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Business Bulletin By business owners, for business owners
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Issue #5
Focus on… Finance Spotlight on James Blacklaws
PLUS Tax planning in its simplest form Navigating the hardening insurance market Sponsored by
Why should you have a bookkeeper? Reducing costs in your business
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The Business Bulletin
A magazine that works for everyone Paul Green Founder & Chief Editor
Welcome to the fifth edition of The Business Bulletin. Hopefully you will enjoy this edition which focuses on finance. Published every four weeks, it will cycle through the following themes: ■ Finance ■ Sales & Marketing ■ Operations & Resources ■ Strategy & Personal Development It will bring together a collection of articles aimed at any small business owner who doesn’t have all the answers and is open to some thoughts and advice from some of the leading experts in their fields. So what makes this different to any other publication? I’m glad you asked! For the reader – no more advertorials. All the featured articles have been chosen for their valuable content, not because the author has paid to be published or taken out an advert to get their slot! For the contributor – you can submit articles for inclusion without having to pay for the privilege or having to advertise. If your article is deemed suitable based on its merits – that it is
All the articles featured in this magazine have been chosen because of their valuable content
relevant, good and engaging content and not promotional of your business, then it will be published. For the advertiser – if a publication is more engaging due to the content, then it is more likely your adverts with be noticed. The number of full-page and half-page ads is limited for each edition and there will be a limit on the number of advertisers from a given industry sector. This means your advertisement is more likely to stand out from the crowd and not be lost in a sea of competitors. Your feedback and thoughts on this magazine are welcome – let us know your experience. Thanks,
Join in! Contact us to contribute an article or place an advert for future editions contribute@business-bulletin.co.uk
Design & Layout: Pixooma Ltd. Proof-reading: James Tarry © Copyright 2021 The Business Bulletin. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, mechanic, photocopying, recording or otherwise without prior permission of the editor or the author of the article. Disclaimer – no responsibility can be accepted for any actions that you take as a result of the content provided in this magazine. There is no guarantee that implementing any of the advice contained in the articles will definitely ensure your business success or have a positive impact. They are presented as information based on the experience of the authors working with many different types of businesses in their field of expertise and are provided as a choice for you to consider if they will be useful for your business.
Issue 5 – Finance | 3
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The Business Bulletin
Contents This edition focuses on finance and brings together a wide range of topics with a selection of quality articles from leading experts in their field.
Why should you have a bookkeeper? Wendy Tate
6
The impact the Government loan 9 schemes will have on business finance James Blacklaws What the hell are balance sheets and profit and loss accounts? Ruth Chettle
12
How do I work out my break even point? And does it even matter? Nishi Patel
15
The tortoise versus the hare! Peter Douglas
18
Reducing costs in your business Martin Wallis
20
Tax planning in its simplest form Roger Eddowes
24
Essential tips for credit control Paul Marks
Spotlight on‌
27
30
James Blacklaws
Navigating the hardening insurance market Heather Coupland
36
Give yourself a financial MOT Neil Wattam
40
Ask the experts
43
SME Survey
45
Issue 5 – Finance | 5
The Business Bulletin
Why should you have a bookkeeper? Over the years I have spoken to a great many business owners; some of which don’t have a bookkeeper preferring instead to do their own books. Each have their own personal reasons for this, all of which I can empathise with. I thought I would share with you some of those concerns I have heard and dispel a few of the myths.
If I do my own books, I will be close to my cashflow
otherwise be overlooked: for example,
is something the business owner needs
that direct debit that is going out of
to overcome; especially if the business
Of course, as a business owner, you
the bank each month for software
is a limited company. As a business
you stopped using some time ago.
owner you simply cannot maximize the
I have personally come across a
value in your business without a small
business paying in excess of £300 per
team of trusted advisors.
want to feel close to what is going on in your business. This is completely understandable – more than that, it’s imperative if you are to make timely decisions to ensure your business moves in the right direction. Does this mean you have to do the nittygritty of the bookkeeping yourself? I don’t think so. With a competent bookkeeper dealing with the day to day stuff, you, as the business owner, can get on with running the business.
month for Sage software and support a good 12 months after moving to Xero, costing the company £3,600. The saving when this was cancelled effectively made the bookkeeping fees cost-neutral for that first year. When was the last time you did
Trusted being the key word here, your team should start with a qualified bookkeeper and a good accountant, both of whom abide by a Code of Professional Ethics, ensuring complete confidentiality. I applaud all business owners whether sole traders,
an audit of the direct debits coming
partnerships or limited companies,
out of your bank? Are any of them for
you are all amazing, doing a fantastic
software or services you no longer use?
job. I would not attempt to service my car, fix my boiler or do anything
You should be reading your
remotely electrical in my home,
are too valuable to be doing work
You feel uncomfortable sharing confidential information
that others can do – and probably do
This is only natural, it’s private right?
and accounts. Leave the numbers
more efficiently – because it is their
Well not exactly, if you are a limited
to the bean counters! For example,
area of expertise. The bookkeeper is
company you will be required to file
we recently started working with a
also a second pair of eyes. They will
accounts at Companies House and
business who weren’t aware they
often pick up on things that would
these can be viewed by anyone. So this
could claim back the VAT on the fuel
financial statements and the accounts receivable report, not preparing them. Your time and skills
6 | Issue 5 – Finance
I leave that to people who know what they are doing, and it is similar when it comes to the bookkeeping
The Business Bulletin
element of their staff mileage claims,
weekend when you should be relaxing
thus reducing their VAT liability.
and recharging your batteries. Not as
that there is something wrong until
Another who was paying a direct
expensive as you think!
the accountant starts to do the year
Often it does not become apparent
end accounts, and by then there
debit for Sage payroll 12 months after
You don’t know how to find a good one
could be a big bill to put things right.
You think they’re expensive
This can be problem especially
accreditation to bookkeepers. These
because anybody can call themselves
professional bodies also ensure that
a bookkeeper. This is so true, and it
their members follow strict guidelines,
Actually a qualified bookkeeper worth
is especially important that you do
have the appropriate insurances
their salt will be able to offer you a
some background checks before
and complete ongoing training to
package deal: a simple scale of fees
taking on a bookkeeper.
ensure they are offering up to date
they stopped using it. The bookkeeper is there to help you succeed.
So how do you find a good one? There are several professional bodies offering
based on the number of transactions so you don’t get any nasty surprises when you receive the bill. In fact, in many cases, as an experienced qualified bookkeeper, I will be able to identify efficiency savings in other areas of your business, which, in some cases, could equate to more than the fees. A second pair of eyes looking out for your best interests, someone to
When did you last do an audit of the direct debits coming out of your bank?
bounce ideas off, books up to date, no pawing over paperwork at the
Issue 5 – Finance | 7
The Business Bulletin
advice; especially important where tax matters are concerned as these rules are changing all the time. Each professional body has a directory of members, their level of membership and their competencies. Check the websites below to see if the bookkeeper you are considering using is listed: 1. Association of Accounting Technicians
a good bookkeeper is one of the best investments you can make in yourself and your business.
2. International Association of Bookkeepers You’ll probably be astounded at how
3. Institute of Certified
fast we can clean up yours and create
Bookkeepers
some useful management reports,
Your current situation is embarrassingly out of control Believe me I understand this one! We are not here to judge your bookkeeping skills and it is a skill,
giving you the all-important numbers to help you make sound decisions for your business. All told, a good bookkeeper is one of the best investments you can make in yourself and your business. Having listed the five main reasons
you think. 6. Messy internal processes hamper business growth. 7. The lack of current or accurate financial information makes it tough to make sound decisions. 8. It’s stressful not knowing how much cash is available. 9. Turnover not monitored, and
believe me. Bookkeepers are used to
SME’s give for not using a bookkeeper,
walking into messes and have seen
I would like to give you 10 good
a non-VAT registered business
it all before, after all it is what we do.
reasons to use one!
unknowingly goes over the
NOT using a bookkeeper can create some nasty problems, which, if left unchecked, can cause major stress for the business owner and employees alike.
threshold at which they need to register for VAT resulting in penalty charges. 10. Doing the books yourself eats into family time and may cause friction (and more
Here are just ten examples that I have come across:
Wendy Tate Bean Counters Bean Counters is a forward thinking Accountancy practice, specialising in Xero Cloud-Based Software and have been a Xero certified practice since 2014. Whether your business is new or old it needs efficient accounting services for growth and sustainability, we offer an outsourced accounting solution tailored to your needs. So speak to us about your bookkeeping, payroll, VAT and compliance needs. 07810 562295 wendy@bean-counters.co.uk bean-counters.co.uk
1. Payroll filings get done late,
All of this takes away your time, energy and peace of mind – not to
incorrectly, or *shudder* not
mention how badly it affects your
at all.
business’s financial results. There
2. Invoices don’t get created and sent to customers on time, impacting business cash flow. 3. Outstanding invoices don’t get tracked and followed up on, no credit control in place. 4. Bills are paid late, incurring late fees and ill-will among suppliers. 5. Cash and inventory goes missing, more common than
8 | Issue 5 – Finance
stress).
is also the matter of increased accountancy fees as your accountant must put everything right before they are able to compile your year-end figures. Most importantly of all it keeps you from your REAL job which is to maximize your business’s value for you and your family.
The Business Bulletin
The impact the Government loan schemes will have on business finance There is little doubt that the Government loan schemes have been the dominant force in commercial lending since their introduction in March 2020.
The schemes have consisted of
offers loans from £50,001 to £5m for
reduced due diligence, especially on
three different products each
smaller businesses.
forecasting the future trading viability
catering to different parts of the SME marketplace.
