January 2021 - TaxAgility Small Business Accountants

Starting a part-time business

Not ready to take the leap, consider a business on the side while keeping your main employment.

A concept image of starting a business

Having a full-time job is, for many people, the path to job security and financial security. While employment is a more comfortable choice when compared to setting up, owning and running one’s own business, the pace of technology growth and a less than stable economy in recent times have threatened this supposed ‘safe-haven’.

Many working adults have come to realise that relying on full-time employment as their only source of income is potentially risky, as jobs can be outsourced or replaced, plus changes in business fortunes can leave them facing the stark reality of unemployment. Accordingly, more and more working people are considering starting a business on the side and seeking additional income streams. If you’re facing a similar situation, this post may make a great read.

Benefits of starting a business on the side

Starting your own business on the side while working full-time can seem quite a hill to climb, but the benefits often far outlay the early pains soon. For instance, after getting a business going and experiencing your first success, a side-line business could soon:

Provide a second income that supports the payment of your rent or mortgage, or ideally, help to pay down the mortgage more quickly than your main job could do on its own.
Lessens the impact of losing your job. In many cases, people who have started their own businesses on the side often quit their jobs to focus on the business full time later. This comes once they are confident that the business has overcome any initial teething problems and can continue to support their dreams.
The second income, or additional disposable income, could also help to afford a few extra luxuries in life.
Running your own business often brings you into contact with people in a similar situation. These interactions will broaden your circle of acquaintances, leading perhaps to greater opportunities.

While there are many benefits, it pays to be clear about what you want to achieve before setting up a part-time business though. Do you want it to be just a part-time or seasonal thing, or do you see it as a potential replacement for your main job? Setting realistic expectations is critical, and can help you to be better prepared too.

Things to prepare before starting your part-time business

While there are few businesses that just followed an idea and been successful right out of the gate, in reality most entrepreneurs spend a fair amount of time on planning and preparation. The main reason is that even the best and most innovative ideas may not turn into great business concepts, unless there is a nurturing environment to help them flourish.

Write a business plan

The first advice most seasoned business people give to budding entrepreneurs is to write a business plan. While there are no rules on what you should include in your business plan, standard items like stating your goals, highlighting market research, operation plan and financial strategy will help you see your business more thoroughly.

Conduct research

At the very least, you should know:

The needs and preferences of your target market
How are you going to find your customers?
Your competitors
Their price points versus your pricing strategy
Do they have any gaps in their product or service you can exploit?
What makes you different from them?

Know your responsibilities

If this is your first attempt at starting a business, you may not be familiar with all the responsibilities and duties of running a business. For example, if you are selling toys, your products need to comply with the provisions of the Toys Regulations 2011, meaning they must bear the CE mark, satisfy the ‘essential safety requirements’ in the regulations, be properly marked to ensure traceability, and be accompanied by instructions for use, along with warnings where necessary.

Crunch some numbers

The first number-crunching exercise you do should be about cost, revenue and profitability – because everyone wants to run a profitable business. Be sensible in how you plan your costs – especially marketing costs, as they are essential to get your products or services to the right people. Equally, be realistic about how much you can make over a period of time. Create a pricing strategy and calculate your break-even point. Find out about the risks you are exposed to and ways to mitigate them.

The second part of finance relates to funding. In essence, your plan to get the funds needed to launch and support the business until it turns a profit. There are a few types of funding – self-funding, funding through debt (borrowing money to start your business), equity (trading away ownership of your company to receive funding), and mezzanine (a combination of debt and equity). Most part-time businesses are either self-funded or through borrowing from friends and family members. Both approaches are helpful, albeit risky, so it is wise to have a back-up plan and know when to source for additional funding later. If you’d like to know more, follow the link to the article The complete guide to business funding.

Choose a company structure

Choosing to start your business as a sole proprietorship or as a limited company can impact how much tax you pay, how far you want to protect your personal liability, how much you want to pay to maintain the company, and how much administrative work you want to do it yourself. At Tax Agility, we help entrepreneurs to set-up a structure that works for them. If you’d like to talk to us about setting up a company, call us on 020 8108 0090 today.

Beware of pitfalls

Working fulltime can be exhausting, and by the end of a long work week, you probably do not have the time and energy to work on your part-time business. Add to that family obligations, and you may quickly find yourself defeated. One way to overcome this is to outsource the work you aren’t good at, if you have the initial investment funds ready. For instance, if you need a website, hire a good web company. If you need advice on company structure, talk to a qualified accountant like us.

