Actions you can take when your small business is in distress

Every good business owner should learn how to spot the early warning signs of distress and know how to turn things around.

In every business, there are moments of ups and downs. Even when you have a good week of strong sales, chances are, you may still keep a lookout for early signs of distress unconsciously. Having the ability to handle business crises and turn things around is an essential part of managing your small business effectively. In this article, our small business accountants look at some common signs of distress and discuss what you can do to turn things around.

Common signs of business distress

Business distress can stem from internal or external. Here are a few common internal signs of business distress:

  • You don’t have enough cash to meet obligations
  • Your clients don’t pay on time
  • Your stocks aren’t selling
  • You miss forecasts
  • Your profit margin is shrinking
  • Your customer base is shrinking
  • Your suppliers don’t want to work with you due to unpaid invoices
  • Your return of investment is making a loss
  • Your staff turnover is high

Changes in the external environment can also affect your business and the distress can include but not limited to:

  • Changes in government policies
  • New threats from competitors
  • Changes in consumer behaviour
  • Saturated demand
  • Weak economic conditions

Five short-term recovery measures that address a business crisis

When your small business experiences signs of distress, the first thing you should look at is how much cash you have, as well as if your cash flow forecast is accurate (or not). If your cash level is low and your cash flow forecast foretells a dire situation, then your short-term options may be:

1. Cost cutting

You aim to cut costs and expenses immediately in order to reverse poor performance. This may include reducing headcount or terminating non-essential staff benefits.

2. Disposal of assets

Selling inventory at a discount or selling other liquid assets to free up cash quickly.

3. Borrow

In some instances, you may need to borrow money to stabilise the business.

4. Identify quick wins

Quick wins refer to any methods that can lower your costs and improve your cash situation immediately. An example is terminating less profitable products with immediate effect.

5. Seek help from your accountants

Your accountants should not be someone whom you meet once a year. Ideally, they should be working alongside you regularly and have the foresight to prevent any capital or financial distress from happening at the very first place. If you are facing a business crisis and receiving no help from your accountant, then it is time to switch to a qualified chartered accountant who champions small businesses like one of our small business accountants here at Tax Agility.

Seven long-term recovery measures that address a business crisis

The above-mentioned short-term solutions work to tide your business over temporarily. Do not let your guard down once your business is stabilised. Instead, continue to work with your accountants to improve business efficiency. An efficient business works effortlessly to convert all the available resources to maximise output, which in turn will deliver better products or services, increase sales, enhance customer experience, and promote a happier working environment.

To achieve optimal efficiency, you may initiate some of the following tasks so your business is prepared to weather the next crisis.

1. Costs control

If you are trading actively, chances are, your costs usually go up and not down, unless you make a conscious effort to control them wisely. Reducing expenditures that are not tax-deductible, renegotiating contracts with suppliers, lowering your tax obligations legitimately with the help of a reputable accountant are some examples of costs control.

2. Make use of cash flow forecasts

Cash is king and it is one vital resource that can buffer your business against sudden changes. Cash is what your business has at any moment in time. A close relative of cash is cash flow, the net change between your cash inflows and outflows for a given period.

An indication of your company’s health, cash flow statements consist of three parts: cash flows from operating activities, cash flows from investing activities and cash flows from financing activities. A simplified example is to calculate expected cash receipts from customers in a given period. Ideally, they should be more than enough to cover your bills in the same period, plus some remaining cash which you can use to reinvest into the business or set aside as a rainy day fund.

Positive cash flow does not happen accidentally. It is achieved through careful planning and sound financial management. Your accountants should also provide you with cash flow forecasts; use them wisely to make informed business decisions. If you would like to improve your cash flow, follow the link to this post five ways to improve your company’s cash flow.

3. Generate new revenue

Launching new or complementary products, creating additional services, expanding online, increasing the number of customers are examples which can help your business to generate more business and revenue. Other ways to increase revenue may include selling your products/ services at a higher price, as well as increasing the average transaction amount. One controversial approach is to sell more to your existing customer base – this may work temporarily but it is unlikely to sustain over a longer period.

4. Reorganisation

If you find yourself questioning the ability of some staff but praising some others after a crisis, you aren’t alone. Many business leaders achieve successful turnarounds by reorganising roles and changing a few people. While there is no fixed formula, a useful guide is to keep only employees who are essential to the business, outsource when necessary and use contractors or temps to ease the workload during busy periods. This lean structure promotes well-defined and fulfilling roles, and it potentially can save you a significant amount of money too.

5. Improve operational process

Streamlining communications, eliminating paperwork, introducing appropriate technology (like using Xero, affordable cloud accounting software that is built for small business owners) are some examples that can increase productivity instantly.

6. Create a value proposition

Competing on price alone can only get you so far, but once you give your customers and potential customers an attractive reason (other than price) to buy from you, chances are, your customer base will increase organically. As a small business owner, you can increase your value by providing exceptional customer service, collaborating with synergetic businesses, offering convenience to your customers, to name but a few.

7. Prepare for the next crisis

You cannot prevent crises from happening, but you can certainly minimise their impact. Internal crises like shrinking profit margin and negative cash flow can be mitigated with good planning. If your accountants offer small business management consulting service, consider using it because you want experts working to improve your business finances for you.