A refresher The Coronavirus Large Business Interruption Loan Scheme (CLBILS) caters for businesses turning over £45m+ and offers loans to SMEs for amounts from £5m to £200m. The Coronavirus Business Interruption Loan Scheme (CBILS)
The Bounce Back Loan Scheme (BBLS) – Introduced due to the slow
of the applying business. More information on all
take up of the CBILS scheme on May
these schemes can be found at
4th, offering loans from £2000 to £50k
gov.uk/coronavirus/business-support
with a maximum loan amount based on 25% of the businesses last year’s turnover. This scheme was introduced, not only catering to the smaller end of UK business, but also with significantly
The Business Bulletin
The immediate and short term impact The scope and size of these schemes is unmatched in UK financial history with a total of approx. £65bn lent under these schemes to approx. 1.5m UK based SMEs, of which a majority is underwritten by UK Plc (for more information on the differing level of Government guarantees please go to british-business-bank.co.uk/financeoptions). The impact of this on the High Street banks is such, that effectively (with a few exceptions) they have
The scope and size of these schemes is unmatched in UK financial history with a total of approx. £65bn lent
solely focused on these products alone during the COVID pandemic leading to several previous agreed lending facilities being withdrawn, and a significant reduction in support to the SME marketplace outside of these loans. The knock-on impact has, arguably, had an even larger impact on secondary lenders. The combination of the fear of increased loan defaults from existing clients, and uncertainty about previously agreed facilities, led to the wholesale withdrawal of previously sanctioned
loans and a suspension on new
clients Banks have declined the
applications. This cut a vital lifeline for
facility or where a client doesn’t have
multiple businesses who relied on this
a relationship with one of the Banks
marketplace to assist where banks
offering the loan.
have already pulled back. There has also been a massive
Many lenders here have used the Government guarantee to shore up
impact on the previously buoyant
their lending book, securing a 80%
unsecured lending marketplace.
Government guarantee for debts
The rise of lenders in this space (led
previously secured against a directors
by the dominant Funding Circle)
guarantee only. This has been a by
has been the revelation of the SME
product of CBILS, effectively transferring
lending space in recent years, with
liability for potential bad debt from
Funding Circle alone responsible for
directors and investors to UK taxpayers.
over £10bn lent to over 90,000 UK businesses with a significant upward trend year on year since launching in 2012 (fundingcircle.com/uk/statistics). Due to the aforementioned
James Blacklaws JB Commercial Finance James, an ex-banker, is a highly experienced and fully Independent Commercial Finance broker, authorised and regulated by the FCA. With whole-ofmarket access. He specialises in helping businesses declined by their banks; businesses looking to grow, survive and purchase commercial property. 07722 432128 james@jbcommercialfinance.co.uk jbcommercialfinance.co.uk
Much of the future of the market
uncertainty caused by Government
depends on the outcome of the
lockdowns, default rates have
Government loan schemes on the
increased and while some larger
banks’ balance sheets and bad
lenders (such as Funding Circle for
debt provision. While the supporting
instance) can manage these defaults
guarantee from the Treasury should,
and the predictable losses (click to
in theory, offer comfort to lenders, the
read FT article), many have folded
reality may well be very different. There
altogether, cutting yet another lifeline
have been multiple Government
for SME’s, especially at the smaller end
backed schemes to encourage
of the marketplace.
lending to the SME marketplace in
The response from many of these lenders has been to ignore their previously successful business model and move 100% into the CBILS market, offering loans generally where
10 | Issue 5 – Finance
The future of business lending
recent years, the most notable being the Enterprise Finance Scheme (EFG), and invariably they end in disputes. While the EFG scheme cannot compare in scope, size, and liability to
the COVID loans (Click for British Bank statistics) it should act as a warning of how these agreements
JB Commercial Finance
can unravel with widespread confusion as to where liability lies (Click for ‘hidden truths’ article). There is every reason to believe that if the economy recovers and the loan schemes work as outlined, then the lending market should be ‘back to normal’ by the end of 2021. While the High Street banks are still very reluctant to lend to trading businesses outside of the Government schemes and to excellent existing customers, the
Does your business need cashflow finance?
alternative lending space does seem to have woken from its slumber in the last couple of months and lending is now notably easier to obtain than during the summer, albeit, a majority of this lending still requires solid background security, such as a property or strong debtor book, to proceed.
Conclusion
Are you looking to buy a commercial property and require funding?
While it can be extremely easy to be critical of High Street banks and the Government loan schemes, the scale of fresh lending to UK based SME is unlike anything ever seen in economic history. These products (especially the Bounce Back Loan) have kept hundreds of thousands
Has your bank turned your business down for finance?
of businesses on life support for a majority of 2020 and combined with other elements of the support program, have protected millions of jobs. Despite this short-term benefit, it seems highly likely that the UK taxpayer will be bearing the cost of these programs for many years to come and
Dont know where to turn for business funding?
the SME owner is no different. While the business lending marketplace will recover, I suspect it will take a number of years for confidence to return and balance sheets to be restored to a point where lenders (especially the High Street banks) feel comfortable loosening the purse strings to a point where we can consider a ‘return to normal’.
Call JB Commercial Finance for a free initial consultation
Telephone: 0116 3440 322 Mobile: 07722 432 128 Email: info@jbcommercialfinance.co.uk Website: www.jbcommercialfinance.co.uk @jbcommercialfinance
James Blacklaws Issue 5 – Finance | 11
The Business Bulletin
What the hell are balance sheets and profit and loss accounts? If you run a business you may know that a balance sheet and profit and loss account form part of your year end accounts prepared by your accountant (especially if you run a Limited company). To many people, they are just numbers on a piece of paper they get given from their accountant each year and they do not really understand them.
Ruth Chettle Canary Accounting After spending the previous 12 years working in a number of Northamptonshire practices, Ruth decided to take the leap and set up her own practice in January 2020. Specialising in looking after individuals and owner-managed businesses her aim is to make accounting and tax less stressful, more affordable and make things as easy for you as possible. 07805 973447 ruth@canaryaccounting.co.uk canaryaccounting.co.uk
12 | Issue 5 – Finance
The Business Bulletin
I am going to take you through the
more than a year’s time. These
The notes will provide additional
basics of what they are and what
will be items such as bank loans.
information about what makes up the
information they provide.
What is a balance sheet?
There will then be a couple of totals: ■ Net current assets/liabilities:
at a given point in time, usually on your year end, of everything your business owns and everything your business owes.
What is included in a balance sheet?
■ current assets: These are things the business owns which convert into cash much
to see whether the business is asset
much the business is worth on paper if you sold everything you own and paid off everything you owe. Capital and reserves The bottom part of the balance sheet
The most common headings are: ■ Called up share capital: This is the amount the shareholders have put into the company for purchasing their shares (if a Limited company). ■ Retained earnings: This is the amount of profits/losses
shows the business liabilities – the
generated after tax to date left
things your business owes. These are
to be distributed to shareholders
again split into two main headings:
or the owners of the business.
that the business is due to pay within the next year. This might include invoices outstanding for goods, Corporation Tax/PAYE/ VAT not yet paid to HMRC, bank overdrafts, bank loans etc. ■ amounts due after one
■ Let investors decide whether your business is risky and if can afford to repay debts. ■ Help credit agencies/suppliers generate a credit score for the business ■ Help value the business if business.
where this has been generated from
The middle part of the balance sheet
liabilities): These are items
The balance sheet can be used to:
you were to decide to sell the
and bank balances.
year (also called current
business loans to fund the business.
shareholders of the business and
resale, unpaid sales invoices
■ amounts due under one
rich or cash poor or highly reliant on
shows what is available to the owners/
quicker such as stock held for
Liabilities
financial position. You will be able
pay off your current liabilities.
as the business owner how
into two main headings:
motor vehicles.
can get a good idea of a business’s
to cash and used that cash to
liabilities. This figure gives you
your business owns. These are split
equipment, computers and
converted all your current assets
ALL assets and deducting ALL
shows the business assets – the things
long time such as buildings,
By looking at a balance sheet you
calculated by adding together
The top part of the balance sheet
the business will own for a
shows what is left over if you
■ Net assets/liabilities: This is
Assets
■ fixed assets: These are things
assets less current liabilities. This
What does a balance sheet show?
This is calculated as current
A balance sheet gives you a snapshot
balances on the balance sheet.
OR ■ Owners funds: If you are a sole trader or a partnership you will
If you run a Limited company the balance sheet for your business is available to view by anyone on Companies House if they search for it.
What is a profit and loss account? A profit and loss (P&L for short) account summarises the income generated and expenses incurred by a business over a period of time (usually a year).
What is included in a profit and loss account?
see owners funds which will
Turnover
be a combination of capital
This may also be referred to as sales or
introduced, drawings taken
revenue. This is the income generated
and profits/losses generated.
by your business. This may be from
The total here should equal the net asset/liability position – the reason it
selling products in a shop or online or it could be by selling your services.
year (also called long term
is called a balance sheet! See Figure
Cost of sales
liabilities): These are items that
1 for an example of a typical balance
These are the costs incurred that
the business is due to pay in
sheet for a small limited company:
directly relate to you making a sale.
Issue 5 – Finance | 13
The Business Bulletin
Figure 1
A few examples could be: ■ The cost of purchasing an item to resell ■ The cost of purchasing the ingredients or components to make something else ■ The staff costs for producing goods to sell
Administrative Expenses
made a profit or a loss for the period
These may also be referred to as
being looked at.
overheads. These are the expenses
Gross profit is the difference between
account will show past information it
regardless of how many sales are
can be used as a tool to review and
generated. Examples could include:
plan for future periods.