Also, beware that those around you may not be as enthusiastic as you are. It goes without saying that to start and run your own business, you need to believe firmly in yourself and know what you want to achieve. Having a clear set of goals and milestones is critical. And, don’t forget to reward yourself a little along the way too.

Once your business takes off, you will soon find yourself spending more time with your clients. The challenge of juggling your time with the new venture may start affecting your day job, leading to undesirable consequences like making mistakes on your job and losing your job before you’re ready to quit.

Popular part-time businesses

Here are a few ideas to help you get started.

Selling products on an e-Commerce platform
Creating creative products – videos, pictures, jewellery etc
Providing handyman services
Becoming virtual assistants
Becoming a freelance designer
Writing for websites

Tax Agility is here to help small business owners

As leading small business accountants in London, Putney and Richmond, we have gladly worked with many entrepreneurs who started small and grew organically over the years. In the process, we become their trusted go-to accountants as well as business advisors.

Our services include:

Accounting & Bookkeeping: leave your day-to-day finances to us. We will also provide monthly management accounts, prepare statements and help you set-up cloud accounting.
Tax: if you are tax-efficient, you will have more money to invest, expand and create jobs in your community. Let us help you with tax planning, tax computation and tax returns.
VAT: from VAT returns to manging VAT on import and export goods, we take care of them so you don’t have to.
Payroll: as your team grows, outsource your payroll administration to us so that you and your team can continue to enjoy accurate and on-time payslips every month.
Management consultancy: take your business forward with practical advice based on financial data and benchmark analysis.

The beauty of working with us is that you have the freedom to choose the level of engagement you want from us – for instance, you may need us to manage bookkeeping for now, give you tax advice when you need money to invest, add payroll when your team expands, and use our management consultancy service when you are ready to grow. All of our services are competitively priced with no hidden charges, and our small business accountants are always here to assist.

Call us today on 020 8108 0090. Alternatively, you can use the contact us form to get in touch.

Small Business: Protect your business against fraud

Learn how to recognise common fraud and protect your business.

A concept image of a fraudster working on a laptop
According to the National Crime Agency (NCA), the estimated annual cost of fraud in the UK is about £190 billion. Victims of fraud are varied – they could be individuals, major corporations, public sectors, and of course, small businesses, which make up 99.9% of the business population.

The NCA believes that private sector is hit the hardest, losing around £140 billion a year to fraudsters – this shouldn’t come as a surprise as many small business owners are regularly targeted by fraudsters who could be internal staff, customers, suppliers, or professional criminals.

Some examples of fraud committed by internal staff include an employee stealing and passing sensitive company data to third parties or a contractor deliberately fiddling their expenses. On the other hand, fraud involves external parties may include scammers selling counterfeit products to your company, requesting your business to pay fake invoices, or tricking you and your staff into installing software that allows criminals to access your files to steal information or lock your systems on purpose – which they then demand ransom from you.

Fraud affects us all, and when small business owners like you and I are being hit, we may see our profits being wiped out and reputations crumble, and the ripple effect may sadly lead to business closure.

An overview of fraud

The Fraud Act 2006 defines the three ways of committing fraud by:

False representation
Failing to disclose information
Abuse of position

The Act also covers a number of other offences relating to fraud, including:

Possession of articles for use in fraud
Making or supplying articles for use in frauds
Participation by a sole trader in fraudulent business
Obtaining services dishonestly
Liability of company officers for offences by company

Fraud covers every form of deception and it won’t disappear because there are always individuals looking to take advantage and make quick gains. There is no one solution to prevent all types of fraud too, and some also evolve quicker than the others. So let’s take a look at a few common types of fraud and discuss how we can protect our small business against them.

Fraud committed by internal staff

No business owner likes to think that they are being targeted by their trusted employees, but the sad truth is that fraud committed by internal staff is more common than we’d like to believe and many such cases have never been made public. In addition, research has shown that employees who hold positions of trust tend to be more dangerous as they can commit the crime longer and use various schemes to cover their tracks.

As chartered accountants for small businesses in London, Putney and Richmond, we do our best to help our clients uncover fraud committed by internal staff. For instance, when you’ve been tricked into signing off duplicate payments, especially on reoccurring charges, then we can spot and alert you when we go through the accounts. However, we must admit that sometimes it is impossible to tell if the transactions are genuine (or not) by looking at them alone.