Stress test your business

Stress testing involves making assumptions and analysing how your business responds in each scenario. Ideally, the results should allow you to identify scenarios that will impact your small business the most (both positively and negatively), what are the potential challenges as well as new opportunities.

As every business is unique, there isn’t a one-size-fits-all stress test or formula. Here is a quick example: assuming you are a small business selling floor tiles to consumers, you may test your business with these questions:

  • What if you lose every one of your suppliers? How long can your business go on without new inventory?
  • What if tiles are out of fashion?
  • What if sales have tripled, will your revenue triple too?

Ultimately, stress test allows you to develop plans that can reduce the impact on your business should an undesirable factor hits, as well as increasing your business opportunities should an extremely favourable factor were to come.

Tax Agility can help small business owners through crises

Every business exists to make money and ideally, you should have full confidence that your business can grow and achieve the success you desire. In reality though, managing a business requires more than sheer hard work. You are required to have sound business acumen, know how to manage people, excel at sales, even know a few accounting rules, among the many subjects needed to overcome distress and run a successful business.

Not every business owner has all the expertise required, nor has the resources to hire full-time specialists. This is why working with independent specialists is often a cost-effective approach.

Take our small business accountants for instance. We are qualified, trusted, and have years of solid experience helping small businesses in London, Richmond and Putney to thrive in good time and bad. We do this by crunching numbers and setting financial disciplines that are unique to your business. With us working alongside you, you know you are in good hands.

If you would like to know how Tax Agility can help your business and develop recovery measures at the first warning signs of distress, speak to one of our small business accountants today by calling 020 8108 0090 or filling in our online form.

 

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This blog is a general summary. It should not replace professional advice tailored to your specific circumstance.

by Donovan

IR35, new changes from on 6 April 2020

IR35 concept image

News relating to IR35 abound. Read on to see if the latest changes, taking place on 6 April 2020, will impact you.

Back in 2017, the onus to prove one’s self-employed status shifted from the contractors to the company that hires them across the public sector. This April, private companies (medium to large organisations) must also take on the responsibility to determine a contractor’s IR35 status.

While the law will go ahead, the government has announced a 12-month grace period as it acknowledged that ‘shifting responsibility for determining employment status is a major change for employers and other organisations that use contractors and contingent labour’, according to the report published by HMRC.

What does it mean?

From 6 April, medium and large companies must determine the tax status of the freelancers and contractors they employ directly or via an agency. This means companies must set the tax status and deduct income tax and National Insurance contributions from the fees paid.

Most contractors aren’t happy with this arrangement because they can’t set their tax status (but they could before 6 April). Plus they now have to pay tax and National Insurance (like an ordinary employee) but with no access to benefits like paid holiday or sick pay.

It must be noted that IR35 does not apply to small businesses. A company is considered small if two or more of the following conditions are met:

  • Annual turnover is less than £10.2 million
  • Balance sheet total is less than £5.1 million
  • Has less than 50 employees

IR35 is a highly controversial subject and many organisations and freelancers already expected it will cause issues. If you want to know about the new IR35 changes and how they affect your company, give us a call on 020 8108 0090.

by Donovan

How to value your small business

Value concept

Find out how to value your small business with the help of our small business accountants.

There are many reasons why a small business owner may wish to know the true monetary value of their business. Among them, putting a business up for sale, attracting investors and valuing shares for tax purposes are the three most common reasons.

In London, opportunities abound when it comes to selling or buying small businesses. Accordingly, many small business owners want to know how to value their business so they can set a maximum selling price accordingly. On the other hand, many entrepreneurs who are ready to capitalise on an established business also want to know the true value of a business to make sure they do not overpay.

At Tax Agility, our small business accountants are fortunate to work with parties from both sides in various transactions and experience the dynamics first-hand. We assist small business owners who want to sell, while in other cases we also advise entrepreneurs who want to buy a business and expand. In this article, we will focus on business valuation, in particular:

  • What information is used in a business valuable
  • Different valuation methods

What information is used in a business valuable

A client once told us that he had been advised that the most cost-effective way to value a business is to get an accountant to review the financial figures and then place a price on the business. Essentially, he was told to avoid formal valuables as they are expensive and buyers would likely make their own assessment anyway.

He was mostly right in the sense that accountants and financial figures are key when it comes to valuing a business, but the most important part is actually getting a qualified accountant who can take time to understand your small business and the full breadth of its operations. In other words, you need an accountant who can spend time to understand your management policy, the industry and the competitive landscape, along with financial statements. Ideally, the accountant should also help you to improve the value of your business before placing a price that truly reflects the worthiness of your business.