■ Rent, rates, electricity, insurance ■ Telephone, internet, stationery
■ Advertising, marketing, networking
your sales and cost of sales. The gross profit figure is used to calculate a gross profit margin percentage which can be reviewed and compared. The gross profit margin shows you how much profit (towards overheads) your business is making for every pound of sales. The gross profit margin is effectively your sales mark up or added value to a product and can highlight pricing issues or inefficiencies. Understanding the effect of
Profit/loss before tax
simple and even a detailed profit and loss account showing more detailed breakdowns of the headings will only give you an indication as to the key areas of your income and costs. It may be whilst reviewing the figures that you will then need to drill into the transactional detail in order to get
deducting all costs and expenses from
information to be able to fully review
sales. This figure is the starting point
costs.
for which tax is calculated whether you are a sole trader, a partnership or a Limited company. See figure 2 for an example of a
Both the balance sheet and profit and loss account are useful tools for reviewing your business performance and should be reviewed on a regular
typical profit and loss account for a
basis. If you are using an accounting
small limited company:
software such as Xero then these reports are readily available to view
on gross profit margins, will aid you in effectively monitoring the
Reviewing a profit and loss account
performance of your business.
will show whether the business has
14 | Issue 5 – Finance
A profit and loss account within a set of year end accounts will be quite
This is the profit or loss generated after
What does a profit and loss account show?
changes to sales or costs of sales
Although the profit and loss
a business needs to incur to run
■ Wages costs for admin staff Gross profit
Figure 2
at a click of a button as and when needed.
The Business Bulletin
How do I work out my break even point? And does it even matter? In its simplest terms, a break even point is reached when your total revenue matches your business costs and your business is not making either a profit or a loss. Anything generated above this point is a profit.
In my experience, many business owners, particularly if they are early in their business journey, consider ‘breaking even’ to be a cause of celebration. In some cases, it is actually a business goal.
How do I find my break even point?
out their break even point which is
Before we go into whether or not a
even units.
break even point is a valid benchmark
expressed like this: Fixed costs / (Price – Variable costs) = Number of break To work this out the first thing you
or goal to work towards, we should
need to do is establish your fixed costs.
probably explain how to work out it
Fixed costs are the costs your business
benchmark or goal, does a break
out. There is a very straight-forward
has regardless of how many products
even point even matter?
equation to help businesses work
it sells or how many customers it has.
But, as a measurement,
Issue 5 – Finance | 15
The Business Bulletin
They are fixed over a period of time
owners regularly forget to factor into
£53 billion last year, many high street
such as a month or a year. Include
their break even analysis is their own
names went into administration
things like premises costs such as rent
salary. Breaking even, but not being
and thousands of workers lost their
or a mortgage, payroll for salaried staff,
able to pay your bills, is no victory in my
jobs. Anyone who managed to
utility bills and insurances and loans.
book. Think about what you wanted to
keep their business going through
It would also be prudent to include
achieve when you set up your business
the challenges of the Coronavirus
depreciation. By this we mean taking
and why. Did you want to earn enough
pandemic in 2020 will have seen first
into account that office equipment you
to replace what you brought home in
hand how vital a cash surplus can be.
have bought will depreciate over time.
your last employed job? Perhaps you
Next look at your variable costs. These can be tricky to work out, particularly as your business grows, but, essentially, we’re talking about the
wanted more freedom and several holidays a year. I, personally, think goals like this are much more important than a break even point.
Another piece of advice would be to be aware of your business’ outgoings and ensure you are making the most of the business tools you already have at your disposal. For example, if you are using Xero accounting software, make
cost of things like materials and wages
sure that you really get to grips with it
divide that by the price you charge
If a break even point is outdated, what financial goal or point should I aim for instead?
for your product or service minus the
I’m not saying there is no place
cost of your variable costs. The answer
for break even analysis. It can be a
own business, don’t be scared of the
to this will give you your break even
useful exercise to carry out to stay
numbers. Checking your costs and
amount of units to sell.
on top of your numbers, but when I
income weekly and monthly and
am working with business owners I
then using that data for planning
How important is it to know your break even point?
encourage them to prioritise the type
and forecasting purposes to reach
of lifestyle they want to achieve over
your goals should be exciting and
fixating on break even data. Business
motivating. Aim for more than simply
Generally speaking, businesses like to
owners should think about things like
breaking even!
know their break even point because it
how many hours they want to work,
can help them to work out what they
what sort of salary they want to pay
need to achieve to become profitable.
themselves and what is the minimum
Many business owners would say
they need to earn to live their life.
their break even point gives them a
Everyone works with the hope that it
point of focus because it makes them
will provide them with a good lifestyle
aware of their minimum financial
so to me it’s common sense that
and operational performance level. It
business owners should work with the
gives them the confidence to model
lifestyle they want to achieve in mind
different ‘what if’ scenarios often based
rather than their break even point.
and activities like marketing, that you can specifically link to a product. Once you have established these figures, take your total fixed cost and
on how many sales they need to generate depending on whether they raised or lowered their prices. However, I would argue that
I would argue if you want to have fewer sleepless nights it’s also essential to aim to create a cash surplus for your business. This allows you to reinvest in
knowing your break even point is far
the business to enable it to grow and
from being the be all and end all of
also gives you the peace of mind that
running a successful business. In fact, I
your organisation is strong enough to
would go as far as saying I think ‘break
cope with any unforeseen emergencies.
even’ is an outdated concept. Having been a Chartered
This time last year no one was predicting how badly Coronavirus
so that you are using all its features and are able to use the software to help you with your forecasting, reporting and budgeting. Lastly, if you are running your
Nishi Patel Northants Accounting Nishi started Northants Accounting in 2014 after a successful career in corporate finance. He has been a Chartered Management Accountant (CIMA) since 2007. Nishi is known for the high standard of tax planning he provides to his clients and his ability to communicate effectively. He has a knack for identifying what the real issues are and creating actions to deal with them. 07735 501251
Management Accountant for nearly
would hit the UK’s economy in 2020.
nishi.patel@northantsaccounting.co.uk
a decade and a half I often find that
The UK’s hospitality sector alone saw
northantsaccounting.co.uk
one of the key things that business
its sales figures drop by more than
16 | Issue 5 – Finance
Securing your business
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If your employees rely on usernames and passwords alone, you’re at risk for a VPN security breach. Are you sure your users are who they say they are? Can simple authentication and vigorious security co-exist? Found out in the RSA eBook:
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The Business Bulletin
The tortoise versus the hare! Over recent years the commercial finance brokerage market has seen the rise of the ‘on-line’ brokerage models. These are aimed at providing ‘all market coverage’ and focusing on ‘speed of delivery’ to service the ‘need’ they believe SME businesses have. They are, in all honesty, normally
it is meeting the criteria, such as
backed by very capable ‘techies’
security and serviceability, required
whose expertise is in creating complex
by the funder. This inevitably leads
algorithms. These allow them to come
to a higher successful conversion
up with ‘funding options’ in hours if
rate. It is acknowledged by most
not minutes. The speed at which a
funders that they will reject a much
solution to a funding problem is found
higher percentage of enquiries from
can, on the surface, appear to be very
on-line brokers than they would
attractive, particularly to a business
do from experienced commercial
that is desperate to find a cash flow
finance brokers or professionals like
solution. This is all very well, but what
accountants or corporate finance firms
can be highly questionable is the
for the very reasons as stated above.
appropriateness of the type and source of funding proposed in such cases.
Obtaining the most appropriate funding for any SME business should,
Peter Douglas Business Finance Services Having successfully completed a Degree in Business Studies Peter spent over 20 years in Export Sales and Marketing. He then decided to give up the globetrotting life and, with his wife, bought a small business which they ran together. Peter
in nearly all cases, be more important
has been involved in running SME’s ever
‘on- line brokers’ NOT because of the
than the speed of delivery. Taking into
since and set up BFS in 2002 having spent
quality of the introductions but for the
account the current unprecedented
volume of enquiries they generate
times we are in, as a result of Covid 19,
due to their high on- line marketing
it is even more pertinent to understand
spend. The ‘on-line’ brokerage requires
where many funders are in terms
volume and, in their drive to build
of looking at taking on new clients.
scale, quality is not their prime focus
Most funders are still ‘open for new
as, being ‘hares’, they are all about
business’ but will have tightened their
speed. Speaking with many lenders
underwriting criteria, become more
in the commercial finance market,
risk adverse and are only interested in
most will confirm that their sales staff
what they regard as quality enquiries.
would prefer to handle enquiries from
This is evidenced by the fact that many
their working capital requirements
a professional firm or experienced
funders have ‘furloughed’ sales staff
in what will undoubtedly be more
commercial finance broker (‘tortoises’)
confirming where their priorities lie in
challenging circumstances given
over any ‘on-line brokerage’ enquiries.
the current climate – that is focusing
what the ‘new normal’ may look like.
on their existing client book.
The Government’s move to support
Funders (lenders) engage with such
This is because the ‘Tortoises’ enquiries are invariably better
As the lockdown restrictions
time getting an education in commercial finance. He says “Whilst it is hard work I have never had so much fun as running BFS. Nothing gives more satisfaction than helping SME’s to grow or regain their strength”. 07770 866955 peter@bufinserv.co.uk bufinserv.co.uk
businesses of all sizes by providing the
qualified in terms of the prospects
continue to be tightened, more SME
CBILS and Bounce-Back Loans has
requirements and confirmation that
businesses will be having to revisit
undoubtedly helped take the pressure
18 | Issue 5 – Finance
The Business Bulletin
off temporarily, it is only a temporary
and commercial finance broker
this can carry various potential pitfalls.
relief! Never has it been more important
members as their Chambers could
Professional, unbiased advice can
to ensure that, when it comes to
now be effectively competitors! Surely a
greatly improve the prospects of
looking for funding, businesses would
better option would have been to pass
avoiding such pitfalls
be well advised to engage with
such enquiries on to local Chamber
professionals and experienced brokers
members!
