Small Business: Motivating your employees
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:
- Accounting and bookkeeping specific to small business
- Tax and VAT for small businesses
- Payroll services
- Small business management consulting
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:
- Small business: 5 ways to get new customers
- Small business: managing rising costs
- Accounting tips for small businesses
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.
Five ways to improve your company’s cash flow
Owning a business is undoubtedly a rewarding experience – it allows you to set your goals and create tremendous financial opportunities, but it can also keep you awake at night especially if cash flow becomes an issue.
As experienced chartered accountants working with SMEs across London, we understand very well some of the trials you face when running your business. To protect your investment and maximise your business’s potential, it is essential that you have the right support and advice when it comes to tackling some of the challenges so you and your business can come out stronger. For the purposes of this article, we aim to discuss issues pertaining to cash flow and how to better manage it.
What is cash flow?
Cash flow is the total amount of money going into and coming out of a business. At any one time, your business should have more money coming in to cover everything that needs to be paid out. If the cash outflows are more than the cash inflows, then you have something called a cash flow gap – most businesses address this gap by relying on overdrafts to help them meet the obligations.
The good news is, cash flow is something that you can plan and control in advance with some guidance, meaning you can actually avoid cash flow gaps and maintain healthy business growth. Now let’s take a look at five tried and trusted methods to improve cash flow.
1. Always collect debts promptly
When it comes to collecting overdue money, many SME owners know the pain too well. According to research by Bacs Payment Schemes Limited in December 2018, more than a third of SMEs wait two months beyond agreed terms to be paid, making late payment a serious threat to the survival of SMEs.
To overcome this, it is crucial that you let your customers know your payment terms before both parties agree to work together. If you are offering a professional service, ask for part payment up-front and tie the remaining balance to each milestone, and make it clear that you won’t start the next phase unless the previous invoice is settled.
As soon as you become aware that certain clients still fail to pay despite knowing the payment terms, following up with phone calls and reissuing invoices will usually do the trick. If it becomes apparent that they don’t attempt the settle the payment soon, then it may be worthwhile to consider a debt-collecting agency. Speed is key to debt recovery – the longer you wait, chances are the more resources and effort will be required to recover payments.
2. Use an invoice template and accept multiple forms of payment
Although simple in theory, many SMEs neglect to make the payment process easier for their customers. Invoices addressing to the wrong customer, having an incorrect address or failing to include the issuing date and adequate bank details are common occurrences. One of our customers shared a story in which they tried for six months to get a vendor to issue a correct invoice – this may seem bizarre to those who keep a watchful eye on your accounts, but similar stories do happen daily due to all sorts of reasons. If you have already made use of an invoice template and the issue is largely because you lack a dedicated staff to properly manage this process, then consider outsourcing it.
For payment between businesses (B2B), bank transfer is the most common payment method and other payment methods like credit card, direct debit and Paypal are less so. Direct debit certainly deserves special mention as it reassures business owners that payments will come on time, so opting to accept direct debit and other forms of payment can help to cut down debt and maintain healthy cash flow.
3. Create accurate cash flow projections
It is essential for the longevity of your business to create accurate cash flow projections – an estimate of money you expect to flow in and out of your business, including all projected income and expenses. A cash flow forecast usually covers a year but you can also design it to cover a shorter period.
At Tax Agility, our small business accountants are experts in cash flow forecasts and we can help you to plan for multiple scenarios, accurately factor in fixed and variable costs, consider seasonality that may affect your business and put in place contingency plans, to name but a few.
An accurate cash flow forecast is invaluable because it gives you the visibility that you need to stay in control. For example, you know that you have to settle a major expense at the beginning of January and your clients are likely to miss payments in December due to the holiday season, then you can take pre-emptive actions like offering discounts to clients if they pay before the due dates, arrange for a short-term facility, or opt for invoice factoring (selling the invoices to a financial company at a discount for immediate cash injection).
4. Review your overheads
Business overheads are expenses that are related to the day-to-day running of your business and they do not correlate to a product sale or service. Overheads can include fixed monthly or annual costs, such as insurance, salaries and leases, or expenses that differ every month – repairs to your business’s building or advertising.
Typical overheads include:
- Utilities – gas, water and electricity
- Rent – the lease costs of the business premise
- Administrative – salaries and office supplies
- Insurance - which can include Property Insurance of General Liability Insurance
- Maintenance and repair
By putting the overhead figures down in your cash flow forecast, you can see which areas (or when) you can cut down expenses or consider a cheaper alternative. In our post “Hiring specialist contractors can reduce SME costs”, we share good tips on how SMEs can optimise the use of resources and achieve maximum customer value, so follow the link to read more if you’d like.