To give you an idea, here are the seven essential aspects a good accountant should take into consideration when valuing your business:

  1. Financial information – present and historical financial statements will be required to address a host of concerns. Profitability and cash flow, liabilities and assets, stock value and book value are among the many items which will be examined in great detail.
  2. Intangible assets – intellectual property, copyrights, brand recognition, and other non-physical assets will also be reviewed carefully.
  3. Management – finding out if the business has a dedicated team and is not over-dependent on key staff.
  4. Legal information – anything from compliance to any present legal proceedings against the company or the company is pursuing.
  5. Competition – market share, competitors, barriers to entry, other similar businesses on the market and other economic factors which can impact the business will be analysed.
  6. Future outlook – as business landscape evolves, the company’s short-term and long-term outlook will be scrutinised.
  7. Circumstances surrounding the valuation – if you are looking for a quick exit due to changes in life goals, then the perceived value is likely to be reduced.

Different valuation methods

When it comes to valuation a business, private companies aren’t listed on a public stock exchange and therefore, finding the value requires some work. Here are some of the common valuation methods used in London and the UK.

1. Earnings multiples

Earnings multiples determine a business’s ability to generate profits and use the figure to set the selling price. This formula is largely based on an industry-based average. For example, if your business makes post-tax profits of £200,000 and the industry-based average ratio is 3, then your selling price could be £200,000 x 3 = £600,000.

It must be said that there is no ‘fixed’ average ratio. It depends on the industry you are in (some industries have a higher average ratio than others) and the complexity of your products and services. Having said that, this method is common for valuing a small business that has been around and making profits for a number of years.

2. Discounted cash flow

Discounted cash flow looks at the estimated profits a business will generate and the likely value of the business at the end of as assessment.

The concept of discounted cash flow assumes that money is worth less in the future and it is today, after interest and inflation rates. To make this formula work, usually data from your past financial statements will be used to predict the future income.

This method is most appropriate for a mature business with a strong client base. It also works well for a business launching a new product with excellent future prospects.

3. Asset-based valuation

Asset-based valuation refers to the value of assets after subtracting business liabilities, without taking into account your business’s future earnings.

This method is most appropriate for a business with substantial tangible assets like property and machinery, as well as intangible but valuable assets like patents, goodwill, copyright, intellectual property, brand recognition and customer lists.

Apart from goodwill which is generally based on the calculation of a residual value, intangible assets are hard to value and a good accountant should use a number of established formulas which may include:

  • relief from royalty
  • excess earnings
  • incremental income
  • comparable transactions
  • replacement cost

4. Entry cost

Entry cost is the estimated cost a buyer would have to invest to set-up a similar business. This formula tends to include:

  • Employee recruitment and training
  • Upfront asset costs and continued maintenance
  • Product development (research and development)
  • The cost of establishing a business’s reputation and its customer base

Which method you should use depends on your circumstances. Most small business owners offload this valuable process to a capable small business accountant.

Tax Agility can help to value your business

At Tax Agility, we look after our clients who are small business owners in London, Putney and Richmond. While we assist clients with the day-to-day tax and accounting work, our ultimate goal is to increase the value of your business by identifying its growth prospects. This way, when you are ready to value and sell your business, you will be cashing in on your reputable business and its success.

If you’d like, our small business consultants can work closely with you to take your business to the next level. We do this by reviewing:

  • Annual business plans, forecasts, and projections
  • Management accounting complete with regular overview information
  • Review of credit control and cash flow
  • Attend important business meetings
  • Strategic plans for business acquisitions and disposals
  • Advice pertaining to capital structure and business valuations

Call 020 8108 0090 or get in touch via our contact page to arrange a complimentary, no-obligation meeting with our small business accountants or our small business consultants today.

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This blog is a general summary. It should not replace professional advice tailored to your specific circumstance.

 

by Donovan

Incorporating a limited company

Incorporating a limited company

Incorporating a limited company

Choosing to set-up a limited company is a popular choice in the UK. This post explains what is a limited company and shares how it can maximise your take-home pay, along with other advantages and disadvantages.

If the time has come and you are considering setting up a business, chances are, you have been made aware of the different types of company structure in the UK. It is even possible that your friends and associates are encouraging you to set up a limited company. Among the many reasons you hear pertaining to a limited company, these three main points are likely to stand out:

  • Your liability as a shareholder is limited.
  • Taxation rates can be more favourable.
  • You can be tax-efficient by taking a low salary and using dividends to make up your income.

But a limited company is not without its disadvantages and we must emphasise that your approach to tax must also be right and lawful, as HMRC can and do challenge company directors. It is with this in mind that our small business accountants want to share the ins and outs of incorporating a limited company so you have an idea if this is the right business structure for you.

What is a limited company?

Governed by the Companies Act 2006 and its own articles of association, a limited company is a legal entity with its own legal rights and obligations, a distinct advantage that is welcomed by most business owners.

Essentially, what it means is that the company can enter into contracts, receive income, own property, pay tax, employ people, sue and be sued. The rights and obligations of the company are separate from its shareholders, directors and employees. In the event that the company is insolvent, the directors are only liable for the amount they have invested in the company and are not held responsible for the company debts incurred in the ordinary course of business. The only exception is when the directors fail to meet their legal obligations and they do look out for the interests of the company, but that does not happen often as most directors do exercise a duty of care.