who focus on obtaining the most
Finally we should mention that, over the years, it has become an undeniable
Sourcing the best funding for a
fact that in many cases there may
business should not just be about
be a need for more than one kind
speed [other than in exceptional
of finance to meet the funding
cases] but a more considered
needs of a business. For example it
appeared over recent years is that of
approach to ensure the right type
may be appropriate to combine a
the Crowd Funding platforms. There
of funding. One very important
commercial Loan with an element
are a significant number of these
consideration is whether there is a
of equity investment. Alternatively a
available today. Not all, however, are
proper (realistic) business plan with
combination of Asset Finance and
totally successful; indeed a number
the necessary financial projections
Invoice Finance may be the best option
have already failed, causing problems
confirming the level of finance that
to avoid unwanted additional security
both for their borrowers and the
is needed to meet future cash flow
requirements. In most cases the review
investors whose money they lend.
requirements and/or to cover planned
of such options will not be considered
Here again it is worth discussing this
capital expenditure. Whilst some
by the on-line brokerages.
optional source of finance with your
business managers are perfectly
accountant (if they have sufficient
capable of writing a realistic business
experience of dealing with Crowd
plan many SME executives would
Funding Platforms) or a professional
undoubtedly benefit from professional
Commercial Finance Broker, before
advice. Although this will cost in terms
making an application.
of fees, it will normally prove to be a
appropriate funding as opposed to the quickest funding. Another ‘on-line’ option that has
Whilst on this subject, we have been puzzled by the recent move by the British Chambers of Commerce to partner with on line brokerage platform Swoop Finance. The offer of a ‘find funding’ service is somewhat surprising
worthwhile investment by saving time and money in the long term. Most Lenders will require a business plan as part of the justification for a loan. No proper plan – no loan! Another factor to be considered
Those business owners that take time and professional advice when it comes to raising funding for their business will invariably be the winners in the long run. As with the old story of “The tortoise and the hare”, invariably the tortoise will be the winner when it comes to getting the right type of funding for your business on a long-term basis. So, If you are contemplating applying for finance for your business then before
and will not be seen favourably by
is any requirement for additional
doing so talk to your accountant or a
many accountant, corporate finance
security against a loan. Here again
Commercial Finance Broker first!
Issue 5 – Finance | 19
The Business Bulletin
Reducing costs in your business Before we look at
Depending on margins, addressing
“how?”, let’s start with
increasing profit as growing sales. Let’s
“why?”. Should costs be a priority, or is the
costs can be every bit as good a way of say your margin is 20%, so that extra sales of £100,000 delivers £20,000 gross profit – often it needs less resource to
most important thing
reduce costs by £20,000 and achieve
increasing the sales line?
are we talking about? I specialise in
the same result. What type of costs “Indirect Costs” – sometimes known as overhead costs. We don’t include payroll within indirects, but it’s such a big cost to most businesses that I have to say something about it here. How do you manage payroll costs within your business? Sometimes we focus on hourly rates and annual salaries, but that can be short-sighted. Here are some great ways to manage these costs – 1. Pay the right wage for the
20 | Issue 5 – Finance
recruitment will be much less. 2. Right-size your workforce. Procurement (which is what I do) is great, and getting the best price is vital, but often there’s just as much to achieve by “right-sizing” in lots of areas. Cut out waste, and don’t pay for something 52 weeks a year which you only need for a month. Does that apply to your workforce as well? Maybe you have some roles you don’t need all year – dispatch staff at Christmas, or an accountant who is busiest in the days after month-end. Pubs, shops and restaurants are very adept at flexing work rotas to make sure they have staff at busy times so they can make sales, but just a
job – that way you’ll have
skeleton at other times (think
motivated staff who will be
midnight at the supermarket).
more efficient, you’ll have fewer
Lots of other businesses can
vacancies to cover by paying for
follow the same principle with
temporary labour and the cost of
flexible hours, bank staff or even
The Business Bulletin
hiring agency workers just for the busiest times. 3. There’s also the opportunity to look at specialist roles. Do you, as a business owner, look after payroll or HR when there could be many more profitable uses of your time? Do you need a bookkeeper to work in the office? Outsourcing is a great way to save costs in lots of disciplines – the professional hourly rate is off the books, and only paid when needed, and very often the skill levels are higher than a small business could fund in house. Great examples include IT Support,
■ Just-right takes into account
can monetise or are you being sold
the size of load, an optimised
features and benefits where there will
delivery route, and a realistic
be a limited opportunity to obtain a
estimate of future growth.
return on investment?
Yes, we’re back to “right-sizing” again, and for a van, that might mean your specification includes engine size, payload and annual mileage. It’s always
Have you incorporated technology into your specification? Are you buying, or are you just being sold to?
worth getting the basics clear before
Supply chain
starting the procurement process.
One of the keys to effective cost
Often it’s worth being a bit flexible as well – do you need a particular colour vehicle, or, for example, does it need to be new or could an ex-demonstration vehicle be cost-effective?
Technology
management is to source through the right supply chains. Every industry not only has multiple suppliers but multiple types of supplier. Think about mobile phones – there are the main networks (Vodafone, EE, O2, Three) and you
Payroll, HR and bookkeeping. Try
Changes in technology take place at
can buy from them direct. Other
and use your business network so
an exponential rate, so how will new
brands use the same infrastructure
that you can find outsource partners
technologies influence your buying
and arguably deliver the same, or
by recommendation which can
decisions? Driverless vehicles are
even better service, such as Virgin,
be much more reliable than those
starting to become a reality, and here
Tesco and Asda, with satisfaction
online reviews.
in the UK, we have vehicles which
surveys rating them higher than
park themselves, vehicles with cruise
the networks themselves, costing
of the key drivers which should
control and vehicles which stay in
less and offering better customer
influence our procurement decisions.
lane and brake automatically on the
service. Finally, you can use third-party
motorway. Mobile phones are now
resellers such as Carphone Warehouse
much more than phones, keeping
to enter a contract with the main
us connected day and night, running
network. Often, we see products being
Let’s take a lesson from Goldilocks –
multiple apps and using QR codes
purchased from the “wrong” supply
the first bowl of porridge was too hot,
to launch software or log location.
chain – printer paper from a cleaning
the second bowl of porridge was too
Individual businesses must decide how
company comes to mind – the cost
cold, but the third bowl of porridge
far the cost of extra technology is going
was high, but it was convenient. That
was just right! We should always
to deliver opportunities or efficiencies.
may be a good decision for a one-
make specification the starting point
Can you see a clear benefit which you
off, but once it becomes a regular
Now, let’s have a look at some
Specification
for purchasing decisions – after all, if we’re not clear what we’re purchasing we may end up with frustration, overspend and goods which don’t really meet your business needs. Let’s think about a delivery van – ■ Too small, and you may pay for driver overtime as the van has to keep coming back to base. Alternatively, you may incur costs from using a third-party carrier. ■ Too large, and you’ll have higher fuel bills, higher insurance and
There are many goods and services, as well as many suppliers, where it’s still far more effective to interact and negotiate
higher monthly lease payments.
Issue 5 – Finance | 21
The Business Bulletin
purchase, the extra margins in the supply chain soon start to add up. For many smaller businesses, Amazon appears to be the answer to a lot of procurement challenges, as it’s a source for a wide variety of products, mostly at competitive prices. We see a lot of businesses where staff spend hours each week buying online, and while they’ll often get good pricing, it’s often no better than using more traditional supply chains. There are
purchasing may look much higher. So how can we tell which is the right supply chain in a given situation? ■ Does it offer best cost, or very close? ■ Are the goods or services fit for purpose? Consistently? ■ Do you get what you need when you need it? ■ Does it integrate into your
Often the first question is about the type of purchase – is it a one-off or a repeat purchase? For a repeat purchase, you’re looking for a supplier who not only offers great prices right now, but has good continuity of supply as well as giving price sustainability. Are you able to group together a number of products so that your total spend is more attractive to suppliers and they are willing to reduce their margins?
a number of disadvantages though,
organisation easily? (No soft costs,
How long will they commit to hold
such as inconsistent specifications,
maybe added services)
prices for? One of the best-known stationery companies sends monthly
unclear returns policies, and above all, staff time spent researching
promotional leaflets which offer great
and ordering goods along with
Price & tariff
managing the paper trail for individual
Once we have identified clearly what
items for the office. The problem is,
transactions – order forms, receipts,
we need, and perhaps a short-list of
the prices go up the next month to be
expenses, etc. Once that time is taken
potential suppliers, how do we go
replaced by different promotions. Very
into account, the true cost of online
about securing the best price?
few customers keep track of the best
prices for pens, paper and other key
Is your business in trouble? Whether you have an urgent financial issue, need a plan to deal with growth, or you simply want an exit strategy, we’re here to help. We’ll give you clear, straightforward and empathetic guidance and support.
Call 0116 2967507 (Leicester), 01926 969000 (Warwick), 02476 0179639 (Coventry) or 01604 263179 (Northampton) Or email us on info@smartbusinessrecovery.co.uk smartbusinessrecovery.co.uk
The Business Bulletin
value product. That gives the supplier
Amazon means that ‘the price is the
a great margin opportunity. Again, are
price’. Also, we’re used to comparison
you buying or being sold to?
sites for insurance, energy and travel.
Regularly tendering your
There are many goods and services, as
requirements will help your business
well as many suppliers, where it’s still far
to achieve consistently good pricing.
more effective to interact and negotiate.
How you assess a tender is up to you
Perhaps you’d rather do business
– maybe it will be all about price but
with a local company, maybe a
you can always introduce a scoring
supplier you have traded with for
matrix to capture other key features.
years? By all means, use the internet
Examples include quality and delivery
to research the prices which are
lead time. Bringing value-added
available but it often works out better
features into the equation can help
to use that as a negotiating point with
you move more towards a strategic
a supplier you know and trust, rather
partnership with key suppliers.
than relying on online reviews for a
The considerations for one-off purchases can be different. Typically, a lot of companies will adopt a “three
company you don’t otherwise know, but offers great prices.