5. Use an exceptional online accounting software
To stay on top of your finances, ditch cumbersome spreadsheets and opt for an easy-to-use online accounting software like Xero. Cloud-based accounting software Xero is built for small business owners who don’t necessarily possess a good level of accounting knowledge as its user-friendly interface makes it easy to understand key financial information.
The cash flow statement in Xero contains three useful sections:
- Cash flows from operating activities such as salaries paid to employees, payment received from customers etc.
- Cash flows from investing activities such as new office equipment or the sale of assets.
- Cash flows from financial activities such as loan repayments, money invested in a business or money taken out by directors.
Xero allows you to customise the layout of your cash flow statement by dragging and dropping items on the interface, as well as showing more granular information like where you have spent cash. To make the most of it, it is best to discuss the cash flow statement with one of our chartered accountants so you can continue to make informed decisions.
Follow the link if you’d like to know more about Xero and how it can help to organise your business account and finance.
Tailored advice to improve your company cash flow
At Tax Agility, our small business accountants have built a strong reputation helping SMEs across London to build a robust set of business fundamentals including managing cash flow and using it to their advantages. If you’d like to know more about cash flow, tax and accounting matters, as well as statutory compliance, get in touch today on 020 8108 0090 or via our contact page to arrange a complimentary, no-obligation meeting.
This article was updated on 24/07/19
If you found this helpful, take a look at:
- Small Business: Top Tips to Manage Cash Flow
- 7 key steps to growing a business online
- Why outsource your payroll administration
This blog is a general summary. It should not replace professional advice tailored to your specific circumstance.
Trusts for Vulnerable People
Trusts for vulnerable people, also known as trusts for vulnerable beneficiaries, are a type of trust that can be set up for:
- someone under eighteen whose parent(s) have died.
- a disabled person who is eligible to receive a Personal Independence Allowance, Constant Attendance Allowance, or Armed Forces Independence Payment, even if they don’t receive any of these allowances.
Trusts, as we’ve been exploring in recent weeks, are a method of organising money, investments, land, or buildings (known collectively as assets) for a person or group of people, including children. But how are trusts for vulnerable people different from standard trusts, if at all?
Vulnerable Person Tax Treatment
In order for a beneficiary to be treated as a ‘vulnerable person’ for trust tax purposes they have to fill in, with help, if necessary, the Vulnerable Person Election (VPE1) form. The form must be signed by both the beneficiary and the trustee(s).
Income Tax Treatment
Trusts with a vulnerable beneficiary may receive a deduction in income tax payments.
To work out this deduction, the trustee(s) must calculate what tax would be payable if there was no deduction available, before calculating what income tax the vulnerable beneficiary themselves would have owed if the income from the trust had been paid to them as an individual. The difference between these two figures can be deducted.
Capital Gains Tax Treatment
Capital Gains Tax is only paid when assets within a trust with a vulnerable beneficiary are sold, transferred, exchanged, or given away, and the assets in question have increased in value above the ‘annual exempt amount’.
This figure currently sits at £11,100 for beneficiaries with a mental or physical disability, and £5,550 for others.
Inheritance Tax Treatment
Trusts for vulnerable people may get special tax treatment depending on their level of vulnerability, as defined by HM Revenue and Customs (HMRC), when the trust was set up, and how long the person who set up the trust continues to live after the trust is created.
These definitions are highly specific, so rather than restating the same information here we recommend you read through the different cases the Government have put forward here (scroll down to the ‘Inheritance Tax’ section).
Multiple Beneficiaries
Keep in mind: It’s possible for a trust to have multiple beneficiaries who are and aren’t deemed to be vulnerable people.
For this reason, and to keep everything above board, all income and assets for any vulnerable beneficiaries must be kept separate from income and assets for non-vulnerable beneficiaries, with only the vulnerable beneficiary’s income and assets being eligible for any special tax treatment.
When a vulnerable beneficiary dies or is no longer deemed to be vulnerable, the trustee(s) must inform HMRC as soon as possible.
Experienced Trust Accountants
To speak with a professional accountant to discuss trusts for vulnerable people, 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.
Trustee Responsibilities
Whether you’ve recently been asked if you can be a trustee for a friend or family member’s trust, or you’ve been a trustee for some time and you want to brush up on what your responsibilities to the trust are, this article will answer all (and any) questions you may have.