A limited company can be large with multiple employees or set-up with just one individual as the sole director of the company. A large number of contractors and small business owners prefer to set-up a limited company of their own as it probably is the most efficient method to maximise your take-home pay. The approach is to channel income through your limited company and paid out to you (and/or any other shareholders) in a combination of salary and dividends. This can result in tax savings, as dividends are treated differently to salaries in terms of tax.

Having said that, we advise contractors to have a chat with one of our contractor accountants to determine if you fall within or outside the IR35 rules.

Now let’s use some examples to illustrate how incorporating a limited company can boost your take-home pay.

Scenario 1: You are the sole director and your salary is £40k a year

In this scenario, you are the director and also the employee. You receive an income of £40,000 a year. In the tax year 2019/20, this means your take-home pay is about £30,736 as any salary calculator website can quickly tell you.

Scenario 2: You are the sole director. Your salary is £10k a year and you declare a dividend of £30k.

In this scenario, you are the director and also the employee. You receive a low salary of just £10,000 a year. To make up your income, at the end of the year after your company has paid company tax on the revenues, you declare a dividend of £30,000. As you are the sole director, you receive the full sum of the dividend. In the tax year 2019/20, this means your take-home pay is £37,923; this is £7,187 more than the previous example.

The above examples are simplified for discussion only. In reality, how much tax you pay depends on your circumstances. Nonetheless, it does illustrate to you why contractors and small business owners prefer to set-up a limited liability company. If you would like to know more about dividends, this post “Understanding dividends” is packed with information.

Other benefits of having a limited company

  • You can easily transfer ownership by selling shares to another party, this is particularly useful if you have an exit strategy in mind.
  • Shareholders (often couples or family members) can be employed by the company and reduce the overall family tax obligations.
  • A limited company looks more professional than a sole trader and if you are looking for funding, investors are more likely to invest in a limited company than a sole trader too.
  • It can fund pensions as a legitimate business expense.
  • Once you have registered your company, no one else can use the same name as your company.

Now the disadvantages of having a limited company

Everything has two sides and before you rush to incorporate a limited company, it pays to take a second to understand the disadvantages.

  • It can be expensive to establish and maintain a limited company.
  • The reporting requirements are complex and best handled by an experienced small business accountant. This will free up your time to focus on your business.
  • The company pays tax on the profits.
  • When the company declares dividends, you and your shareholders are responsible for pay tax on them, despite dividends have lower tax rates than salary.
  • The financial information of the company is made public by Companies House.
  • If any of the directors fail to meet their legal obligations, they may be held liable for the company’s debts.

Tax Agility can help you to incorporate a limited company

Before making a decision on how you should go about incorporating your company, it is best speaking to a qualified and independent small business accountant like our team here at Tax Agility. The reason is simple – there will be areas like VAT, tax incentives/ relief (such as the Annual Investment Allowance), cash flow management, and general financial control that we can assist you with and give you and your business the best chance to succeed.

At Tax Agility, we have been championing small businesses across Putney, Richmond and Central London for many years now. As everyone has a unique situation and aspiration, our personalised package starts from £105 per month + VAT. This means you can engage our service and use us as your financial controller without paying big money.

So let’s kick-start the conversation today. We are available on 020 8108 0090 or you can contact us online to arrange for a complimentary no-obligation meeting.

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This post is intended to provide information of general interest about current business/ accounting issues. It should not replace professional advice tailored to your specific circumstances.

by Donovan

Use of technology

Small Business: Use technology to your advantage

Small businesses in London can certainly use technologies to build stronger capabilities and seize growth opportunities.

Use of technology
In October 2019, when high street chains Karen Millen and Coast went into administrations and announced closures, the online fashion chain Boohoo acted swiftly to snap up the two brands following their collapse. But Boohoo is not keeping the stores open, instead they choose to relaunch them as online-only retailers.

If you have been following this piece of news and the closures of other high street stores, you can see that technologies have changed the way businesses operate and how goods and services are being delivered and consumed. In fact, it is said that consumers now spend one in every five pounds online; this means that traditional brick and mortar stores are seeing 20% fewer sales than before but they still need to maintain overhead (business rates, rents and wages) that increases every year.

Needless to say, to compete in the digital era, SMEs must develop digital capabilities and competencies. It is with this in mind that our accountants for London’s small businesses look to discuss how small businesses in London can utilise technology to help them streamline operations, improve their brand awareness, enhance customer service, bolster fiscal health and gain an edge over competitors.

How should my small business be using technology?

Using technology to streamline operations

In many small businesses, the owners and the employees tend to wear multiple hats. For instance, the sales person is likely to be the person who manages accounts and even chases unpaid invoices. The marketing staff may also take on the roles of web design, social media, or even photography. To help ease workflow, small business owners and their employees can turn to technology.

For instance, apps for project management, note taking, inventory tracking and document signing are inexpensive and brilliant in increasing efficiency. Cloud computing is another obvious choice. By storing your data in the cloud, you are essentially empowering your team members to literally work from anywhere as long as they have an internet connection.

Cloud computer does not limit to just servers and data storage though; cloud-based software is also a real money saver. In the UK, many small businesses have chosen to use Xero, a powerful cloud-based accounting software that is built for small business owners. If you would like to know more, check out this page about Xero and how it can help you to organise your business account and finance.

