an accountant's perspective


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Resources for start-up businesses

If you are just starting your own business or expanding/ taking on employees there is a lot you need to know and keep up to date with.

Visit our handy downloads page to stay up to date with all the latest tax information and guidance on how to approach VAT, payroll, National Insurance contributions, self-assessment and bookkeeping. Use the links below to find out more of what you need to know:

 

New starter checklist for Payroll

http://www.abc-accounting-services.co.uk/perch/resources/basic-payroll-information.pdf

 

The basics of bookkeeping

http://www.abc-accounting-services.co.uk/perch/resources/bookkeeping.pdf

 

Self-Assessment explained

http://www.abc-accounting-services.co.uk/perch/resources/1395927146selfassessment.pdf

 

The basics of VAT – 2014

http://www.abc-accounting-services.co.uk/perch/resources/vat.pdf

 

National Insurance Contributions – rates and allowances

http://www.abc-accounting-services.co.uk/downloads.php

 

2014/15 Tax data

http://www.abc-accounting-services.co.uk/perch/resources/1395935011taxdatafinal.pdf


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Tax data 2014-15

For all your up to date tax data information for the tax year ahead (6th April – 5th April) – Download this pdf.

You can either store it on your PC or print it out and fold it into a 3 page leaflet for your convenience. Just click on the link below:

tax data FINAL

Next week I will be doing a separate blog on pensions to clear up any confusion over what has changed and what we can expect in the coming months/ years.

Happy reading!


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Pre-budget predictions: Any good news?

With the budget around the corner it is time to take stock of what has been and what will arrive in its place. There are three topical areas where we can state with reasonable certainty what is set to change because of published draft clauses for the 2014 Financial Bill. These are personal tax, capital gains tax and business tax.

For personal tax the expectations are:

  • Individuals born after 5 April 1948 will be entitled to a personal tax allowance of £10,000.
  • Employees will be able to increase the maximum value of shares acquired under Share Incentive Plans (SIP) and Save As You Earn (SAYE) schemes. The increased limits will be: SIPs – £3,600 on the free shares that can be awarded to employees and £1,800 on the partnership shares employees can purchase; SAYE – the monthly amount that employees can save will be increased to £500.
  • The annual exemption limit for employer-related loans, to be treated as earnings, will be increased from £5,000 to £10,000.

For capital gains tax the expectations are:

  • The annual exempt amount to be increased to £11,000.
  • The rule that exempts the final 36 months of ownership of a private residence from CGT is to be reduced to 18 months. The 36 months will still apply if the owner is disabled or moved into a care home.

For business tax the expectations are:

  • HMRC is introducing new legislation affecting Limited Liability Partnerships. Members of LLPs who satisfy the new criteria as “salaried members” will effectively lose their self-employed status and be taxed under the PAYE legislation.
  • There will also be restrictions on the way in which mixed partnerships, those with individual and typically corporate members, allocate profits and losses.

We know more about what is expected in the 2014 budget. For more information go to: https://www.accountancylive.com/autumn-statement-2013-summary

One of the most significant changes comes to National Insurance contributions. The changes promised in last year’s budget come into effect this April:

  • Almost every employer who is a business or charity that pays Class 1 NICs on their employee’s or directors earnings is eligible. The Allowance could reduce your contribution by up to £2,000. To check eligibility go to www.gov.uk/employment-allowance for more info. This rolls out on the 6th April 2014 – we waited a year for it so don’t delay and make sure you benefit from day one!

This budget proposes another concession for employee’s under the age of 21:

  • From 6 April 2015 employers will no longer be required to pay Class 1 secondary NICs on earnings paid up to the Upper Earnings Limit (UEL) to any employee under the age of 21.

It is another year of waiting but yet another nice reduction in National Insurance contributions.

What we do not know is what surprises there will be in the 2014 Budget. There will be live updates on our social media and significant points posted here throughout the speech on the 19th March. Once again we await a lengthy speech, some disappointment, some broken promises, some kept, and hope for the outcome to be good for business above all else!


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Managing your cash flow

This is a great article found on the newbusiness.co.uk site that I felt I had to share. Go and check it out online @:

http://www.newbusiness.co.uk/articles/banking-finance/managing-your-cash-flow-0

 …or carry on reading: 

A recent ICAEW survey revealed that 58% of micro businesses (less than 10 employees) and 35% of small and medium businesses (between 10 and 250 employees) had no debt.

 

Good cashflow management is key

A recent ICAEW survey revealed that 58% of micro businesses (less than 10 employees) and 35% of small and medium businesses (between 10 and 250 employees) had no debt. Many businesspeople must wonder how they can manage without borrowing. The answer is largely to do with good cash flow management.

Why is cashflow important?

Having cash allows a business to operate. So managing your cash resources and making sure you have enough to meet your needs, e.g. paying wages, buying supplies, meeting your personal financial requirements, is absolutely critical. 

Starting up – things soon get complicated

Most businesses start with a small amount of cash from the proprietor. As they build up the business they leave sufficient funds in the business to cover the bills. Problems often start when they offer credit to customers or buy on credit. Or they take on an employee or a sub-contractor who requires regular payment.  Suddenly cashflow – payment from customers and payment of supplies bought on credit – becomes an issue.