In the simplest possible terms, a trust is a method of organising money, investments, land, or buildings (known collectively as assets) for a person or group of people. There are three types of people involved in a trust: the settlor, the trustee, and the beneficiary. The settlor is the person(s) who place the assets into a trust. The beneficiary (or beneficiaries) is the aforementioned person or group of people who benefit from the assets over time, and the trustee…
The Trustee
As a trustee you will be expected to manage the trust in the best interests of the beneficiary or beneficiaries. In the words of the Money Advice Service:
“As a trustee, you’re responsible for using the money or assets in a trust to benefit someone else. You won’t be able to benefit from the trust yourself (unless the trust agreement says you can). What you can and can’t do may be set out in detail in the trust document.”
Tax Responsibilities
Trustees hold the sole responsibility for reporting and paying tax on behalf of the trust. If there is more than one trustee (you’re not the only trustee for your specific trust), one of you must be nominated the ‘principal acting trustee’ and manage the trust’s tax affairs by yourself.
Assuming you’re the only trustee, or you’re nominated the principal acting trustee, you are required to register the trust with HM Revenue and Customs (HMRC) by 5 October of the tax year after the trust is set up. To do this you’ll need to complete form 41G and send it to HMRC’s trust and estates department.
Once the trust is registered you’ll be required to send HMRC an annual Self Assessment tax return regarding the trust’s income and any gains.
Reporting Responsibilities
As a trustee you are also expected to report to the trust’s beneficiary or beneficiaries on what tax has been paid and what income has been created whenever they ask for this information.
If the beneficiary is a close friend or family member they will, fingers crossed, not be asking you for this information every few weeks. But as and when they do ask for this information you will be required to complete form R185, or form R185 (Settlor) if you need to report this information to a settlor who has an interest in the trust.
Experienced Trust Accountants
To speak with a professional accountant to discuss your responsibilities as a trustee, 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.
Ban on Anti-Invoice Finance Terms in Work Contracts
From next year (2016) small and micro-businesses across the country will have a new option for growing their business and improving their cash flow thanks to a decision by The Department for Business, Innovations, and Skills (BIS) to allow small business owners the right to secure finance against money owed to them through invoices for all working contracts.
This decision was made possible due to a ban on anti-invoice finance terms, with the ban being seen as a direct method of speeding up economic growth and, as a result, helping to create jobs.
Invoice finance is particularly beneficial for small and micro-businesses because it give them the option to receive the income that’s owed to them sooner, thus avoiding falling into negative cash flow. Speaking on the ban, Small Business Minister Anna Soubry said “While invoice finance may not be right for everyone and is absolutely no excuse for late payment, I want small businesses to have the option of using it to increase their cashflow. This is all part of our plan to maintain the UK’s position as the best place in Europe to start and grow a business.”
What is Invoice Finance?
Invoice finance is a option that allows small and micro-business owners to receive finance for invoices that contain money (often late payments) owed to the business. The Asset Based Finance Association (ABFA) estimate that over 44,000 businesses in the UK receive over £19 billion of invoice finance in this manner at any given time.
Invoice finance allows small and micro-businesses to receive the majority of the money owed to them much faster (often within a standard thirty-day invoicing cycle) than if they simply waited for their customers to pay their invoice.
Regular, positive cash flow is the lifeblood of small business, which is why invoice finance has become increasingly popular among small and micro-businesses in recent years, with the ban on anti-invoice finance terms likely to increase this. Despite this excellent new change, it would still be advised to keep up to date with the best practices on How to Minimise Late Payments.
The Changes
In the past clauses within working contracts looking to prevent sub-contracting would often (and sometimes inadvertently) make it impossible for invoice finance to take place on said contract.
The ban on anti-invoice finance terms in contracts, which was made possible by terms set out in this year’s Small Business, Enterprise and Employment Act, received cross-party support in Parliament, with almost-identical bans in Australia, Canada, and the United States said to confirm its necessity.
Speaking of the importance of small businesses, Small Business Minister Anna Soubry said: “Small businesses are the economic backbone of Britain and we will do everything possible to make sure they continue to grow and create jobs. By scrapping restrictions on invoice finance, thousands of firms across the country could benefit from faster access to hard-fought funds.”
The Federation of Small Businesses was also complimentary of the ban, with National Chairman John Allan stating that “The decision to outlaw the ban on terms in contracts to prevent businesses from choosing who they want to go to for invoice financing is overwhelmingly positive for businesses around the country.”
For more tax information in relation to business, click here.
Experienced Accountants
If you’re looking to start applying for invoice finance, or you just want to know how to go about applying when the time comes, your accountant can work with you to simplify this process.
To speak with a professional accountant to discuss the new anti-invoice finance terms, 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.