Using technology to improve your brand awareness and sales

In this digital age, having a web presence is a given and being visible in social media (Facebook, Twitter, LinkedIn, etc.) is also expected. But small business owners know that it can be a challenge to manage a company’s online presence. For a start, it takes time and efforts to make a landing page rank high on search engine results pages and more importantly, complaints rather than compliments tend to crowd your social media profiles.

While there are no silver bullets that can remove all digital challenges, small business owners can certainly use the following tactics to increase their brand awareness and sales online:

  • Launch targeted advertisement campaigns like Pay-Per-Click.
  • Give consumers a reason to visit your page, entice them with discounts or freebies.
  • Post fresh, engaging and relevant content regularly.
  • Partner with influencers who can help to promote your brand.
  • Seek help from a professional digital marketer and test out which digital channels are best suitable for your business.

It is important to treat your online presence like a business function – meaning you set objectives and measure the progress, and if things do not work out, change your strategy accordingly.

Using technology to enhance customer service

Once upon a time, Customer Relationship Management or CRM software was used solely by multinational corporations. Today, they are helping small businesses to capture and convert new leads, store customer information, automate your communication including drip sales emails, stay in touch with your customers, among other tasks.

The upshot is this – if you don’t know who is buying from you, or if you’re still relying on Excel to store the information of your customer, then it’s time to talk to one of the many CRM software experts and find a system that is best suitable for your business.

What about AI?

Artificial Intelligence or AI is undeniable a buzzword we often hear nowadays. The fact is most of us have already used AI-powered apps and devices in our daily lives and will continue to utilise AI through a piece of technology or equipment.

How should small business owners go about implementing technology?

When it comes to technology, the word relevant is key; what works for a company may not work for another. However, the process that helps you decide whether to use a piece of technology or not should be data-driven as opposed to relying on one’s gut feeling.

Let’s assume for a moment that every store in your area has installed a new digital payment but you. You believe that the new technology is too much of a hassle and you prefer to accept only cash. Whether your decision is right or wrong, only data (in this case your sales figure) can tell. If your sales remain strong despite you have chosen not to accept digital payment, then you can safely conclude that it is the right decision. However, if the absence of the new digital payment has hurt your bottom line but your gut feeling still resists it, chances are, you will lose out eventually.

In the event that you have decided to invest in a piece of technology, then it is worth measuring if the technology has indeed resulted in improvements in a certain area.

Tax Agility helps small businesses in London

Small businesses in London are rather progressive and forward-looking when it comes to embracing technology. Walking around Cavendish Square in Central London where one of our offices is located, it is relatively easy to see stores listing their website and accepting a myriad of digital payments including international options like WeChat Pay.

For small business owners considering bigger investment in technology, it is always worth looking at some numbers and calculate the return of investment first. If you need independent and honest advice pertaining to your accounts, you can give one of our small business accountants a call.

At Tax Agility, our small business accountants take on the accounting and bookkeeping duties for entrepreneurs in and around London, affording you more time to focus on your business.

The services we provide for London’s small businesses include:

Call us on 020 8108 0090 or get in touch via our contact page to arrange a complimentary, no-obligation meeting.

You may also like:

This blog is a general summary. It should not replace professional advice tailored to your specific circumstance.

by Donovan

Business planning

Planning the future of your business

Business planning

Your small business can flourish through business planning, continuous improvement and strategic advice.

Turning a business vision into reality requires entrepreneurs to navigate through a river called planning that is full of twists and turns, with rapids as well as areas of calm-moving water. Before launching a business, most entrepreneurs need to analyse their business idea and their appetite first, asking tough questions such as:

  • Are you ready to take on the challenges of being an entrepreneur?
  • Do you have the skills needed to run your business successfully?
  • Is your business idea viable?
  • Is there a market for your services or the products you intend to sell?
  • Is it worth investing your time and money into it?

After the analysis, it is time to put your thoughts down into a very important piece of paper called the business plan. Do not dismiss this step because a business plan sets you up for success when you first start, and it goes on to help you adapt as your business grows. Yes, you read that right – a business plan is not just for fresh-faced entrepreneurs who are eager to launch a business, it is also for seasoned small business owners who want to expand and grow. In this article, our small business accountants at Tax Agility put together what we have learned from working with small business owners throughout London over the years into tips that can help you plan for your business.

We cover:

  • What is a business plan and why is it vital to both start-ups and also established businesses looking to grow?
  • Business growth planning
  • Exit strategy planning
  • Business debt planning
  • How our small business consultants can help in each of the above situations

Let’s talk about business plan

In our line of work, it is common to meet entrepreneurs who trust their gut feeling more than a business plan. There is nothing wrong with it if you know how to translate your gut feeling into a series of actionable items and manage to assemble a team and sell your vision based on your gut feeling alone. In most cases though, gut feeling isn’t enough and this is where a business plan can help:

  • It helps to prioritise – By defining your business objectives, your business plan gives your business direction, maps out strategies to achieve your goals and helps you to manage possible challenges along the way. If you are already in business, use your business plan to recalibrate your objectives and set out plans to adapt to the changing market.
  • It gives you control over your business – Your business plan requires you to study the business landscape and know your competitors and other factors that may affect your success. If you are already in business, it is time to take a step back and review because your business plan should evolve based on your experiences – both successes and failures. A good rule of thumb is to review your business plan once in every six months.
  • It gets you funding – It is highly common for entrepreneurs to use their personal savings, liquidate their assets or even max out their credit cards to launch a business. But to sustain and grow the business, additional funding may be required and in this instance, your business plan is a tool that will help to convince investors why they should invest in your business. If you would like to know more about funding, “The complete guide to business funding” may make a good read.