Martin Wallis Auditel Martin Wallis is a Specialist Procurement Advisor for cost management consultants Auditel UK. For over 15 years, Martin has been helping medium-sized enterprises to reduce costs and increase profitability, creating £millions of enterprise value. Over the years, he has bought everything from minibuses to mobile phones, and from paint to polo shirts. 07986 550864
quotes” approach. Increasingly, that is
martin.wallis@auditel.co.uk
based around an internet search, but
auditel.co.uk
this can be misleading. Shopping on
The Business Bulletin
Tax planning in its simplest form Nearly everyone who has their business up and running will want to make sure they’re claiming expenses to reduce their tax bill. However, there are a number of rules that need to be followed.
by HMRC. As an accountant, I can’t claim the cost of my suit as it has two purposes – one is business but the other is to provide personal decency. Another example is if you decide to extend a business trip abroad
Roger Eddowes Essendon Accounts & Tax Roger trained at Edward Thomas Peirson
for leisure purposes, you can only claim for the business days, not the additional leisure days.
Should I operate as a sole trader or limited company? That is a frequently asked question and the answer is, “it depends”. Operating as a sole trader is the simplest and cheapest in terms of compliance costs. An annual tax
There are some expenses
return is prepared to summarise the
that HMRC will disallow, namely
sole trader accounts with the profit
by Chancery, as a partner. He started
entertainment, so all invoices should
being subjected to both income
Essendon Accounts & Tax with Helen
be kept just in case HMRC open a
tax and national insurance. If there
check or an enquiry into the accounts
are two or more of you involved in
and the expenses. As you’re getting
the business then you may all come
your business up and running, it’s
together and form a partnership with
entirely possible that you’ve incurred
profit allocations being taxed as if you
business costs prior to forming your
were a sole trader.
& Sons in Market Harborough before working at Hartwell & Co, followed
Beaumont in 2014. Roger loves ‘getting his hands dirty’, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Using an extensive network of business contacts to leverage the best guidance and practical solutions,
limited company. You can claim “pre-
he has been called a Business Godparent
trading” expenses for things like:
due to his caring, hands-on approach. 07595 021376 roger.eddowes@essendonaccounts.co.uk essendonaccounts.co.uk
■ Computer equipment and software ■ Domain name registration
Operating through a limited company, however, gives the flexibility of when to extract the profits into the personal hand and the realms of income tax. So, for example, you may earn a huge profit one year and
■ Office rent
nothing the next. With a limited
The expense must be incurred wholly
■ Business insurance
each tax year, maximising the use
and exclusively for the purpose of
■ Stationery
running the business. If the expense has a dual purpose i.e. personal mixed in with business, it won’t be allowed
24 | Issue 5 – Finance
■ Accountancy costs ■ Travel costs
company, you could take 50% out of tax-free allowances and the tax brackets. Your accountant would be advising you as to the best way to extract the profits from the company.
The Business Bulletin
There are basically two ways, either
■ the directors – these are the
and a confirmation statement at
through pay or by dividends.
people whom the shareholders
Companies House (note – these are
Each method has a different tax
appoint to run the company
two separate documents) and a
consequence so the accountant
on their behalf and indeed
corporation tax return at HM Revenue
should be advising you on which
it may be the same people!
& Customs.
is the most beneficial – which may
As a director, you’re legally
be affected by other circumstances.
responsible for the company’s
Indeed they may throw into the mix
activities. All decisions must be
a company pension contribution to
for the benefit of the company
reduce the profits. It won’t necessarily
and not an individual
be the same for each business owner and so it’s important to seek the right advice. Also, the flexibility of having a limited company enables you to set up a brand and bid for work that maybe you wouldn’t be able to get if you were just a sole trader.
Once a company is formed,
For small companies, you’ll be pleased to know that you don’t need to file the profit and loss account (the balance sheet still does though), so no one can see a list of your income and expenditure. There are various filing
it will come with a certificate of
deadlines for these documents but
incorporation and documents called
once the company is into its second
the memorandum and articles of
year, the accounts filing deadline at
association. The latter is effectively
Companies House is nine months
the company rule book. Each year
after the period end. The tax return
the company must file both accounts
filing deadline at HMRC is 12 months
When setting up a company, you’ll need to decide on: ■ the name – this must be unique and can be quite fun – but not if nothing comes to mind! ■ a registered office address – we do recommend that this isn’t a personal home address and at our accountancy firm we offer our office address as
Operating as a sole trader is the simplest and cheapest in terms of compliance costs
an option ■ the shareholders
Issue 5 – Finance | 25
The Business Bulletin
2. You have more paperwork to
and then, to make it confusing, the
the need to become VAT registered
corporation tax is due nine months
you must calculate the turnover on
do, although this is mitigated by
and one day after the period end.
a 12-month rolling basis (the last 12
good accountancy packages
As I say, it can be confusing and indeed daunting so that’s why I’d always recommend a limited company appoints an external accountant to
months from any point in time). If you don’t register within 30 days you’re likely to be subjected to a penalty. If the threshold isn’t breached, you
guide them along the right path.
may still become VAT registered and,
We’re often asked if a business should
of course, there are some plus points:
register for VAT. Well, you don’t have a choice if your turnover exceeds the threshold. We recommend that you use accounting software to help determine whether you’re over the threshold or not. (For the 2020/21 tax year, the VAT registration threshold is set at £85,000). A common trap is to use the
1. You may claim back VAT suffered on purchases if you have a valid vat invoice 2. You tend to get credibility in the marketplace if VAT registered Yet, on the downside you might: 1. Price yourself out of the market if
turnover for a set accounting period
your client can’t recover the VAT
or calendar year. When assessing
element of your invoice
There are various schemes in place which your accountant can discuss with you, such as the flat rate scheme; but with small companies, I at least recommend that the cash basis is looked into. Under the invoice basis the VAT payable to HMRC every quarter is calculated by taking off VAT suffered on purchases away from VAT on sales invoices but with the cash basis the VAT used in the calculation is on invoices that have actually been paid. VAT is often a tricky area and your accountant will be able to advise and if necessary, help you complete and file the returns.
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The Business Bulletin
Essential tips for credit control Credit control can be described as the process of ensuring customers pay their invoices on time, and the system in place to resolve the issue if they don’t. Credit control is a vital part of controlling your cash flow.
Despite this, credit control is an
be identified as late for payment
in full within 14 days. Before offering
area often neglected and given
unless the due date was known in
early payment discounts, make sure
little priority. Business owners and
the first place. Within 30 days of the
the business can afford it and consider
managers can get tunnel vision
invoice date is common. However,
with their primary focus being on
when deciding on payment terms
generating sales. While this is an
for your business, it’s very much up
important aspect of any business, it
to you and could include payment
can be at the expense of ensuring
on receipt of invoice and up-front or
that the funds generated from those
staged payments.
sales are received in a timely manner. It’s important for businesses to
You don’t have to take a blanket approach and terms can differ from
have a good credit control system in
customer to customer. In some cases,
place and not rely on the goodwill of
a customer may have their own
their customers, assuming they’ll pay
supplier payment terms which differ
within a reasonable time frame. What
from your terms. If there is no room for
is reasonable to a customer might not
negotiation, you’ll either need to accept
be reasonable to you, as a business owner. It may sound obvious, but the
their terms or decline their custom. It’s also worth considering whether to offer an early payment discount to
first step to implementing any
encourage customers to settle invoices
credit control system is to decide
sooner rather than later. For example,
on payment terms. An invoice can’t
a 5% discount if the invoice is settled
Paul Marks Michael Paul Accountants Paul specialises in onsite services for our clients in particular management accounts preparation, accounts software implementation and training, VAT returns and general business advice. 07761 465120 paul@mpaccountants.co.uk mpaccountants.co.uk
Issue 5 – Finance | 27
The Business Bulletin
if it’s worth forgoing this extra income to assist with cash flow. As well as setting payment terms, it’s important to decide on credit limits, which again may differ between customers. A credit limit is the maximum amount a customer is permitted to owe your business. If they reach their credit limit and want to continue to trade with you, they
On this note, don’t try to hide terms
used properly is an invaluable tool
or bury them amongst other text as if
for continually monitoring the
you’re ashamed of them. Be open and
performance of a business and vital
honest and state your business’s terms
in keeping on top of credit control.
clearly from the beginning. This way,
At the click of a button, the software
you and your customer both know
will produce a report stating exactly
exactly where you stand and there
how much each customer owes,
is very limited scope for confusion or
the amount which is overdue and a
misunderstanding.
breakdown of the individual invoices
If new customers are required to
which make up that overdue amount.
need to make a payment towards the
sign a contract with your business,
outstanding balance or renegotiate
include your credit terms in that
also send automatic reminders or
their credit limit. You may consider
contract. Payment terms should also
statements to customers with overdue
giving them a temporary increase if
always be clearly stated on each
invoices. This is a great feature. However,
there is a specific reason why they have
invoice and made clear when a
it doesn’t mean you can take your eye
breached their limit and it’s unlikely
customer places their first order.
off the ball. Just because a customer
to reoccur. When deciding on credit
Agreeing payment terms with your
Many accounts packages can
gets a reminder, they aren’t necessarily
limits, consider this question – could
customers is very important but, if
going to spring into action and pay, so
my business survive if the customer
there is no system in place to monitor
you can’t leave it all up to the system.
doesn’t pay? It’s not uncommon for
whether they are being adhered to,
a business to collapse because a
then the whole credit control process
customer who owes them money
debt needs to be chased. Don’t be
is being undermined.
scared to do this or feel afraid that you
goes bust, with no way of paying its
If a customer doesn’t pay, then the
This is one of the reasons why
might offend your customer. If they
it’s important to have good quality
have agreed to your payment terms
accounts software in place which
but aren’t abiding by them, then
is regularly kept up to date and
you have every right to contact them
operated by someone with the
and chase payment. This could be in
limits have been set, they need to be
necessary expertise. Unfortunately,
the form of a statement, email or a
communicated clearly to customers.
