July 6, 2020

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.

How do I choose a Good Accountant ?

What is your definition of good? For the person I was with today it included: someone who understood QuickBooks accounting software, has experience of factoring, doesn’t just delegate to junior staff, was prepared to ask questions and communicate. The last accountant but one got the sack – having worked with the firm for a day I would suggest much of this was due to poor communication rather than poor work. The last one walked out at the end of the first day. This was because the ‘books’ needed sorting out before he could move forward. The last 4 months they have tried to manage without, so there is some sorting still to do. I am sure they will be back on track within a month. What will they do then?


Last summer I was asked to profile my perfect client. When I showed the list of good points to the first few people, they agreed that I was describing their ideal customer. Clear on what they wanted, quick to pay, kept to an agreed timetable, refer new business your way etc.. However, they went on to say, that they would not fulfil all my criteria. It reminds me of the saying ‘do unto others as you would have done to you’. If you profiled you perfect client, would you fulfil your own criteria?


So, in summary, decide what you want from an accountant, discuss this with them and, most importantly, give them a chance to do it. If you or your accountant haven’t yet filed your tax return, give them all the information and help they need. If you need to get an accountant, or are going to change, start the process today as they will want to get authorisation from you to speak with HMRC and this takes time. Remember, you are not the only client they have.

Like to chat a little further ? Im happy to advise

How much do you put away for tax?

They say the two certainties in life are death and taxes. The big difference is that you know when taxes are due, the same thing can’t usually be said about death.

I have today been to a client who has, for as long as I have known her, religiously put money away each month so that when her VAT bill or tax bill arrives, the money is always there to pay it. When she changed her trading status from sole trader to limited company we sat down and did the figures to make sure she knew approximately how much she would need to have saved and by when. What she now does is put a larger amount aside every month and then pays a dividend to cover her holidays and Christmas. She also pays a monthly salary and has this, and its PAYE, set up on standing order.

work out your tax and put it awayAlthough she would rather not pay tax, she knows the more she pays, the better she is doing. By reviewing her transfers to the company’s second account regularly, she just sighs with a smile when I tell her how much VAT to pay or what her corporation tax bill is. This is different from the reaction of some of my other clients who know when the tax is due, but always think it will be nil. At least that is one excuse as to why they haven’t put money aside.

If you are not sure how much to put aside, speak to your accountant and they should be able to help. Remember it is always better to put too much away and have a nice surprise rather than a nasty shock.

Could your business benefit from this proactive planning ? Contact me and I will be happy to help.