Get a grip – keep accurate, up-to-date records

New businesses need to establish some good habits. These start by making sure that the business accurately and regularly records details of trading transactions. This might be in a manual cashbook, on a computer using a spreadsheet or accounting software or using a simple ‘paid’ / ‘unpaid’ system for bills. Accounting records must allow the business to instantly find out what monies are owed from customers and the amounts unpaid to suppliers. 

Preparing a cashflow forecast.

But running a business requires more. A cashflow forecast is essential to be confident about the business being able to meet its commitments. The forecast will detail when receipts are expected and payments are required .Forecast receipts and payments are usually analysed into months but can be weekly or even daily if the cash position is tight.

You start with what bills are already owed or owing and known commitments such as the weekly or monthly expenses such as payroll, rent and leasing or hire purchase payments. You then build in predictions of receipts and payments from future sales and purchases over the forecast period – usually up to a year ahead, although a bank will require longer if you are seeking a loan or overdraft.

Cashflow forecasts should be a key tool in the management toolkit. They can highlight when the business might run low on cash and can be the basis for an action plan to remedy the situation before it happens. 

Receipts from Customers -vital steps to maximise receipts:

For big value sales on credit, check the customer’s credit rating. Agree the terms of payment with the customer before starting work. Invoice as soon as the goods have reached the customer or service rendered. Regularly progress payment with the customer starting a few days after invoicing.. If payment is not received within the agreed period, progress payment higher up the customers management and consider how quickly you stop supplies or services. If still unpaid, use solicitors’ letters and threaten court proceedings. If still not paid, consider whether to go to court, or are you throwing good money after bad?

Payments to Suppliers

Agree payments terns with suppliers at the start of trading with them and always try to stick to themIf you think it may not be possible to pay, contact the suppliers concerned and ask for more time. Provided you consistently pay on time, and requests to defer payment are rare, they will probably agree, to delay payment. Letting suppliers down will reflect in your credit rating which may come back to affect future supplies. 

Working Capital Control

Managing cashflow is in part a mirror image of the businesses investment in working capital.  Generally, the higher the value of stock or work-in-progress, or monies owed by debtors the greater the difficulty in keeping control of cashflow. So maintaining a tight grip on stocks and debtors should free up cash for use elsewhere in the business.

Capital Expenditure

Decisions to invest in capital equipment such as computers, equipment or motor cars should be scrutinised carefully. The acid test is can the money be more profitably used elsewhere?

If the new asset is essential to the business, think about deferring payment by hire purchase, leasing, or hiring. Also consider the tax perspective. If you have been making losses, leasing or hiring might be preferably.

Summary

  • A business should have a continuous focus on cash flow
  • Good practices and clear lines of responsibility are important.
  • Have clear payment terms with customers and suppliers
  • Have a system for following up late receipts from customers
  • Knowing your current bank balance and how you expect it to change over next 3 months is vital
  • Good financial management not only helps manage cash it will reassure finance providers if you are seeking finance.
  • A growing business can mean increased working capital. Arrange your finances to meet any increased need. 

You may also find this video useful:

http://www.youtube.com/watch?v=3CjRpolbjy0  


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Happy Birthday Belinda

Well, it might be the case that you do not learn a great deal about accountancy from this blog but hopefully you might just see how the industry has changed over the years.

Our boss is one of a kind. She started the business out of a port-a-cabin and has worked her socks off to get where she is today. With a busy office, a team of fifteen dedicated employees and a business on the verge of its second expansion you might say that she has plenty to celebrate. We would certainly like to see her taking a moment to congratulate herself and appreciating how far she has come – well done boss – you have earned it!

So to celebrate her birthday we are presenting a picture blog of what we thinks make our boss special. She is a fitness instructor in the evenings, renowned in Gainsborough for her distinctive voice (loud) and appreciated by the local café on Corringham Road Industrial Estate for her regular business and love of ham, eggs and chips.

Belinda Darley – just not your stereotypical accountant – observe:

snuggles

the george

belinda

bindi

vid8

bindibirthday

bindi 2 funny

80s Bindi

Happy Birthday Belinda – our very own 80s Step instructor ace accountant – Don’t ever change – your team loves you for exactly the person you are today 🙂


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What is accounting and bookkeeping? Are you prepared?

They are familiar terms that we vaguely understand but try to avoid at all cost. The moment you gain a little of enthusiasm towards them and open a book, or scan a website to learn more, you retract in horror at what it involves! And yet, if you have a methodical system, maintain some legible records then you can survive that initial terrifying moment of realisation. Bookkeeping and Accounting all boils down to detailing your business income and expenditure.

Simple bookkeeping

For the most simple set of accounts you need:
• a cash book to record money entering and leaving the business
• a sales ledger, which details money received and owed
• a purchase ledger, which logs outgoings
• a wages book, which details salary payments and National

Insurance contributions

These books will most likely exist within a spreadsheet in some computer software these days so you will be able to see everything on a single screen.
It is also a good idea to start as you mean to go on. So get a box file and divide it into months so you can keep cash purchase receipts. Then get a couple of files and store unpaid purchases in one and paid purchases in the other.