many business owners see the
phone call. The saying “he who shouts
Don’t rely on doing this verbally. If
financial record-keeping side of their
loudest” is quite relevant here. Even
an issue arises, it’s your word against
business as a necessary evil that
customers with the best intentions of
theirs. If a customer has genuinely
they don’t want to devote much
paying on time may suffer cash flow
misunderstood the terms, this is
time or money to because it doesn’t
issues themselves. If they have limited
likely to create bad feeling with a
add anything to their business.
funds to pay their suppliers, who are
potentially good customer, so always
This couldn’t be further from the
they going to pay first? Those who
put payment terms in writing.
truth. A good accounting package
are actively chasing and are going
creditors. The higher the credit given to customers, the more reliant your own business is on their survival. Once payment terms and credit
to continue to do so, or those in the background too afraid to speak up? Although you should be assertive
consider this question – could my business survive if the customer doesn’t pay?
regarding overdue payments, don’t go at it like a bull in a china shop. If your customer is experiencing cash flow difficulties, it’s better to negotiate a payment plan than end up in an argument and lose the customer altogether. However, when you chase late payments, it’s important to have a fixed process in place which is applied consistently. An example of this might be as follows:
28 | Issue 5 – Finance
The Business Bulletin
aware of the Late Payment Act shows
No business likes to turn custom
becomes overdue, send a
that you’re on the ball when it comes
away, but if you’re regularly struggling
statement
to overdue debts and gives you a tool
to get particular customers to pay
to use as leverage. For example, you
within a reasonable period, then
could write to your customer stating
consider whether you really want to
that, although you’re entitled to charge
continue to deal with them. The time
interest and compensation, if they
you spend chasing payments could
settle the overdue amount in the next
potentially be better spent elsewhere,
seven days then you’ll waive this right.
such as finding new customers who
■ As soon as a payment
■ If the payment is still outstanding after 14 days, send an email reminder ■ If after 30 days, the payment is still outstanding, then phone the customer directly If your customer is another business,
If, despite all your efforts the customer is still not paying up, then
will pay on time. A part of credit control is also
then you’re entitled to charge interest
there is the option of taking legal
knowing when to give up. There may
on overdue amounts. There is a
action. This could be through the small
be times, particularly with smaller
statutory interest rate set down under
claims court, a solicitor or a reputable
debts, when it’s just not worth the
the Late Payment of Commercial
debt collection agency. However, if
time and potential cost of continuing
Debts (Interest) Act 1988, of 8% plus
you want to continue to trade with the
to chase the debt. Frustrating as it’s
the Bank of England base rate. If your
customer, you need to consider the
not to be paid for work you have
costs are higher (for example if you’re
damage of taking legal action on your
done or products you have supplied,
using a debt recovery agency), you
relationship with them. Along with the
sometimes you have to take it on the
can claim “reasonable” recovery costs.
cost and time involved, this normally
chin, write it off and move on.
Letting your customers know you’re
makes legal action a last resort.
Advertise for as little as £59
Issue 5 – Finance | 29 (20% discount when block booking 3 ads)
The Business Bulletin
Spotllight on…
… you’re going through a bit of a bad time don’t quit.
30 | Issue 5 – Finance
Spotllight on…
The Business Bulletin
Spotlight on James Blacklaws James, an ex-banker, is a highly experienced and fully Independent commercial finance broker, authorised and regulated by the FCA. With whole-of-market access, he sources funding and business loans for those wishing to buy commercial premises, or those looking for funds to develop their business. In this interview he shares about his business and thoughts on the finance industry.
So, how have you got to where you are today?
spend on yellow pages adverts or adverts in the
I’ve been in the industry 18 years now and have
local newspaper. I took the view that the best
run my own business about five and a half. The last year or so has been quite turbulent. I try and keep people as up-to-date as possible on what’s going on with government loan schemes for the business side and the property side of things with regard to the ability to raise finance. I began as a corporate bank manager in 2003 for a High Street bank and I was in that industry
way of meeting as many people and showing my expertise to as many people as possible was traditional networking. It’s as simple as a Google search initially and from there you meet people who introduce you to other groups. I’ve always had the theory, you go along to something, you never know where it’s going to lead. I find it an incredibly effective way to meet
until 2015. I was looking after business customers,
people and demonstrate your knowledge to
looking after their relationship requirements,
them in a controlled environment for a nominal
their product needs, their lending requirements. I
fee. As opposed to sending a blanket flyer out,
decided to become self-employed in June 2015
or a newspaper advert, which may reach several
and start my own brokerage.
thousand people, but how many of them are potential clients for you, or introducers for you?
When you first came out of a corporate, did you
Probably not many. It’s something I’ve always done,
know about networking? Was that something
it’s something that I enjoy doing. I’ve continued
that you knew you needed to do? How did your
to do it during lockdown via Zoom and other
networking life start?
platforms which have been provided, and it’s been
Like a lot of people when I started my own
successful for me. It’s been the way I’ve grown my
business, I had little money and lots of time. Because I started a service industry, I sat here and waited and waited for the phone to ring and, of
business and it’s the way I’ll continue to hopefully grow my business going forward. I implore anybody in the current pandemic and
course, it doesn’t ring because no one knows who
the lockdowns to get as involved in virtual meetings.
you are! You don’t have thousands of pounds to
I believe an element of networking in this way
Issue 5 – Finance | 31
The Business Bulletin
certainly towards the end of my time there it was. I doubt whether that’s
Like a lot of people when I started my own business, I had little money and lots of time.
changed a lot in the last five years. I don’t want to have to have weekly appraisals with my boss telling me I’ve not sold enough credit cards, or widgets, or whatever it may be. And I don’t want a man in a suit telling me what my performance level is, or what my working hours should be. So, that’s been a massive why for me. It would be very easy to sit here and say it’s all about my family and my kids and stuff; of course it is - that’s why we go to work in the morning. But that
is here to stay for good. I personally
room, or frankly, I’ve seen people do it
would be my why if I was actually in
applaud that, because I think it’s
from their own bed before!
an employee position as well. Certainly
a fantastic way of meeting people without having to spend an hour and
What’s your why? What drives you
the idea of running my own business and the high I get has been massive
a half on the road to attend a meeting
and gets you out of bed each day?
when you don’t know how many
Like a lot of small business owners, I
my own business and feel it’s a very
people are going to be there anyway.
don’t want to have to get a job again!
privileged position. To continue to do
So, why not do it from your own office,
The world of banking is very tough.
that is certainly the reason I get out of
your own premises, your own living
It’s become increasingly pressurised,
bed, whatever time it is every morning.
32 | Issue 5 – Finance
for me. I thoroughly enjoy running
The Business Bulletin
Even if all you’re doing is offering YouTube advice, you’re showing your expertise and raising your credibility. I think giving back in that way is incredibly important. Totally off-track, the boxing gloves and other boxing memorabilia you have. What’s that about? I’ve been a boxing fan since I was knee-high to a grasshopper. What you don’t know is I’ve got about another 20-odd signed gloves on my wall signed by a variety of famous boxers and as well as various fightworn memorabilia. I have things from Evander Holyfield and a piece of the ring when Mike Tyson fought Lennox Lewis and other things like that. I’ve got my own office at home where I tend to indulge myself of the odd purchase to take me back to when I was first getting into boxing. I’m simply an enthusiastic fan. Did you actually used to box yourself, or are you more of a ringside person, rather than in the ring person? These days, certainly ringside! It’s many, many years since I got in the boxing ring. Probably well over 20 years, I would say. And I like to keep it that way. I enjoyed it. I enjoyed the fitness element. I wasn’t so keen on getting punched in the face. Whilst I
with, their qualifications and their
who’s a bit more human than others
authorisations they hold. I think that’s
and someone who can back it up
what I offer, which may be different
with testimonials and case studies,
to a lot of current entrants into the
which, may be many others, despite
marketplace - being quite strong
having a slick suit and a nice car, can’t
in those fields. As I mentioned, I’ve
actually do.
spent virtually my whole working
I’ve got that combination
life in this industry and have run my
of experience, knowledge and
successful business to date.
authorisation. If you recommend
I try and back that up with social
anyone who deals with commercial
proof. I started doing daily YouTube
finance, please make sure they are
videos at the start of lockdown. Now
FCA-registered, FC authorised and
I’m doing them once a week, but my
registered and they’re a member
YouTube channel has got over 150
of one of the trade bodies. Please
videos on it. My website has got a lot
don’t deal with anyone who’s not.
of free blogs on it, and I try and show
The combination of experience and
myself as being different by actually
approachability, I think is the reason
Whenever you’re looking for any kind
offering free information and advice
why people come to me. Hopefully
of service professional, and certainly
first. A lot of brokers will charge an
they find that slightly more relaxed,
in the finance sector, whether it’s
upfront fee to see a client. I’ve never
but experienced service, is something
an independent financial advisor,
done that. I think that anyone who
which is appealing to them.
a mortgage broker, or somebody
decides they want to utilise the
who does what I do, there are
services of a commercial broker.
certain things you should check. You
I’d like to think if they search and
challenge has been?
should look for experience, how long
they found my services, that they’re
Anyone starting a business from
they’ve been running their business,
recommended to me, as opposed to
scratch with no customers, it is
the clients they’ve been dealing
someone else. They find someone
difficult. I mentioned earlier about
enjoyed them, I had a limited amount of success in the ring, I much prefer being the other side. What would you say makes you different from your competitors?
