 

By all means get a company car, but calculate (or get someone else to) how much it will add to your tax bill up before you sign on the dotted line. Fuel can be treated separately so don’t assume if you have a company car, you have to get the company to pay for all your fuel. You can put in a claim per mile which is much less than 45p per mile as you use your personal car.

 

The alternative is that you own and fund the car yourself, making sure you include business within the insurance cover. You can then claim your 45p per mile and get the company to pay you at that rate.

 

The situation is different if you are a sole trader – but I will leave that for another day… If you are looking to make a decision and need assistance – contact me

Why are you in Business ?

This is a question I often ask new clients. From my viewpoint, it gives me an insight into what they care about most. If they simply say to make money, this gives me the lead to ask how much money? How close are they to this goal? What are they doing to help them exceed it? If they say it is nothing to do with money, I ask more questions to find out why they feel this about money.

For many business owners, money is actually a secondary consideration providing they are making enough. But again, I would ask the question how much is enough? Please don’t try and work out your ‘earnings’ from your business as an hourly rate. For some business owners, the hours they put in may mean they are actually close to minimum wage. If you do 60 hours a week for 52 weeks a year at minimum wage, your salary would be just under £20,000. I would suggest that your life expectancy would not be very good either.

I am sure that you are not one of those that lives purely to work and pay the bills. At an income level described above, it would be much less stressful to be employed by someone else and let them make the strategic decisions.

So, how much do you earn? Check on you last year’s tax return. How many hours do you work? How much do you charge for your time? This may not be a direct hourly charge, but when you attend sales meetings trying to convert a stubborn prospect, or spend time resolving issues that needn’t have happened, have a think about how much this is costing you. What else could you have been doing with your time that would have earned you/your business more money? That is certainly how I feel about the domestic cleaning and ironing. I can earn more in the 3 hours a week I pay for help, than it costs me to employ that help. What parts of your business can you apply the same logic to?

So whether you are in business to make money or provide a good product or service, remember you have still got to pay the bills. Your time is valuable, you only get one life – make the most of it! Need help understanding your figures ? Contact me for a consultation.

Are you worried about RTI? Do you know what it is?

As from 6th April 2013 all employers will need to tell HMRC every time they pay someone. This is known as Real Time Information (RTI). Whether it is the usual staff getting their monthly pay, or a casual member of staff getting cash for helping you out for a couple of days, the taxman needs to know.

If you run your own payroll, the chances are you are using software to do the calculations. It is likely that it will also file the necessary forms on line for you but it is worth checking.

The logic behind this change is that HMRC will be able to link multiple employments together as they are happening and make sure the correct tax code is being used. This should stop so many employees getting bills sometime 3 years after the tax year in question. The other benefit to the taxman is they know how much you should be sending them each month so, if you don’t pay, they know how much to chase you for!

The emphasis will again be put on the employer to ensure that the employee is entitled to work in the UK. For new employees, HMRC suggest seeing a copy of the passport to confirm name, date of birth and help towards a right to work in the UK. If a potential member of staff does not have a passport, HMRC suggest a birth certificate as an alternative. That is all very well unless the female in question has got married. How do you then match the name to the individual without marriage certificates etc? There are alternative documents that can be produced, but does someone turning up for a day’s work carry these papers about as well as their National Insurance number – they may need to in future.

Once the individual is set up within a payroll system, the operation should be straightforward. It’s a bit like sending HMRC a copy of the payslip each time you work out pay as well as giving one to the employee. If it is a casual worker who gets paid cash at the end of the day, it is up to you to work out the correct figure to pay. In a very few cases such as this one, you can send the copy of the payment details through to HMRC within 7 days of making the payment. Most other cases you need to tell them on or before the date the payment is made.