What goes into your business plan?

A good business plan typically covers the following points:

  • Your business objectives, both short and long-term objectives
  • The products or services it will provide
  • What is your pricing strategy?
  • What is your budget?
  • What are your risks?
  • Who are your customers?
  • How do you reach out to potential customers so they are aware of you and your business?
  • Who are your competitors?
  • What sets you apart from your competitors? In other words, why should your customers buy from you and not them?

It can further expand to cover:

  • If your ideas or products are innovative, how do you protect them?
  • How do you keep up with technology?
  • At what point can you take on staff?
  • What is your exit strategy?

As you can see, you can make it as comprehensive as possible. The most important lesson here is not to write it and put it aside because you are busy managing the day-to-day. Use it, review it, improve it – because your business plan will empower you to think, plan and stay ahead of the game.

Let’s plan for your future together

It is worth noting that having a robust business plan is one of the many steps required to launch or to improve a business if you have already set-up your company. Other types of knowledge needed to make your business successful include cash flow, compliances, debt, gross profit margin, net profit margin, to name but a few. As not everyone is an accounting expert who understands numbers and how they can affect your business, it is time to reign in small business consultants like us who can help you do number crunching and maximise your business success.

We do this by:

  • Understanding your business and your objectives
  • Focusing on your interests
  • Analysing your numbers
  • Reviewing the key trends in your business
  • Forming tailored solutions for your needs
  • Offering cost-effective services
  • Providing honest and expert advice

At the end of the day, our small business consultants produce:

  • Annual business plans, forecasts, and projections
  • Management accounting complete with regular overview information
  • Review of credit control and cash flow
  • Attend important business meetings
  • Strategic plans for business acquisitions and disposals
  • Advice pertaining to capital structure and business valuations

If you would like to know how we can assist, give us a call on 020 8108 0090 today. In the next section, we will discuss specific planning pertaining to common issues faced by many small business owners today:

  • Business growth
  • Exit strategy
  • Debt reduction

Business growth planning

Businesses exist to make money and grow either organically or inorganically.

Organic growth refers to utilising your current business structure to increase output and boost sales, thereby driving growth. The process takes time and effort, but it is sustainable, less risky, and most importantly, it adds value to your company.

On the other hand, inorganic growth means you gain instant market share and revenues boost by acquiring or merging with another company. While it is risky, the benefits of having a larger market share are indeed attractive.

Most small business owners prefer to grow organically but some prefer the acquisition route, particular those in the high-tech industry. The thing is, there isn’t a standard business growth recipe that can be applied systematically to every business. Growing your company relies on your business model, your general management, and above all, your financial numbers. If you are planning to grow your business this year, either organically or through acquisition, contact one of our small business consultants and we would be happy to review your numbers and help you formulate a realistic growth plan.

Exit strategy planning

At some point you may be thinking of selling your business to a third party or finding an internal succession, and this process of withdrawing yourself from the business you have created should ideally be a smooth transition.

As small business accountants in London, we often hear from various business owners about their plan to sell up and in most instances, turning this concept into reality requires thoughtful planning. For instance:

  • How fast do you want to sell?
  • What is the valuation process?
  • Should you restructure the business to optimise the sale value?
  • How to ensure that all relevant tax issues are managed?
  • What is the due diligence process?
  • How to identify and evaluate potential buyers?
  • How to create a competitive bidding environment?
  • How to negotiate?
  • What are the strategies you can use to maximise the sale of the business?

The list goes on and touches on various elements, from addressing accounting and tax queries to a mountain of documents that spell out everything from confidentiality to terms of sale. If your plan is to exit the business, contact our small business consultants at Tax Agility today so we can help to kick-start the process and set the strategy in motion.

Business debt planning

Assuming you are in control of your cash flow, chances are, you should not need to borrow. Cash flow is really one of the biggest issues for small business owners and many people do not understand why they are suddenly short of cash when everything seems well. This is where our small business consultants can help – we are here to analyse your numbers and provide cash flow forecasts, as well as helping you to plan for multiple scenarios that will have an impact on your business.

In the event that your business is short of cash and you need to borrow, then these tips may be helpful to you:

  • Know your ability to pay it back before you borrow
  • Have a sensible repairmen plan, this will allow you to pay back the money and still have money to fund the operation
  • Know when you can be debt free
  • Plan how you can create extra income to pay off debt
  • Review how you can cut expenses and save, as a pound saved is a pound earned

Cash flow is a subject that many small business owners find it fascinating and if you are interested to know more, this post “Five ways to improve your company’s cash flow” highlights practical steps you can use to control your cash flow.

