November 14, 2019

How Can you afford it ?

Do you sometimes find yourself wanting something for the business, but thinking you can’t afford it? Like any purchase, you should first ask yourself the questions ‘why do I want it? What benefit will I get once I have purchased it?’

miniDepending on the answer to these two questions, you can then decide whether to even think about how to fund it. A very simple and small example was a purchase I made at the weekend. I am a latecomer to iPhone’s and have historically logged my mileage in my diary so I could make a claim at the end of each month. Sounds good as I always have my diary with me so can easily enter the mileage. Trouble is, you run out of space against the day; although I keep my diaries, it would be hassle for the taxman to go through and agree my monthly claims even though I do circle the numbers for easy reading. However, one of my clients has been using FYI Mileage and sending me the sheets each month. I splashed out £1.99. I can now tell you I have done 12 trips amounting to 143 miles since 1st July. By recording 27 more miles than I would otherwise have remembered to claim for, I have covered the cost by the reduction in Corporation Tax I will have to pay. I am sure I will manage this by the end of July. So, return on investment one month maximum.

 I know this is a minute example, but I also placed an order for a stand at The Business Show at Olympia. This is costing nearer £3,000. Same rules apply. What do I need to ‘sell’ at the show to recover the cost and cover my, and my staff’s, attendance and travel and accommodation? I have done the maths and happy that we will bring in revenue that will exceed the costs.

 So the next question is cash flow. How do I pay for the show before I get the money from the sales? The answer is I agree a payment plan to spread the payments. The salesperson was amused that when I had said that my business is training clients in the area of understanding their finances, that I was demonstrating exactly the same to him regarding my own. Justifying why I was not prepared to pay it all today, or even all within 30 days when the show was not until November. That I could use much of the cash not paid up front to generate the income that would allow me to pay the balance prior to the show. A mutually beneficial timing was agreed with the condition that I would be included in all marketing even if they had not received full payment. I have got caught out by that one before. So watch out for Wellington Consulting links in The Business Show marketing. I also hope to see you at stand 160!

So what have you bought recently that you first thought you could not afford until you worked out the benefits? How did you finance it? Please share your ideas so that others can enjoy accounts and grow their business.

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

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