Britain’s SMEs Lack Effective Leadership & Management Skills

Do you lack effective leadership & management skills?

According to the recent Growing Your Small Business report by the Chartered Management Institute (CMI), shortfalls in effective leadership and business management skills are holding back the growth and productivity of Britain’s SMEs.

The report, which was launched last month at the House of Commons, focused on the importance of SME owners not just hiring good managers in every area of their business in the first place, but also on the need to improve their current employees management and effective leadership prospects across the board by providing regular management training sessions and developing new talent.

In the report, Chief Executive of the Chartered Management Institute, Ann Francke, notes that “Small businesses are a vital part of our economy, employing over 15 million people, with a combined turnover of £1.6 trillion… Their growth is being held back by poor management and leadership. It’s the leading reason for business failures.”

Areas of Improvement

Some of the main points, and areas of improvement, covered in the report are as follows:

Poor SME management is now the leading cause of failure in small businesses, accounting for 56% of all insolvencies,
Conversely, improved management personnel has been identified as the key factor in the growth of medium-sized businesses.

Despite this, many SME owners perceive time and cost as barriers to entry in providing management training sessions for their employees, yet the CMI argue that improving management and leadership within an SME is a key factor in strengthening its growth and reducing the chance of the business failing.

SME Productivity and Employment Growth Held Back

According to data collected by the CMI from a wide subsection of British businesses, nearly half (44 percent) of small and medium-sized businesses that were founded in 2011 had failed by 2014, with just 16 percent of new businesses across the country currently considered to be fast-growing.

Chief Executive of the Chartered Management Institute, Anne Kiem, was clear in her assessment of the importance of management training sessions, noting that: “The evidence shows that small business productivity and survival are greatly improved through the application of business and management education.”

The report found that just 41 percent of small businesses across Britain provided management training sessions for their staff over the last year, compared to 89 percent of businesses with more than 250 employees. Micro-businesses with less than 24 employees faired even worse, with just 36 percent having provided management training sessions for their staff over the last twelve months.

Experienced SME Accountants

You can never underestimate the importance of working alongside good managers in every area of your business. When you hire an accountant, such as our experienced professionals here at Tax Agility, we can work to manage the financial side of your business for you.

Contact Us

To speak with a professional accountant to discuss how we can help manage the financial side of your business, or for anything else, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no-obligation meeting.

New Dividend Allowance to Replace Dividend Tax Credit

From April 2016, a new Dividend Allowance is due to replace the current Dividend Tax Credit, with the headline rates of dividend tax due to change as a result.

Available to anyone with a dividend income, Chancellor of the Exchequer George Osborne announced in July’s emergency (summer) Budget that the new Dividend Allowance will allow you to earn £5,000 of dividend income, tax free, with you only having to pay tax on dividend income received above this amount.

Our clients should note that the new Dividend Allowance will not reduce your total income for tax purposes: any dividends you receive will continue to count towards your basic or higher tax rate bands, and may in turn increase the rate of tax payable on dividends received above the £5,000 tax-free allowance. The new allowance will simply mean you’re not liable to pay tax on the first £5,000 of any dividend income you receive.

Headline Rates

Under the new Dividend Allowance comes new headline rates payable on dividend taxes. When you receive dividend payments over £5,000 in a single tax year you’ll be liable to pay tax on these payments at the following rates:

  • 7.5 percent in the basic rate band (currently 0 percent),
  • 32.5 percent in the higher rate band (currently 25 percent),
  • 38.1 percent in the additional rate band (currently 30.56 percent).

It’s important to note that basic rate tax payers are currently paying 0 percent on dividend payments over £5,000 as under the current Dividend Tax Credit system any tax liabilities above this amount are normally covered by the enclosed tax credit.

Because dividends are the most common, and preferred method for owners and investors in small and medium-sized businesses (SMEs) to pay themselves, dividends are often seen as the highest point of your income. For this reason, only those receiving a significant portion of dividend income will pay more tax under the new Dividend Allowance, as the above figures show. The Government predict that investors receiving a small to modest income from company shares will receive a cut in their dividend tax payments, or see no change in payments owed.

Dividend Exemptions

Despite the changes the new Dividend Allowance will bring, the exemptions available under the current system are due to remain.

Any dividends you receive into pension funds that are currently exempt from tax will continue to be received tax free. The same is true for dividends received on shares you may hold in an Individual Savings Account (ISA).

Experienced Tax Accountants

Here at Tax Agility we believe that if you’re an SME owner considering incorporation, you shouldn’t allow the rules of the new Dividend Allowance to affect your decision too much. Though the choice to incorporate should always be taken on a case-by-case basis, we recommend speaking with you accountant regarding any questions and concerns you may have.

