November 21, 2017

Business Advice from Berkshire – What will make the difference?

In many businesses the most precious asset is the staff. Without good, knowledgeable, dedicated staff you cannot expect to have an outstanding business.

 What do you put in place to ensure your business is the best it can be? It may be something as simple as a headset for the phone so that staff can easily make notes while talking to prospects and customers. This also means they don’t get a crick in their neck and are happy to keep working.

penx Another area that can make a difference is knowledge. Are your staff fully trained to do what you are asking them. I recently spent a day in Somerset with an experienced member of staff who felt she was not using her accounts software to the full so the business hired me for a day’s consultancy, including the cost of travel. They realised the benefit of using what they had better, rather than being average and struggling on as they were. I am often asked to work one to one with a firm as they ‘got the software some time ago but never had any formal training’. By the end of the day they kick themselves when they realise what they could have been doing and the time they could have been saving. All it took was a small investment to quickly get returns that would last them for many years. Even if they changed the software, they can never lose the skill and expectation of what can be achieved.

 As you know, I am a great believer in training and would ask you include it in your budget. You wouldn’t give someone a ball of wool and needles and expect them to knit a jumper. Even if they knew how to knit, they would need a pattern to follow and some guidance as to the expected shape and size. How often do you request something from your staff without giving them the skills and full picture of what is expected?

What can you think of that can make the difference between being an average and being a good supplier to your customers – and your staff? Remember, you are also staff of your business so this applies to YOU!

How many hours do you work ?

As part of the new regime that HMRC are bringing in for payroll know as RTI (Real Time Information) you will need to declare whether each employee does under 16 hours, 16 – 30 or over 30 per week or is an occasional worker. As a business owner, you may well do over 30, but how many do you get paid for?

 

At minimum wage (currently £6.19 per hour) you would need to be taking a salary of £9,657 to meet this hourly rate on 30 hours per week. If you are a director of a company, it may be that your company recognises your efforts by paying you a dividend depending on the profitability of the company. Even if it does not have the cash to pay you at the time, it may reserve the funds by adding it to the amount the company owes you. This is not uncommon. Dividends do not attract National Insurance whereas salary does.

 

So, is this a ploy by HMRC to ensure that company directors are getting a fair wage or will they start chasing those companies that primarily pay their directors by way of dividends on their shareholdings?

 

The good news is there is another box to tick which says the hours are unspecified. As a director you may choose how many or how few you work so this sounds like a more accurate answer.

 

If you employ your children during the school holidays to create PowerPoint slides, help with your web site, proof read the book or reports you have written, they would be counted as ‘occasional’ workers so must go on the payroll, but you don’t have to pay them every month. Remember this is an allowable expense of the business and will reduce the tax bill whether you are a sole trader or a limited company unless – of course – you pay them a huge salary. The minimum wage for under 18s is £3.68 per hour.

Grow your business by understanding your accounts

Most business owners are not accountants. This may sound obvious but understanding your accounts is one skill that every business owner needs if they are going to succeed.

 

Employing an accountant is a good idea, but an even better one is for you, as the business owner to understand what the output that you pay for actually means.

 

At a meeting last week, a client said that they realised they needed to be more involved when the area manager ask them about sales figures – they were fine with that. They were then asked about the overheads, what size was the electricity bill typically? How much did they have to pay for waste removal? They realised that all this information went into a carrier bag and was passed to their accountant. Although all the information was input into an on-line system so they could see it whenever they wanted – they had purely focused on sales and never looked at the rest.

 

If you have not bothered, or were too scared to ask, I suggest you get a copy of Understanding Your Accounts for the UK business owner by going to www.understanding-accounts.co.uk and purchasing your own copy. This book explains what the figures mean, which to worry about by using plain English and examples.

 

IT has taken me a while to produce the book but it was released 7th February 2013 so is up to date and purely focuses on the UK.

 

So … Enjoy Accounts and Grow Your Business

What Costs can you control ?

Do you know what benefits you get from the costs your business incurs? Do you know what it is paying out for, and to whom? As time moves on, so does the needs of every business – and business owner. Are there alternatives to what you are currently spending your money on that could give you a greater benefit?

A simple example may be when do you upgrade a computer system further rather than biting the bullet and replacing the systems? Although it may seem painful at the time, I know many accounts staff who spend time and frustration waiting for their system to do things – or rebooting when they have asked it to do too much. For some reason it is often forgotten how much time the accounts department spend at the keyboard – or waiting for their computer to give them an answer! How does that come back to costs? The tasks that they can’t do as they do not have time may be costing you money. Payment of unpaid invoices not being chased meaning the money is in your customers’ account – not yours. Relationships with suppliers strained as their bills are not getting processed as quickly as they might. This may lead to early settlement discounts being missed or the opportunity for direct debit discount not being investigated.

I am not intending waving a flag to help the accounts department, just asking that you acknowledge the contribution that they make to the business. As a business owner, you don’t need to enter the figures and chase the debts – that can all be delegated. What you need to do is understand the figures. It is not the calculation that matters it is what you do as a result of the answer. Don’t be put off by the numbers, others may like those better than you. In the same way you may or may not enjoy driving a car, the fact you can – or can hire someone – makes most locations accessible to you. You can then choose whether you go there. The important thing is you have the choice providing you have the knowledge.

