September 26, 2017

Business Advice from Berkshire – I’ve got round to it – when will you?

There are some things that sit towards the bottom of my ‘to do’ list as I know I ought to do them so won’t actually remove them. They won’t make me instant money nor will they, on the surface, cost me money by not doing them, so why don’t I choose to do them?

IntuitSometimes it just takes will power to go ahead. I have been training QuickBooks since 2004 and been listed as QuickBooks Advisor for many years. Last year they bought out an accreditation scheme so you could take an exam, and become a ‘certified’ version. I downloaded the course material, read it through, decided it was fine as I knew and taught most of it, but never did the exam. This year they have also bought out an accreditation for their On-Line QuickBooks so, as I am on the stand next to Intuit – authors of QuickBooks at The Business Show at Olympia, I thought perhaps I ought to go for it. I am glad to say I passed both exams to a high level so can now be one of their elite team. The only question now is why didn’t I get round to it before?

I have done my personal tax return, I have done my VAT return, how about you? Are there jobs that you don’t fancy that are not time critical yet but you will feel so much better when they are done. It may be they were part of this year’s New Year Resolution. There is still time to complete it before the end of this year.

Go on, take the plunge and share with me what you have or will achieve over the next month.

Business Advice from Berkshire Partnership Agreements

If ever I am asked about partnerships, one thing I feel strongly about is that a partnership agreement should be drawn up. Everyone knows how much upset and anger can happen when a couple get divorced, well the same can arise when a partnership has a change in partners. This can be dramatically reduced if something is put in place at the start.

Book coverAlso, it is not just about splits to, or extra partners joining the partnership, if one partner is unwell, or even worse dies, what will happen to the business then? If the partner was married does the remaining spouse want to continue with, and contribute to, the business at the same level as their late spouse? Are they technically able? If inheritance tax has to be paid, how will the business be valued? How will the tax be paid?

On a more positive note, a simple point is how the profits are going to be shared. Does each partner contribute capital and actively work in the business equally? I had a recent call where I was asked what could be done. A client wanted to invest some capital so that her friend could carry out a project to enhance the value of the investment and then share the proceeds. One would get a share of the sale proceeds over the investment as reimbursement for risk and interest on the ‘loan’ plus the return of the original investment. The other would receive the remaining share of the sale proceeds over initial investment in recognition of their efforts for the increase in value. I suggested they sat down together to consider all aspects such as running costs, anticipated date of sale, what if something happened to one of them and then draw up a simple agreement and both sign it and keep a copy. My feeling was that at least they had documented their original intention as a starting point for discussions in the future.

I have another client who, if they had done this when they entered a joint venture some years ago would not now be dealing with solicitor’s letters. It could have all been resolved four years ago rather than dragging on taking time and money to resolve.

Even if all you are doing is asking someone to do some freelance sales work for you, it is worth writing out the expectations of both sides which should, of course, include confidentiality so you start with a full understanding of who is responsible for what and how the rewards are going to be shared.

bill view pennyIf you are already working with someone but have no agreement in place, it is not too late to create one. If you choose to involve a solicitor, save yourself money by preparing your joint list of things you feel need to be included before making the appointment. A solicitor may have a template but it will not include clauses specific to your business.

Two or more people working together are usually stronger than the sum of the individuals. Two or more people fighting does not get the job done.

If you feel it would be useful to have a facilitator to prepare the list of items to be covered, contact Wellington Consulting who would be happy to help.

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.

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.

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 are you planning for next year ?

Many people start a year with New Year’s resolutions, but they often do not achieve them. Are you going to be one of those?

I would suggest the main reason for failing to achieve is that you can see the goal you want to achieve, but don’t plan a route to get there. If you want to travel to any destination, you wouldn’t just expect to arrive without the journey. How you choose to travel is a matter of for you. The decision will be based on research, preferences and practicality – and possibly budget.

One question I have long asked myself is why do many business owners put more effort into choosing a car than the decisions that affect their business? So, my simple request to you is decide where you want your business to be this time next year and then put the effort in to planning the route including check points to ensure you are on track. If you do this you will get there.