Here’s an example – a business owner hires seasonal staff during busy periods, so when a manager authorises payments to temp staff, one can’t tell, without digging deeper, if these temp staffs are genuine or if the manager has committed payroll fraud, which is rather widespread.

Fraud committed by internal staff is often uncovered during an audit of a company’s annual accounts, which is burdensome and costly to most small businesses. In comparison, entrepreneurs may find it easier (and cheaper) to establish tighter internal controls and perform random checks.

It is also important to understand why an employee may choose to commit fraud against your company – usually it is driven by personal greed, to fund an expensive addiction like gambling or drug use, or in some case, they simply want to abuse the trust the company has placed on them. And after a while, the staff who has been defrauding the company is likely to show a change in their lifestyle habits, such as taking frequent holidays or showing off their knowledge about high-end brands.

Fraud committed by customers

If you run an eCommerce site or a retail shop, you may be familiar with card-not-present fraud committed by some customers. It happens when someone uses a fraudulent card to pay for goods over the phone or online, and the goods are picked up by courier to the customer right away. In the UK, which party should be responsible for the amount lost in a fraud case depends on the payment method. If the customer gives their fraudulent credit card over the phone or online (without using 3-D secure like Verified by Visa), then the merchant is often liable. But if the merchant uses 3-D secure for all online payment, then they are not liable.

On the other hand, if a customer walks into the shop and uses contactless or Chip & Pin to defraud the owner, in this case the owner is not liable. To minimise customer fraud, banks and credit card companies often encourage business owners to deploy 3-D secure online or have the customers pay in person.

Fraud committed by suppliers

Most small business owners tend to be careful when they first select their suppliers but after a while, they tend to let their guard down and do not notice if the supplier is over-changing them. Sometimes, business owners also comply when the supplier asks to be paid in cash and avoid VAT on a sale, which is also a type of fraud.

If you believe your supply chain is vulnerable to fraud, then it is good to review the process and conduct due diligence when necessary.

When seeking out a supplier like an accountant or a cybersecurity specialist, it is also worth checking their credentials. For example, we are ICAEW (Institute of Chartered Accountants in England and Wales) chartered accountants and this means we follow a set of principles such as integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour. In other words, as our client, you will receive honest answers from our knowledgeable teams who keep abreast with the latest developments in practice, legislation and techniques. We also act diligently and respect confidentiality.

Fraud committed by criminals

Out of all the cases mentioned in this article, fraud committed by criminals is perhaps most widely encountered and reported, and phishing and malware (or ransomware) remain high on the agenda.

Phishing happens when scammers pretend to be from a trusted company and they trick you into giving out personal information, such as bank details. They often appear helpful, like alerting you to suspicious activity on your bank account, offering you financial rewards (including tax refunds from HMRC), or helping to verify and restore your records after a technical error. They are also good at manipulating your emotions, using words that can make you panic, fearful, or even curious and hopeful, so that you can divulge information quickly. The best thing to protect yourself against phishing is to take a step back and don’t respond to their requests. If you think the message could be genuine, then seek to verify the message yourself – by calling the authority or the company from a number listed on the website. Under no circumstances, you should use the contact you have been given over the phone or email.

Malware or ransomware, on the other hand, is about scammers trying to trick you into installing software that allows them to access your files or lock your systems unless you pay the ransom. It may come in an email or is attached to a file you have downloaded online. Sometimes it also involves a scammer impersonating as your IT provider and informing you that something isn’t working (like your software is compromised, broadband speed is reduced, etc). Their goal is to get you to install something so they can take over your system later. To protect yourself, be vigilant when you click on attachments, links in email, or access breaking news through an unknown link. Also, keep a back-up of your data offline.

Don’t let fraud ruin your business

Many small business owners work hard to create a successful business, so it is very unfortunate that fraud can cause a serious reputation and financial damage to businesses.

While prevention is key, entrepreneurs also know that the cost of fighting fraud can spiral out of control quickly and have a direct impact on your profit margin. If operating costs and profitability are a concern, perhaps you can talk to one of our small business accountants.

When we review your business finance, we can also help you with accounting & bookkeeping, tax, as well as payroll management.

Our approach is flexible and entirely depends on your business needs. You can hire our bookkeeping and tax services now, add payroll when your team grows, then use our management consultancy service when you are ready to take your business to new heights.

All of our services are competitively priced with no hidden charges. Call us today on 020 8108 0090, or use the contact us form to get in touch.

Month: January 2021

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