If I can be of any help contact me - oh and big news on the Book Next Week !

What are your costs of distribution?

A cost that is often overlooked when deciding on prices, or considering profitability is the cost of getting your product or service to the customer. Whether it is you travelling to a meeting at your customer’s location or the cost of postage and packaging, they are each costs you would not incur if you had not made the sale.

What bought this home to me was the cost of distribution of my, soon to be launched, book. I could buy padded envelopes from W H Smiths at 99p each (or 3 for 2) or I could buy 100 for under £10 with free delivery on 300 or more. That was just the first cost. There was then the cost of postage. I am glad I have a franking machine but it still over £1 second class.

The costs can mount as much and more when delivering yourself. Parking at the station, the cost of the train fare, taxi to and from at the other end. I know that today I will spend more on taxis than the pre-booked train fare but this is still cheaper than driving at 45p per mile – and I can get some work done on the train. This cost of travel can make quite a dent in the daily rate. I know I am doing more work locally and from my office. I have no travelling costs or time involved so I don’t have t have the conversation about why they should pay for me to go to them. To be fair, my daily rate is less when they come to me as I know I can do chargeable work when I would otherwise have dead time while I was in the car.

If you have engineers or technicians on the road, just consider what the costs are. I am not saying you shouldn’t offer the service, I am saying make sure you build in the cost when calculating the price. The idea of being in business is to make a profit, not just deliver a fantastic service. If you don’t make a profit, you will not be able to continue which means that people will be deprived on the quality products and services you offer. If you do not get the figures right, you cannot continue.

Are you working to a budget ?

Budgets are not just for large firms. Every business can benefit from creating a budget. They can benefit further from using that budget to plan cash flow and monitor progress.

 

Tax return sooner rather than laterWhen you sit down to create a budget you validate the overall strategy for your business. If you have not written down your plans, it may be that creating the budget forces you to actually deicide what you are trying to achieve and then, if you have the resources to do it. One critical resource is manpower. Although you can take on more staff or freelancers to help out, they will need training which will divert other members of staff from their primary staff. This is not a problem, providing it is built into the plan.

 

The other resource to consider is cash. Can you afford to buy the stock to fulfil your projected orders? This leads me nicely to propose that, following the preparation of a budget, you should also prepare a cash flow. As with all plans, if you know there are going to be times where cash is tight, it is not a problem if it is part of the plan.

 

Having created your budget and planned your cash, the next stage is taking action, and then monitoring. There is little point preparing a budget if it sits on the shelf. I am a strong believer in working with businesses to create their budgets. If they know how the projections were arrived at, they can validate them as they go, and have the understanding to update them if needed.

 

The title of this was not do you have a budget, but are you using the budget you prepared. What is your answer?

What will you do differently in 2013 ?

I have just finished completing my mileage claim for last month. If you drive for work, how do you keep your mileage log up to date – and remember to put the claim in?

 

Whether you are employed as a director of your own company, employed by someone else, or are a sole trader or partner who claims mileage, you need to keep a log of miles you do for work. I recently saw a client who was paid 40p by his employer. He was good at keeping a log but did not realise that, if he did under 10,000 claimable miles a year, he could claim the difference between 40p and HMRC approved rate of 45p. By claiming 5p times 9,000 miles he could claim an expense of £450. As a higher rate tax payer, when you multiply this by 40% it works out to £180 of tax he could get back. If he was reimbursed at 25p, the refund would have been £720 of tax – a nice payout.

 

The other thing to check is that your car insurance covers the business miles you do. A simple check and often there is no extra charge to have business listed on the certificate.

 

So, whether you run your own business, or are employed, it is worth noting the mileage and other expenses you pay out on and ‘forget’ to log at the moment. The important point to remember is the more legitimate expenses you claim, the smaller your tax bill and the more money you will have.

 

May 2013 bring you every success, happiness and money.

Are you paying your Staff enough ?

Are you paying your staff enough?

How much do you pay your staff? As from 1st October the national minimum wage changes for those aged 21 and over to £6.19 and the apprentice rate rises to £2.65. Rates for younger staff remains unchanged.

Did you know that agricultural workers will get a different minimum wage, depending on what they are being asked to do, and are entitled to a higher rate for overtime? If you are in this sector, you probably know all this but I have had clients who have been caught out and ignorance is no excuse.

When did you last pay your part time workers holiday pay? The common reason that staff are underpaid is when they work on a zero hours contract and therefore don’t book their holiday, they are just not available to be put on the rota. Where the hours vary from one week to another, the calculation for holiday is then based on 12.07% of time worked. When looking at the cost of employing staff, this should be taken into account – and the employer’s national insurance.

Lastly, the most important member of staff is you. Without you the business could not function. How many hours do you do, how much do you get paid per hour? When did you last take a holiday?

 

Do you need help with ensuring that you are the right side of the law ? Contact Penny for more advice