Tax Agility is your trusted small business consultants

Every business owner needs some forms of help – it can be someone helping you to figure out what’s next, someone providing a valuable second opinion, someone introducing new clients to you, and someone working with you to improve profitability.

At Tax Agility, our dedicated small business consultants work cohesively with you to help build your business and take it to the next level. We use numbers and data to recommend changes, mitigate risk and improve profitability.

Give our small business consultants a call on 020 8108 0090 today because your business deserves the best opportunity to succeed.

If you liked this post, you might also like:

This blog is a general summary. It should not replace professional advice tailored to your specific circumstance.

by Donovan

Happy New Year

Happy New Year

Happy New Year

Tax Agility wishes everyone a very Happy New Year.

If 2019 has not given you a reason to be confident about the future, then we hope 2020 will.

The tide of business ebbs and flows. One minute you may be making progress but you may also face set-back on the next corner; as long as you are prepared for them, you are likely to do well.

At Tax Agility, we are specialist accountants working with small business owners and contractors. If you need a pair of trusted hand in managing your finance, give us a call on 020 8108 0090 and we would be glad to discuss it with you.

Happy New Year.

by Donovan

Team of office workers congratulating employee

Small Business: Motivating your employees

Motivated employees are productive and good for your business.

The performance of your employees has an impact on your bottom line and here are 11 useful tips that can help.

Numerous studies have suggested that highly engaged employees are more likely to exceed performance targets and achieve success. As not every employee shares the same personality type and not everyone is motived by the same incentive, how you should go about motivating your employees is an interesting subject worth discussing.

Why do employees work?

Before you start providing incentives to your employees with an aim to motivate them, it is worth asking the question – why do they work and most specifically, why do they choose to work for you at this point in time?

Undeniably, the need for financial security plays a big part but it is not the whole picture. Factors that lead employees to show up for work may include:

  • This is a place where they belong
  • The job may be a reflection of their self-worth
  • The work may be fulfilling and rewarding
  • They may enjoy exerting control
  • They may like to be challenged

If you are interested in delving deeper, both Maslow and Herzberg have theories of motivation and the internet is flooded with articles about these two scholars which can help you to understand human needs.

The idea is that once you have profiled each person and their traits, you can then start to personalised motivation.

11 effective methods of staff motivation

Individualised motivation

Individualised motivation is a scientific step that can help to motivate individuals to the maximum of their abilities. To do that, you must first understand their individual needs.

Create a safe working environment

Under the health and safety law, business owners must provide a working environment with little or no risks to the health and safety of their employees. That aside, most people tend to prefer working in an office that is quiet (particularly in an open-plan office), tidy, well-lit, has adequate ventilation, has access to clean drinking water and toilets, as well as has sufficient work areas where they can perform the work comfortably. If your office environment ticks all the points above and they are important to an employee, then you will have a happy and engaged employee.

Create a positive office culture

Creating a morale-boosting office culture does not always mean providing free doughnuts and coffee. In this instance, we are talking about projects that have an impact on the wellbeing of your employees, their relatives or even strangers. For instance, having a scheme that allows extra holidays if an employee needs to care for a sick relative or a project that involves your staff to help out those less fortunate in your community.

Listen to your employees

No one likes to be ignored. Be an active listener to your employees and allow them to share ideas, ask questions, or discuss anything that is important to them. When they speak, give them your full attention and maintain eye contact. If they are giving you an idea that will help your business, let them know accordingly.

Have a dialogue

The other side of listening is sharing. Talk to your staff frequently, involve them in your company vision and tackle any potential issues that may lead to disengagement.

Set meaningful goals

Believe it or not, most people actually love a challenge so using goals to motivate employees are not new. The crux of the matter is the goals must be meaningful – while they can be challenging, the goals should be attainable if one puts in the appropriate time and effort.

Timely recognition

When a job is done well, a sincere thank you, positive feedback or a token of appreciation often will make the employee feel positive and appreciated, though it must be done soon following the task rather than a few months later.

Social recognition

More and more companies are using social media to give a shout out to their star performers.

Encourage learning

We live in a world that is constantly changing, primarily shaped by the evolution of technology, globalisation of commerce, social and political landscape, among other factors. To help make your business more agile and competitive, encourage your employees to keep learning and challenge themselves.

Promote from within

Most employees like to progress as an individual and as an employee. When there are new opportunities, consider to promote from within and create a smooth transition.

Build trusting relationships

Relationships often outlast companies so it is wise to invest time and effort to build strong relationships with your staff.

Tax Agility supports small businesses in London

Every small business owner knows the importance of having motivated employees. At Tax Agility. While our small business accountants may not be able to help motivate your staff specifically, we can help you tackle your accounts, bookkeeping and tax issues, giving you peace of mind so you can concentrate on running your business and providing motivators that matter to each individual staff.

We provide the following services:

Call us today on 020 8108 0090 or get in touch via our contact page to arrange a complimentary, no-obligation meeting.