To speak with a professional accountant to discuss the new Dividend Allowance, or for anything else, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.

The Importance of Cash Flow Management Can’t Be Undersold

In a recent report issued by The Institute of Chartered Accountants in England and Wales (ICAEW), small business start-ups were called upon to improve their cash flow management skills in an effort to avoid burning through their financial resources at too fast a pace.

This consideration came as a result of a survey conducted by the ICAEW whereby 23 percent of all small business advisors surveyed said that proper cash flow management is the biggest hurdle start-ups have to overcome in their business, but just 16 percent of start-up entrepreneurs who were asked the same question believed this to be among their chief concerns.

Ahead of proper cash flow management, the survey uncovered that 28 percent of the start-up entrepreneurs surveyed claimed that not getting enough customers and a failure of their business to make enough money caused them the most concerns.

Skewed Perceptions

These skewed perceptions and false assumptions of what allows a start-up to remain in business can be damaging to the prospects of, well, exactly that.

Referencing the report, director of business at the ICAEW Stephen Ibbotson noted that “Entrepreneurs’ perceptions of what they think will be the challenges they face as a start-up and the reality they actually encounter are very different. These false assumptions can often lead to businesses not fulfilling their maximum potential and at worse, failing completely.”

However, there is some cause for hope. Of the start-up entrepreneurs surveyed by the ICAEW, 68 percent agreed that working with an experienced business advisor is ‘extremely useful’ for any start-up business.

5.5 Million Private Sector Businesses

A Government report released earlier this month stated that there are now 5.4 million private sector businesses in the UK; a new record; with this figure accounting for 900,000 new businesses since 2010.

The report also stated that small businesses contribute 48 percent of all private sector employment, adding £1.2 trillion turnover to the British economy. With 75 percent of start-up entrepreneurs surveyed by the ICAEW claiming that starting up their business was more difficult than they originally thought it would be, the importance of proper cash flow management is more crucial than ever.

Experienced Start-Up Accountants

Here at Tax Agility we do more than just prepare your accounts. Our experienced start-up accountants can work with you to improve your cash flow management processes, all while providing appropriate advice surrounding the financials of your business. If your cash flow management system need an entire overhaul, we can even work with you to prepare budgets and cash flow projections to get you back on track.

To speak with a professional accountant to discuss how we can improve your cash flow management processes, or for anything else, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.

What is The Help to Buy ISA?

help to buy isaThe Help to Buy ISA (Individual Savings Account) is an ISA designed to help first time buyers get onto the property ladder by allowing them to save up to £200 a month into the ISA, with the promise that once you purchase a property (worth up to £450,000 in London, and £250,000 outside the capital) the government will increase your ISA savings by 25 percent, up to a total of £3,000.

This means if you save a total of £12,000 into your Help to Buy ISA, the government will top this up by the full £3,000 to give you a total of £15,000. You may make an initial deposit of £1,000 into your individual account, with your deposit also qualifying for a 25 percent government boost.

It should be noted that the Help to Buy ISA is only available to individuals 16 years old and above, and it’s only payable to those purchasing a property within the UK. Purchases of overseas properties do not qualify under the scheme. The Help to Buy ISA cannot be used if the property is to be rented (let) out.

Couples’ Advantage

One thing which makes the Help to Buy ISA especially tempting to couples and partners, married or not, is that they’re available on a one per person basis, rather than a one per home basis. This means that you and your spouse can both pay into your own Help to Buy ISA, saving a total of £24,000 between the two accounts, and receiving a total of £6,000 from the government.

This applies not just to romantically involved individuals, but also to friends and family members who are purchasing a home together.

When’s it Available, and for How Long

The Help to Buy ISA is available through banks and building societies across the UK from this Autumn (2015). New accounts will only be available for four years, but once you’ve opened an account there’s no limit on how long it can be held.

In terms of the ISA itself there is no minimum monthly deposit, but your bonus can only be collected (upon purchase of a home) once your qualifying savings reach the minimum amount of £400, meaning you have saved a total of £1,600, with the government topping this up to £2,000.

Under the scheme’s rules of saving a maximum of just £200 a month, it will take you just over four and a half years to qualify for the maximum bonus of £3,000, should you wish for it. If you and your partner, friend, or family member also have a Help to Buy ISA you may choose to ‘cash in’ sooner.

Experienced Personal Accountants

To speak with a professional accountant to discuss the Help to Buy ISA, and whether it’s a good scheme for you to partake in, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no-obligation meeting.