Happy Christmas and a Successful 2013

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.

Do you enjoy working online ?

The government is trying to encourage greater use of computers. This may be a move to efficiency, but is it what you like to do?

This might sound a bit rich, as you are reading this on line, but do you do it by choice? What happened to the old days of piles of papers?

As an accountant, I still deal with piles of paper. Most departments at HM Revenue and Customs cannot communicate by e-mail. They are improving, but having tried to deal with things over the telephone, including call backs to then be told to write in can be a little frustrating. What compounded the issue for me was the first chap I spoke with didn’t know the answer so I suggested writing in. I was told not to do that, as it would not be looked at for at least three weeks. This is much better than some departments a couple of years ago, where they had a three month backlog of post. So things are improving.
Can we help ?
If you have an outstanding issue, by all means ask your accountant to chase it, but the more information you can give them, the more they can give HMRC, the more likely you are to get an answer. If you have an outstanding tax return for 2011/12, get it moving now so you know how much tax you will have to pay by 31st January 2013. If you are due a refund, there is still a chance you could get it by Christmas – if you act now and let them simply put the money in your account. If only one could just get all customers and client to ‘simply put the money in your account’, life would be wonderful!

How has the weather affected your business ?

The one thing we can be sure of is change. What was drought earlier in the year, is now replaced by floods. Although these are extremes, they are not entirely unexpected. From a business perspective, the question is how much will they impact on your business?

Some years ago, I had a client near Gloucester lose his earlier year records when his garage was flooded. As he could not then prove payments made in cash to HMRC, he had to pay up £2,500 again. He did once have the payments book but he had binned it with the other soggy papers.

That was costly, but what have you in place if your computers gets water damaged? How quickly can you get replacements with the right programmes? How quickly can you restore your data up to the previous working day? How many sales and customers could you lose if this happened? It doesn’t have to be just floods that cause wet computers!

If you don’t currently have off site copies of your data, I would urge you to do so. If you are a small business, it may simply be a manager taking an external hard drive home every week. Better than this is web hosting. Even better is automatic backups so it is not reliant on someone remembering to do it – even when they are on holiday.

We haven’t yet had much snow, but put plans in place now so your business doesn’t take a dip as staff can’t get to work, customers don’t know if you are open or not and delivery times are extended/suspended due to the weather and the holiday period. Have a good one.

Happy to speak to you about how I might help

Why is your car like your accounts?

If you have a car, you pay for the insurance and tax each year, because you have to. If you have a limited company you prepare accounts each year and submit them to Companies House and HM Revenue and Customs because you have to. Even if you are not involved with a limited company, you still need to send your accounts to HMRC.

That’s the compliance bit out of the way. Now to the practical side. When did you last fill the car with fuel? When did you last check the oil and top up the washer bottle? You may well get someone else to do the service and, if it needs it the MOT, but you will do or delegate the lesser activities, and you know you must make sure that the major ones get done.

So, why am I comparing your car, to your accounts? You expect your car to be there as a tool of your trade. To get you to appointments, to carry your equipment and to get you to the bank, Post Office and other locations you need to reach as part of your business. As a result, you make sure you have the fuel and that it is in full working order. Your accounts are the same. If you do not take care of them and check them regularly you may find yourself with a problem.

Tax return sooner rather than laterWhen did you last check who owed you money – and then chased them. As long as the money is in their bank account and not in yours, the more it will cost you. Particularly if you work with an overdraft, you are paying interest because your customer chooses not to pay you. If you are an organisation that have staff that do the chasing for you, do you know how much time they are having to spend, and on whom. What could you do to help?

Accounts receivables (amounts your customers/clients owe you) is just one area to check. Have your suppliers put their prices up and you are not aware of it? Are your staff working more hours but actually getting less done?

Your accounts are a tool, if you learn how to use them fully, your life with be easier and safer and your business will grow.

I love helping business use their accounts to the full – contact me for a chat