Other useful articles pertaining to small businesses that may interest you are:

This post is intended to provide information of general interest about current business issues. It should not replace professional advice tailored to your specific circumstances.

by Donovan

Christmas gifts

Tax guide for Christmas gifts

Christmas gifts

Non-cash Christmas gifts cost less than £50 an item can be considered as ‘trivial benefits’.

As the calendar year comes to an end and Christmas approaches, many small business owners in the festive spirit enjoy giving a token of appreciation to the team members. But before you go and splash out, here are the tax rules you need to be aware of.

  1. Cash or vouchers which can be converted to cash are not considered as trivial benefits. They are subject to tax and National Insurance.
  2. Christmas gifts that are less than £50 per head (inclusive of VAT), not considered as a reward for their work or performance, and not stated in the terms of their contract, can be considered as trivial benefits. In this case, they are exempted from tax and National Insurance.

Christmas gift examples

Some thoughtful Christmas gifts that are below the £50 mark and can be considered as trivial benefits include:

  • Something traditional: a bottle of wine or a box of chocolate
  • Something more personalised: a scarf, a pair of gloves or a personalised mug
  • Something popular like small electrical items, anything from portable power banks for phones to adapters.

What about Christmas bonuses?

HMRC is clear on Christmas bonuses – any cash you give to employees as a Christmas bonus means earnings. This means you have to add the value of the bonus to your employee’s other earnings, pay PAYE tax and also National Insurance through payroll.

What about gifts from a third-party?

It is possible for your employees to receive gifts from a third party. For example, you run a bakery and your employees may receive a gift from a flour manufacturer. The gift can be cash, vouchers, cheques or items. What you have to report to HMRC depends on what kind of third-party reward your employee receives and whether you are involved in arranging the reward.

The rule of thumb is that if the cash or vouchers are involved, the third-party must deduct PAYE from the reward and you must deduct National Insurance on the combined value of the reward and the PAYE tax paid on it by the third party.

For non-cash goods, the third-party must account for the tax due on the reward and pay tax and National Insurance. However, if you are involved in arranging the reward, the third party will pay for the tax due and you are responsible for the National Insurance.

As this can get complicated quickly, the best approach is to talk to your tax accountant.

Tax Agility can handle your taxes

At Tax Agility, our small business accountants can provide tax advice concerning Christmas gifts and trivial benefits to all small business owners in London, Richmond and Putney. You can count on us to provide honest tax advice pertaining to:

  • Corporate tax
  • VAT
  • Employers’ PAYE
  • National Insurance
  • Business rates
  • Income tax (for directors and shareholders)

Give us a call today on 020 8108 0090 or get in touch with us via our contact page to arrange a free, no obligation meeting.

If you enjoyed this article, you might also be interested in:

This post is intended to provide information of general interest about current business issues. It should not replace professional advice tailored to your specific circumstances.

by Donovan

Business people Celebrate Merry Christmas And Happy New Year

Tax rules for staff parties and annual events

Business people Celebrate Merry Christmas And Happy New Year

Beware of the £150 per head exemption before organising your office party.

The idea to get your team members away from work and their daily routines for a social function is sound and meaningful. Rightly so, HMRC recognises the importance of such social event and allows tax exemption to small business owners who look to reward their employees with a staff party or a social event.

Important tax rules on staff parties and annual events

HMRC is stringent when it comes to the extra perks you provide to your staff and the perks are subject to PAYE tax and National Insurance.

But once a year, HMRC allows you to spend £150 per employee which is an exemption, meaning you can claim them as a business expense. To qualify, the event must:

  • Occur annually. It can be a Christmas party or a summer event.
  • Cost less than £150 per employee. This cost includes VAT and other related expenses such as the event itself and transport.
  • Available to all employees.
  • Available to their partners, meaning their partners are also subject to the £150 per head limit.
  • Applicable to shareholders who are also directors or employees.

What happens if my event costs average more than £150 per person?

If your annual event exceeds the £150 tax exemption per person, you cannot claim the first £150. Instead, you must report the whole amount to HMRC and pay National Insurance on the full cost of the event accordingly. In this instance, it is best to get help from your accountant as you will also need to complete form P11D for each employee.

Can I host more than one annual event?

Yes. Employers can host multiple annual events but must ensure that the combined cost of the events is no more than £150 per employee for the year. However, to make it easier, most business owners choose to use their tax exemption budget during a single occasion.

Let Tax Agility manage your taxes

Tax is probably not the favourite subject among many small business owners. In the UK, tax is a complicated subject and how much tax your business has to pay depends on its structure, the VAT option it chooses, and how much money it makes. We understand that not all small business owners can keep abreast of the latest tax changes, which is why our accountants for small business owners are here to assist.

When it comes to taxes, you can count on us to provide services pertaining to:

  • Corporate tax
  • VAT
  • Employers’ PAYE
  • National Insurance
  • Business rates
  • Income tax (for directors and shareholders)

Whatever you need, we are committed to making your business a success - contact us today on 020 8108 0090 or get in touch with us via our contact page to arrange a free, no obligation meeting.

If you enjoyed this article, you may also be interested in:

This post is intended to provide information of general interest about current business issues. It should not replace professional advice tailored to your specific circumstances.

by Donovan