December 19, 2018

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?

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

When did you last claim expenses ?

There are 3 good reasons why you should put in an expense claim:

1. You have paid out money on behalf of the firm so they owe it to you
2. The firm needs to know what it has paid out/costs it has incurred otherwise it is working with an incomplete picture
3. If expenses are to be recharged to the customers. They should be included before the customer forgets they agreed to pay for them.

Whether you work for someone else, or yourself the same three rules still apply. The sooner you put the expenses in, the sooner you can be paid and the firm knows it has a liability.

You might trade as a sole trader and the concept of expenses seem strange. The same rules apply. If you pay parking of, on average, £2 per day and record it for 45 weeks of the year that amounts to £450 worth of costs. So, if you pay 20% tax and 9% NIC that is £130.50 extra you would need to pay in taxes if you didn’t make the claim.

For many small expenses such as parking, you cannot always get a receipt. HMRC understand this providing you are making notes and claims as you go rather than inventing a lump at the end of the year. It may be that your bank statements show when you had to park to go to the bank. As well as the parking, don’t forget to claim the mileage unless the business owns the car and pays for your petrol.

Other amounts often overlooked are postage, paper (when bought from Tesco’s with the week’s shopping), car washes and charity donations. All are allowable and some do have receipts, others don’t. If some of the items on the receipt are business and some not, then include the receipt and just mark which you are claiming for – at least you have proof that the money was spent.

The important thing is to do it while you still remember – Happy to chat things through with you if I can be of help

When should you outsource?

The four reasons why you might outsource are:

Lack of skill
Lack of equipment
Lack of capacity
Cheaper than doing it yourself
The one thing you cannot outsource is the responsibility for completion and quality. That is down to you.

The reasons I have chosen this topic are twofold. Firstly I am writing a book ‘Understanding Your Accounts for the UK Business Owner’. I have outsourced the publication and PR as I do not have the capacity (or the skill) to find appropriate individuals to work with. I know that this may not be the cheapest option, but if my time is available to charge to clients, I can make the money to pay for those with appropriate skills, knowledge and contacts.

The second reason for my choice is I have recently been passed a client who thought they could manage without an external accountant to compile their company accounts and corporation tax returns. Basically they had a go and then buried their head in the sand. It didn’t go away and they ended up with a £20,000 tax bill. Having done the work, the bill should be nearer £2,000 including interest for late paid tax. What they will have to pay are the penalties to Companies House and HMRC. These will be nearly £1,500 in total and could have been avoided. Recognising that you need help or advice and acting can save you money – or at least stop you wasting it.

When considering outsourcing, make sure you are happy with the quality and ability to deliver from your chosen supplier. Having clearly specified your requirements and time frame don’t forget to get progress reports to ensure they are on track. In the meantime make the most of what you can do that you are not outsourcing as you have decided you can do that better and/or more cheaply without compromising the core work.

Are you charging enough ?

 

What is enough for you? This leads from the question ‘why are you in business?’ This week I had a client who greeted me with the comment: “Every year when I drive over with my books, I tell myself I really ought to put my prices up”.

She provides her services mainly to the elderly in care homes with limited incomes. Her children have both left home and the second one is now going through university. Her main reason for working was to pay for their education, but she also enjoys her work. Do you think she should put her prices up?

Pricing is not all about making the greatest profit you can, it is about understanding the figures so you can decide what is appropriate. Do you want to price yourself out of the market, or just appeal to a small niche? Someone I worked with a couple of weeks ago had just taken an order for a dining table at £35,000. That is not a typo. I can confirm that I will not be placing a similar order.

In order to ensure you make a profit, you do need to understand what costs are involved, both in the delivery of that particular sales and in the running of the business. If you don’t have precise figures available, just jot down what your overheads are in a year divide, by twelve and realise how much you need to make in a month before you even consider the costs involved in a sale. This is why you cannot afford to work for free. By all means give a sample or taster away, but make sure your customer knows this is not the norm.

If you feel that you need to talk through your pricing structure please get in touch