What would you say your biggest
Issue 5 – Finance | 33
The Business Bulletin
my industry start in the last year or so because they’d been made redundant
I enjoyed the fitness element. I wasn’t so keen on getting punched in the face. hopefully reasonable respect in the
of someone in my industry, or in
community and doing lots of business,
anyone’s industry, and you look at how
to being a one-man band starting
long they’ve been going and their
again. It took me a long time to get
previous customer history.
my head round that. I guess it was a bit of an ego check in many ways, in
you’ve just started, it’s very difficult to
that I felt I’d be able to do it, and felt
crack that credibility kind of veil. I felt
I’d be able to walk in and do business
when leaving the bank, I’ve been in
on day one, and actually, it wasn’t.
the bank for 12 years, people want
of them have already quit and gone back to employment. It’s actually very, very difficult to start from the bottom, which I’ve had to do. That was the massive challenge for me. Both from a personal point of view and an ego point of view. Also from a financial point of view, because it’s nice to earn money to pay the bills! We try and take in our stride and move on with it. What is your top tip for any small
when you look at the credibility
If you’ve got nothing, because
from their finance jobs. I know a lot
I think the initial challenge of
business owner out there? I think especially at the moment, my top tip is hold your nerve. If you are doing the right thing, if you feel that you’re running your business the right way, you’re looking after your clients and you’re marketing yourself properly; yet you’re going through a bit of a bad time - don’t quit. Keep confident, keep working hard and
to talk to me because of that – well
knocking it all down and starting
actually, no. Breaking down that
things will turn around. I’ve seen so
again, in the long term feels very
and starting again from being an
many people in the last six months
fulfilling. A lot of people start a
experienced bank manager, with
say, “It’s all gone wrong and I’m going
business, we’ve seen a lot of people in
to quit.” I understand that we all have days like that but keep doing the right thing. Work hard and success will come back - that’s what I’ve said since starting my business. I had to tell myself that several times. Just keep going, keep doing it, keep turning up and success will come. So, I would just say, don’t quit.
Watch the interview This is an extract of a video interview – to watch the full session, visit: youtube.com/ watch?v=kuwqjrVOips
Evander Holyfield vs. Lou Savarese, El Paso, Texas, 2007, photograph by John Kloepper © Shelka04. Reproduced under Creative Commons Licence: Attribution-ShareAlike 3.0 Unported. Source
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The Business Bulletin
Navigating the hardening insurance market The state of the insurance industry continues to fluctuate. This can be confusing for business owners trying to forecast future insurance costs while industry experts monitor the market and try to project whether insurance premiums will rise and by how much.
36 | Issue 5 – Finance
The Business Bulletin
What is clear is that risk management, loss control and safety continue to be crucial to the success of any business insurance package, regardless of market conditions. Now is a good time to evaluate your business’s risk management plan as a whole
Soft market = lower premiums + increased capacity which means insurance carriers write more policies and higher limits
to ensure your business can attain
+ wide appetite
favourable pricing regardless of
+ increased competition among
market conditions.
What a hardening market means for you
insurance carriers + relaxed underwriting criteria which means underwriting is easier
During times of a soft market, like the past few years, business owners see cost reductions in their organisation’s insurance premiums, even without a reduction in their risk. As a result,
Heather Coupland Konsileo Heather has over 20 years’ experience in the business insurance and risk management sector providing protection for companies. She is passionate about helping companies of all sizes to protect and grow their business through bespoke insurance and risk management
Hard market
programmes. Her focus is on being an
= higher premiums
enjoy enhanced insurance protection,
extension to your business for you to competitive premiums as well as a professional and efficient service.
business owners are often unwilling
+ limited capacity which means
to spend time and resources on
insurance carriers write less
loss control and risk management
insurance policies
heather.coupland@konsileo.com
because they already see their
+ limited appetite
konsileo.com
insurance premiums dropping. This reduction in pricing is deceptive,
+ less competition among
setting businesses up for a shock
insurance carriers
when the market takes a turn.
+ more stringent underwriting
It is important to take advantage of the opportunity to get ahead of the game by proactively addressing losses and risks now. When insurance prices begin to climb, those organisations that have taken the initiative to address losses and mitigate risk will see modest increases in premiums. Whereas those that simply rode the market without working to reduce risk will have a harder time placing cover and will not be offered as  competitive rates. As a business owner, a 15 per cent increase in cost will still be unpleasant, but a 40 per cent increase in addition to a reduction in cover could end up affecting your company’s well- being in the short
07595 021376
criteria which means underwriting is more difficult and data is key Risk management, loss control and safety continue to be crucial for the success of any business insurance package, regardless of market conditions.
attacks, digital addictions, etc. ■ Interest rates are at an alltime low in which investment income cannot be relied upon ■ Property insurance rates were far too low before 2020 and were already running at a loss. An increase in frequency of severe property losses such as the floods caused
Several factors influencing the hard market ■ Coronavirus will be one of the
by storms Dennis and Ciara. Climate change have insurers struggling with correctly predicting floods and they
largest loss on records for non-
need to build up a pot of
life insurers together with loss
money to take care of the next
of investment income.
set of severe floods.
■ Insurer Solvency II –the legal
■ Ogden Discount Rate resulting
requirement to set aside
in significant additional costs
a significant proportion of
to Insurers in the settlement
earned premium to ensure
of injury claims. The Ogden
soon or hardens gradually, a business
there is enough money to
discount rate is a calculation
with effective loss control and risk
pay future claims. New and
used to determine how much
management initiatives will always
emerging risks will need to be
money insurance companies
pay less to secure their firm, even in
considered e.g., driverless cars,
should pay as compensation
the softest of markets.
increase in crime and cyber-
to people who have suffered
and long term. Even if the market does not harden
Issue 5 – Finance | 37
The Business Bulletin
life-changing injuries so that
the increase in your premiums will be
it will cover all their predicted
minimised later.
future losses. ■ Reinsurance is a key component of an insurers pricing model and rates will rise significantly leaving insurers with no option other than to reflect these increases in their rates and to reduce their market capacity.
Take charge of loss control
The best advice is to ensure that your insurance broker provides a consultative approach to accomplish the following: ■ Pinpoint your exposures and cost drivers. ■ Identify the best loss control solutions to address your unique risks. ■ Discuss a risk retention strategy that accurately reflects
The best approach to control losses is
the business’s risk tolerance
to prevent injury and illness, manage
appetite and investigate
claims effectively and implement cost
alternative risk retention
containment strategies. If you work
options such as higher
to reduce risk and prevent loss now,
excesses and/or deductibles.
■ Create a solid business continuity plan to account for disasters and other unpredictable risks. ■ Build a company culture focused on safety. ■ Manage claims efficiently and challenge reserves where appropriate to keep costs down. ■ Start renewal negotiations early to manage expectations.
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The Business Bulletin
Give yourself a financial MOT Money makes the world go round, or so they say. It’s certainly important and whether you like it or not, its something you can’t avoid. Some people bury their head in the sand at the thought of dealing with their personal and family finances, but ignore it at your peril.
You work hard for your money and why not make your money work hard for you? Here are some of the areas to look at when doing a financial review – hopefully it provides some pointers to give you a better understanding of where you are at and potentially highlight areas for improvement.
Rainy days
1. What’s the value of the pension? 2. What is it invested in and what have returns been over the last year / 3 years / 5 years? 3. Repeat as necessary!
have you contributed? Do you have some spare cash? You could potentially contribute to your pension & get tax
Have you got some money set aside
relief, effectively boosting your pension
for that unexpected bill or event?
for free. There are restrictions and rules,
Ideally this pot would cover 3-6
but for many people, the main rules to
months of expenses to give you
be mindful of are
and your family the best chance of getting through that period of time, without having to worry too much about short term finances. If you haven’t don’t panic – but make it a high priority to sort.
Pensions Pensions provide a tax efficient ‘wrapper’ to help fund your future lifestyle. It’s a good idea to make sure you know what you’ve got, where it is and how it is performing. Find your most recent statement and / or log on to your provider(s) portal.
40 | Issue 5 – Finance
Neil Wattam
Across your pensions, how much
■ You can only contribute up to £40,000 or your relevant earnings per tax year ■ You can make additional
Wattam Kirby Mee Neil has worked in various finance and accounting roles since 2004, starting as an auditor, followed by senior positions within FTSE 100 and FTSE 250 companies, including as Finance Director. His experience of working in numerous businesses and sectors, including running a limited company, provides a sound base from which to help clients. Neil is a Chartered Accountant (ICAEW) and holds the Diploma in Regulated Financial Planning (CII). Neil is studying towards Chartered status with the CII. 0116 218 4891
contributions above £40,000
neil@wkmwealth.co.uk
using ‘carry forward’ rules:
wkmwealth.co.uk
❙ if you contributed £20,000 in 2019/20, then you have £20,000 still remaining to
cannot be accessed before the
use – but only if you have
age of 55 currently, so don’t
earnings >£40,000 and have
make additional contributions
fully utilised the current tax
unless you’re happy to tie up
year allowance
that money
■ Don’t forget money in your pension scheme is tied up and
Consolidating pensions schemes can often make sense, but equally,
The Business Bulletin
you may have a pension that has
Whilst the state pension offers
Stocks & Shares ISAs arguably
benefits that you’d lose if you were to
a relatively modest income, it will
offer the widest range of investment
transfer. So make sure you check out
increase year after year and will be
opportunities and potentially growth
what benefits you may have.
payable for the rest of your life. That is
over the long term, but that comes
absolutely not to be sniffed at.
with higher risk and the requirement
Otherwise, by consolidating, you’re reducing administration and possibly fees too and allows you to keep things invested in a similar manner. You could move the pots to your current workplace scheme, or open a Self Invested Personal Pension (SIPP). SIPPs typically offer more choice in terms of investment opportunities and also ability to access your pension flexibly in future.
to select the investments too.
ISAs These are tax efficient wrappers, in which to hold cash or investments. ISAs can grow free from income tax and capital gains tax and you can withdraw the money at any time without any further tax due. So, similar to pensions, take an interest…
Please don’t ignore it. Get a state pension forecast at gov.uk: www.gov.uk/check-state-pension
returns are typically lower as well, meaning the risk is that your money is effectively losing value, as the price of goods increase. Lifetime ISAs (LISAs) are a potentially useful option – if you are under 40 years old, you can open
1. What have you got, where is it?
State Pension
Cash ISAs are lower risk from an investment perspective, but the
2. What is it invested in (assuming it’s not cash) 3. What do you plan to do with it?
one. You can contribute up to £4,000 per tax year, which takes part of the £20,000 overall ISA allowance. The benefit with LISAs is that the government boost that contribution
You need 35 years of National Insurance contributions to get the full new state pension. This would be worth around £9,000 per year. If you have some missing years, it is possible to buy them back (sometimes up to 10 years prior) and it often makes financial sense to do so.
