September 26, 2017

Have you got 31st July in your diary?

tax, self-assessment, HMRC, 31st July, accountant, herefordshire, monmouthshire, gloucestershire

Have you got 31st July in your diary?

 

We may all have put this matter to one side, filing the reminder letter in the unshrinking in-tray, but staying on top of our taxes is vitally important to all small businesses and those who are self employed.

The key is to not fear them or forget them!

 

I know you are busy, time so often our enemy and much better spent delivering our goods and services, but time has to be taken to keep our business affairs in order and avoid any nasty penalties. And if you don’t have the time, engage with someone who has both the time and the expertise.

Diary dates.

So, let’s start by reminding ourselves of the key dates for your diaries regarding taxes:

  • 5th October – registration date for individuals who are self-employed
  • 31st October –paper tax returns completed submission deadline
  • 31st January – online tax returns submission deadline
  • 31st January – deadline to pay taxes you owe
  • AND if you paid more than £1,000 tax on 31st January 2017, you may have more to pay by 31st July 2017.

How do you know if the July 31st deadline is applicable to you?

HMRC state this: ‘If you are self employed and earn enough to pay over £1,000 in tax and you have not already settled all tax due for the year to 5th April 2017, you will need to make a payment by 31st July this year.’

Also, if you have rental income or large amounts of investment income such as dividends, you may also be affected.

There is further information on the gov.juk website, or if you are unsure talk to your/an accountant.

You still have time.

If you haven’t already completed your tax returns, don’t panic! You can still avoid HMRC’s late filing penalties just start taking action now.

  • Gather together all your receipts, bills, bank statements, mileage logs, sales invoices and takings summaries
  • If you have already entered these into a spreadsheet or accounts software, such as QuickBooks Online, well done. It will make your life easier, and you will have a better handle on how the business is doing.
  • Gather other details of income such as bank interest, rental income (and related expenses), P60s and P45s and P11ds from any employment or pension you have. Also pension payments if you can deduct those from your tax bill
  • If you are married, discuss with your spouse whether there is benefit in reallocating some of the personal allowance to the other spouse (10% can be moved although some rules apply)

Decide if you are going to feel brave and prepare your own tax return. If so

And if you would rather have help making sure you are declaring everything and claiming all you can, call me and we can get things sorted.

Penny Lowe, Wellington Consulting

Visit my website to find out more about how I can help you and your business >

How much do your customers owe you?

If you go overdrawn at the bank, they are quick enough to let you know you have their money if it is not by prior arrangement. And they charge you to let you know and charge interest until you pay them back.

Birmingham-20121029-00115Would you be better off if you treated your customers the same as the banks treat theirs? It may be that you wouldn’t want to upset your customers and you would rather they did not go to the competitor every couple of years. But, you are in business. If people buy from you, they should expect to pay. It is up to you to make it clear before they buy, when you are expecting payment to be made.

If you operate with a bank overdraft, you know all about paying interest. If all your customers paid you within the terms you lay out at the start, how much smaller would your overdraft be? How much less interest would you be paying – all that then becomes profit and can either be used elsewhere in the business or be enjoyed by the business owners.

Many business owners don’t like to charge customers interest, but the banks have no problem! Remember, the alternative to charging interest is to either make sure you are paid before the work is done, or depending on the industry, issue credit terms and make sure you have a system in place to chase the moment an invoice becomes overdue, relentlessly until it is paid.

Penny LoweI do suggest a system as otherwise you can find you spend more time chasing money than making it. If you do find this is the case, you may need to revisit some more basic questions such as why do customers feel they don’t need to pay. Do you need to charge some customers a premium as you guess from the start they will be late payers? Do you need to hire someone to get heavy as you would rather keep them sweet for the next purchase they choose to make. I have been used as an excuse – and a threat when my clients are chasing money. My accountant is worried that you might be unable to pay and won’t let me do any more work until you do. If you don’t pay, you will leave me no choice but to pass this debt over to someone else to deal with (accountant or small claims court).

The trick is to be consistent and this is another reason to have a system. If ‘it’ can chase for you, it will free up time for you to do the more profitable tasks.

What tips do you have for making sure your customers pay? Enter your comments below.

Would You like an upgrade?

How often do you ask clients if they would like to spend more with you? To sell more to existing clients is cheaper than finding new clients!

gravatarWhen we flew home from our holiday with British Airways, the simple question above resulted in them getting more income for not a lot more expense. They already had the air side lounge with food and drink and staff available. On board the plane the comfy seats would have been empty, the staff would have had time on their hands if we hadn’t upgraded. The only costs to them were food and drink and processing the extra payment.

This made me think of how often, or not, I try to up sell my services. If it is classroom training on QuickBooks, then every time. I feel that in most cases classroom training is too general. You only need an accountant who understands all, a business owner who understands nothing about accounts and a book-keeper that has used Sage for years and wants more of a conversion course. With this diversity, what level should I pitch it? Then add in the different business sectors that each of these may work in, how can you justice to all? I know one to one training would be of most benefit to my clients, so that is what I sell. I then give them a couple of options and let them choose.

If a prospect asked you what is different about your premium service, what would you say? What would be the benefit to them of paying you more? Is it a more personal service, delivery by the most senior staff, extras that the prospect may not even have considered?

The decision for the prospects comes down to available products and prospect education. If they can see what is in it for them, it will make their choice easier. It will also demonstrate what makes you different from your competitors. You have the prospects’ interest at heart.

What you are offering them is an educated choice. For them the ability to make a decision based on fact rather than simply going for the cheapest and living to regret it. Have you ever found yourself in that position?

If you haven’t already, make a list of what your business offers as an upgrade, then cost it, decide on a price and trial it. Remember, you are only educating your prospects on other choices available. You have nothing to loose and extra income to win. Wouldn’t you like higher profits?

Enter your comments below about whether you are going to offer an upgrade and why.

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.

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.

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

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.