December 9, 2019

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.

What is your company doing for its employees this Christmas?

If you are taking them out for Christmas dinner, you can claim up to £150 including VAT without having to declare it as a benefit. However, if you wanted to give them cash, or something they could exchange for cash, you would need to put it through the payroll and pay tax and NI on the amount.

 

So, if it a Christmas bonus they get, I am sure they will appreciate it especially if you pay the tax and NI due. If you simply want to but them a small gift, that is fine – especially if it is a turkey. That is definitely tax allowable.

Can we help ?

If you send your employees and clients Christmas cards, this is another allowable expense – so is the work’s Christmas tree. If you find some of the shopping is combined with personal shopping, this is not a problem. Ask the shop to prepare a receipt for your business. If this is too much hassle and you have a till receipt for combined personal and business items, just circle and claim for the business costs and keep the receipt. The business then owes you the money by way of an expense claim or payment out of the business funds. This type of split shopping trip is not just true at Christmas. If you buy you office milk and paper from Tescos with the week’s shopping, keep the receipt and mark what is business and make sure you claim.

 

If you are a very small limited company, i.e. just you with help from the family, don’t forget you are an employee and entitled to your Christmas lunch. Have a good one.

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