Issue 5 – Finance | 41
The Business Bulletin
insurance products setup through the limited company, from a financial/tax perspective.
Pensions provide a tax efficient ‘wrapper’ to help fund your future lifestyle.
Wills Have you got a will? According to a survey in December 2020, nearly 60% of adults in the UK do not have a will. It appears to be linked to the idea that ‘it won’t happen to me’. Surely you would rather have an element of control over what happens to your estate should the worst happen? If you’re not married or in a civil partnership, your partner has no rights
by 25%, so your £4,000 becomes
step in to provide financial
to the estate whatsoever, without a
£5,000! What’s not to like? Well there
assistance in the event of a
will being in place. Even if you are
are some rules…
death
married and there is no will, the rules
1. You can’t withdraw that
■ Critical Illness provides a tax
money before you’re 60 unless
free lump sum in the event of
it’s used towards buying your
you suffering a serious illness
first home
(e.g. cancer / heart attack)
2. If you want to withdraw it
■ Income protection can
earlier or for another reason,
provide a tax free income if
there is a 25% penalty
you’re unable to work due to
Don’t forget Junior ISAs. Everyone (pretty much!) has an annual ISA entitlement, including children. Adults
becoming ill or injured If you own your business, it is sometimes beneficial to have these
of intestacy kick-in and determine who is entitled to what. That could be out of kilter with your wishes. Get a will in place! There are a myriad of matters to consider when thinking ahead for your finances, but if you take the time to run through these items, you will have made a big step forward. This article is for general information and does not constitute any form of advice or recommendation.
have £20,000 each and children (<18) have £9,000 each. Children aged 16 & 17 get both the child & adult allowances, hence can put £29,000 into ISAs when they are aged 16 and 17. If you don’t contribute to an ISA within a tax year, you lose that entitlement.
Personal insurance Have you got a mortgage? Are you renting a house? The answer is probably yes to one of them. Would you be able to pay these costs and keep a roof over your head, should something unforeseen happen – e.g. should someone in the family get injured, sick or even worse, die. ■ Life Insurance and Family Income benefit insurance provide cover that could
42 | Issue 5 – Finance
Stocks & Shares ISAs arguably offer the widest range of investment opportunities and potentially growth over the long term, but that comes with higher risk
The Business Bulletin
Ask the experts Do you have a burning question that you would like the answer to? Or maybe you’re looking for some advice to help your business? In each edition some questions will be shared and answered by some of The Business Bulletin experts.
Q. Where do I go if I can’t get
A. There are potentially many options
face to face meetings will they come
funding from my bank? Are there
open to you if your bank declines your
and visit you? Ask them.
other options than the bank for
business lending request.
Roger Eddowes
raising funds for my business?
The commercial finance world
A. The commercial finance market
has changed significantly in the last
has changed considerably in recent
decade and where the High Street
years, partly due to the effects of the
banks previously had a stranglehold
banking problems back in 2008. The
over the industry, there are now many
effect of that crisis was to make the
lenders open to requests, even if they
main banks much more careful in
have been previously turned down by
choosing which loans to grant. The
a mainstream lender. I would also add
net effect over the following years was
(especially important) that you ensure
for other ‘alternative’ lenders to appear
that any independent broker you may
to plug the gaps left by the banks in
use for business finance (or indeed any
certain areas of the market.
finance) has a membership of a trade
Many of these alternative lenders are very solid and serious in the way they conduct business. Unfortunately there are others that have appeared who are not so trustworthy. The
body (NACFB or FIBA for instance); plus has the relevant FCA authorisation. Without these, you may not be eligible to complain to the Ombudsman if required or the brokerage may not
difficulty for the potential borrower is
have the relevant insurance in place.
thus to know which are the reliable
James Blacklaws
one and which should be avoided.
JB Commercial Finance
The other problem is to identify which loan most suits your business
Q. How do I go about choosing a
requirement. Indeed in some cases
financial adviser? There seem to be
the best solution to raising finance
a lot of financial advisers out there –
for your business may be to have
how do you choose the right one?
a combination of loans of different
Essendon Accounts & Tax A. Certainly ask trusted contacts. There are also websites - Vouched For, for example, which provide testimonials. I would also suggest checking whether the advisor is tied to one provider. One provider is unlikely to provide the best in the market. Finally, make sure you ‘get’ them and they ‘get’ you. Unless you’re looking for just a transaction, financial planning is a process keeping you on track, watching your back, making sure you’re on the right path. So it’s important to have a decent relationship. An adviser may be a highly qualified chartered practitioner, but it’s no good if you don’t understand each other. James Tarry Scottsdale Moneywise A. Choosing an adviser depends on what you want from them. Is it life assurance or an income if your ill or
A. Ask your trusted referral partners
technical structures like trusts? Or
or business contacts who they would
like most people, is it simply that you
recommend. It may seem obvious
want your money, savings, ISAs and
but you need to find someone you
pensions to grow in value and not
can get on with and someone who
to lose out when the stock market
will understand you. So who do they
crashes? For the latter, ask meaningful
Peter Douglas
act for already? Have they also got the
questions and don’t be afraid to. Ask
Business Finance Services
capacity to look after you? If you like
to speak at least three of the adviser’s
types e.g. a working capital loan plus, say, asset finance. This is where it is best to employ the services of an experienced commercial finance broker.
Issue 5 – Finance | 43
The Business Bulletin
clients and ask them what happened
Is the adviser fully independent and
to forecast and budget as well as you
when the stock market crashed. Was
acting in the client’s best interest or
may be required to produce them
their adviser pro-active enough to
restricted in the advice they can give?
if looking for external finance.If you
have moved their money into safe
Ask the adviser to explain a little of
use an accounting software package
havens beforehand? Before they chose
how investments work and see if he/
these reports can be generated at a
their adviser what research did they
she is easy to understand. So it is not
click of a button. But it is reliant on
do or was it just they liked the person?
really about how you ‘feel’ about the
your accounting software being up to
adviser it should be more about his
date and accurate.
or her track record. In the end the
Got a question? If you have a question – then email us and these experts will set about answering it for you. It can be on any business topic you like, be it finance, sales, marketing, operations, resources, strategy or personal development. If you would like a more immediate response, then raise your question on the “Ask The Experts” forum.
difference will be many of thousands of £s across time. Rob Harris Your Financial Friend
Ruth Chettle Canary Accounting A. Yes, preferably in the first few days of the following month. I would also have projections included. You need
Q. Should I have a set of monthly
to know what profit you are making
management accounts? How do I go
and what you are projected to make
about generating these and how will
in the months ahead. If you have
they benefit my business?
this information you are more likely
A. As business owners most of you
to get your business decisions right.
will already have a rough idea of
Its far easier and less stressful if you
how your business is doing. Monthly
know that you might have a cashflow
management accounts are a great
issue in the months ahead as you
way to monitor and confirm how your
can plan for it.
business is doing each month. These
Roger Eddowes Essendon Accounts & Tax
can be used internally for helping you
Contributing experts
Ruth Chettle
Peter Douglas
James Blacklaws
Canary Accounting
Business Finance Services
JB Commercial Finance
Rob Harris
James Tarry
Roger Eddowes
Your Financial Friend
Scottsdale Moneywise
Essendon Accounts & Tax
44 | Issue 5 – Finance
The Business Bulletin
SME Survey What has the biggest impact on your cashflow? For any small business managing
small business owner.
the cash in and out is essential. Lack
I guess not surprisingly
of cash is one of the top reasons that
debt, overheads and
businesses fail. (Source: Hiscox). The
staff were the next
intention of this survey was to find
major issues with
out what the main causes of poor
credit terms, tax, loan
cashflow in a business.
repayments and VAT following up the rear!
The original options were: ■ Credit terms from suppliers ■ Debt (money owed by customers) ■ Loan repayments ■ Overheads (rent, rates, etc) ■ Sales (lack of) ■ Staff costs ■ Stock ■ Tax (NI, corporation) ■ VAT There was an “other” option in case any of the above were wildly out and there was something else significant that was affecting the cashflow. In total there were 93 responses to the survey and the results can be seen below. Respondents were able to choose more than one option. Lack of sales was by far the main issue. It is unclear whether this is due to the pandemic being faced at the time of undertaking the survey or whether this would apply under “normal” business conditions. The next survey (see below) will
This is good news for anyone involved in sales training/ consultancy as it would seem there is definitely a need for support in this area. With regard to debt management, there are a number of things that can be done to improve
is going to come as a surprise and
this. Some of them being: don’t wait
bite you in the proverbial! Again,
until month end to issue invoices,
accountants can help with this and
reduce your payment terms (on
there are software solutions that link
presentation of invoice is a good one!),
with your accountancy software to help
chase invoices before they are due,
better manage, or at least monitor,
get a third party to chase overdue
peaks and troughs in your cash.
invoices, arrange a payment plan for bad debtors – there have been articles in previous editions looking at debt management and credit control. Likewise with credit terms being an issue – renegotiate or arrange
Get involved
payment plans with suppliers. With tax and VAT issues it is always
To take part in the next
worth talking to your accountant for
survey – What factors are
advice or contacting HMRC directly
hampering your sales?
to see of there is anything that can be
– visit here: https://forms.
done to help out.
gle/764FKa82attH5XdP9. The
Whatever your issue, make sure
explore this further and see what is
that you are monitoring your cashflow;
impacting the lack of sales for the
doing a forecast if possible so nothing
results will be shared in the next edition of this magazine.
Issue 5 – Finance | 45
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