For cash, cheque and card payments, till rolls are an ideal means of updating your sales ledger. If your company will be issuing invoices then sales paid and sales unpaid need to be separated into files electronically or with another couple of ring files manually.

You need to keep just about every piece of paperwork that you receive, no spam though, that can be shredded. Keep bank and card statements, fill out paying-in books and cheque book stubs meticulously, maintain payroll records (if you employ people) and VAT records (if you’re registered). For help in any of these areas go to the PAYE or VAT sections.

Electronic bookkeeping systems

The software for basic accounting may not be as expensive as you think. A budget of £100-£180 would get you basic accounting software and you can choose one that comes with free support. The most popular software for electronic records (spreadsheets) is Microsoft Excel.

There are also dedicated accounting packages which are easy to use. See the Mother website (www.managewithmother.com/about/cashbook) for the bookkeeping software that ABC backs. It is a great tool and we can recommend it because we have several clients that are very happy with it.

Software is ideal because any errors can be corrected quickly; you can get financial reports with the click of a button. Any money you owe or is owed will be brought to your attention. You can also see sales patterns and costs, which helps with forecasting and budgeting for your business.

So, can I do this myself?

If you cannot afford a full-time bookkeeper then you will have to do much of it yourself. As your business expands the role of a bookkeeper can be combined with other duties, such as office or HR manager. A part-time bookkeeper may be more viable for small to medium businesses.

It is possible to do it yourself and then get an accountant to take care of the complex bits that quite frankly would give you sleepless nights and a nasty tension headache. A small business will be faced with the chore of doing the books after hours, or at weekends. Once your business expands then the quality of the accountant you choose could have a great impact on your company.

The best advice when choosing an accountant is to follow your gut feeling, see how up front they are about their fees and test their knowledge before signing up with them. Don’t go for the one up the road before getting a feel for whether it is right for your business.


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Flat Rate Scheme for VAT: How does it work?

  • There are those who champion it as a big money saver. Recently, we have had questions relating to this scheme from clients asking us how it works and if it would be beneficial for their business. We have had to reassure clients that if they qualify for this scheme then they have already been automatically placed on it. However, for those without an accountant this is certainly something you should look into and seek advice if you think you are eligible.

    There are cases where money can certainly be saved by using the flat rate scheme for VAT but you have to be eligible – and the majority of people are not.

    Do you qualify?

    First of all your VAT taxable turnover needs to be less than £150,000.

    This total includes everything that you sell (products and services) that are liable for VAT in that year. This includes standard, reduced rate and zero rates sales or other supplies but excludes the actual VAT that you charge and exempt sales and sales of any capital assets.

    You also need to be in a position where you do not claim back VAT on purchases because you cannot reclaim VAT back on purchases under the flat rate scheme. In addition if you regularly receive a VAT repayment under the normal VAT rules or make a lot of zero rated or exempt sales the scheme may not be right for you.

    When raising a sales invoice you charge the full VAT rate (20%). However, as mentioned above you do not claim input VAT on any expenses. The VAT you pay to HMRC on the flat rate scheme is at a lower rate depending on the category of your business. You should receive a 1% discount for the first year of registration.

    For example the current percentages for the following categories of business all differ:

    Advertising 11%

    Catering services, including restaurants and takeaways 12.5%

    General building or construction services 9.5%

    Printing 8.5%

    Architect 14.5%

    These are just a snippet of the business categories that exist.

    What does it look like on paper?

    1) As an architect you charge a client £200 + VAT (@ 20%) for services done.
    You receive a total of £240 including the £40 VAT.
    Under the flat rate scheme you pay 14.5% VAT or £34.80 to HMRC for this invoice.
    Therefore you would save £5.20 in VAT on this transaction.

    2) As a printer you charge a client £680 + VAT (@ 20%) for printing work done.
    You receive a total of £816 including the £136 VAT.
    Under the flat rate scheme you pay 8.5% or £69.36 to HMRC for this invoice.
    Therefore you would save £66.64 in VAT on this transaction.
    You may be able to claim back VAT on capital assets worth more than £2,000. Always check this and seek approval from HMRC.

    You cannot join the Flat Rate scheme if:

    You were in the scheme and left during the previous 12 months.

    You are or have been within the previous 24 months eligible to join an existing VAT group or registered for VAT as a division of a larger business.

    Your use one of the margin schemes for second hand goods, art, antiques and collectibles, the Tour Operators’ Margin Scheme, or the Capital Goods Scheme.

    You have been convicted of a VAT offence or changed a penalty for VAT evasion in the last year.
    Or, your business is closely associated with another business.

    If you are not sure then please do ask as this scheme is not appropriate for everyone. Those who do qualify certainly ought to be on it and we can help you with that as well. For those in doubt contact your accountant for advice. Feel free to call us on 01427 613613 and receive some friendly advice free of charge.