Small Business

Tools for SME Accounting and Assessing Business Performance

Here at Tax Agility we’re the first to recognise that, despite the fact that keeping in regular contact with your accountant is the key to ensuring your small or medium-sized business (SME) remains in good shape, it’s still helpful to have access to certain accountancy and business assessment tools that you can take advantage of between meetings and phone calls with your accountant.

For this reason, we felt that it was about time for us to publicly recommend some of the tools we frequently suggest our clients look into. Using any one of these tools you’ll be able to measure your SME’s performance, almost in real time, against certain Key Performance Indicator (KPIs).

Xero

Pitching themselves as “Beautiful accounting software,” we are experts in Xero’s easy-to-use platform and, should you wish to use it to keep a constant eye on your small business’s financials, we’ll be happy to get you set up in no time.

FreeAgent

Though all accounting tools in this list can be used by freelancers, FreeAgent is the only one that is actively going after the freelancer crowd, making it easy for you to see your expenses, track the amount of time you spent on any one project, and send estimates and invoices.

ClearBooks

ClearBooks provide a simple online application for you to keep an eye on (or entirely manage) your accounting, payroll, HR, and final accounts. Should you wish to use ClearBooks we’ll be happy to set you up on their platform.

QuickBooks

Staying on the ‘books’ theme, QuickBooks is popular among small business owners and accountants alike, with features allowing you to accept payments, send invoices, track sales and expenses, and manage Value Added Tax (VAT), to name but a few.

What KPIs Can You Derive from Your Accounting

As your accountants here at Tax Agility, it’s our job to ensure you’re being kept up to date with the status of your Key Performance Indicators either whenever we look through your accounts, or on a pre-arranged timescale.

If you wish to assess your small business’s performance outside of these times, however, it’s good to have an idea of all the possible KPIs you can derive from your accounting tool of choice. For example:

• Debtor days: What is current average number of days it takes between you issuing a customer with an invoice and that invoice being fulfilled?
• Gross margin: What margin (the revenue minus profit) are you currently operating in? This can be calculated for individual items or your entire business.
• Inventory turnover: How much inventory are you turning over (selling) in a given time frame?
• Debt ratio: What portion of your small business’s assets are currently financed by debt? This figure is indicated as a percentage.
• Net profit margin: What is your net profit margin in a certain time frame (often calculated over a quarter or a year).

Experienced Tax Accountants

To speak with a professional accountant to discuss the best (and easiest to use) tools available for assessing your small business’s performance, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.

If you're not quite ready to pick up the phone and are simply looking to develop some knowledge on the wonderful world of accounting, feel free to read our blog. More specifically, our pieces that are specific to accounting.

by Donovan

How to Minimise Late Payments

As a small or medium-sized business (SME) owner it’s essential that you’re paid on time by your customers, as having strong cash flow; payments coming into your business on a regular and timely basis; is absolutely essential to the success of your company, especially in the beginning.

Late payments are a natural part of doing business, but this doesn’t mean they can’t be minimised when you take consistent and appropriate steps to vet your clients and customers, provide them with multiple methods of payment, and, should it become necessary, apply interest charges to late payments.

With a recent YouGov poll approximating that 85 percent of all small or medium-sized businesses across Britain have had to deal with late non-payments by their clients and customers at some point, knowing how to minimise late payments will put you ahead of your competition in ensuring that every invoice you send out, gets paid.

1) Do Your Homework

The number one way of knowing whether a new client or customer is going to pay their invoices on time is by doing your homework by checking their credit ratings; much like companies that bill your business (or you personally) on a multi-part basis will check your credit rating ahead of time to provide them with historic assurance that you’re likely to pay their bills.

Unlike with larger companies, where the threat of being taken to court for not paying an invoice looms large, SME’s are historically taken advantage when it comes to late and non-payment. When you check a new client or customer’s credit rating ahead of doing business with them, you dramatically reduce this risk.

2) Provide Multiple Methods of Payment

Though this shouldn’t be necessary, if providing alternative payment methods to your current list increases the chances of a customer or client paying on time, it’s worth it (assuming a particular payment method doesn’t charge extortionately-high fees).

If your client tells you they’ve popped a cheque in the post (but it won’t arrive for several days), if they were late in sending out their cheque in the first place it’s within your right to ask them to pay you using a different method, with the more options you provide them reducing their excuses for not getting their payment to you as soon as possible.

3) Always Apply Interest to Late Payments

Of course sometimes, despite your best efforts to reduce such a scenario, a client or customer  will still hold out on paying you for as long as possible.

For this reason, you should consider adopting a policy whereby you always apply interest to late payments. British companies have a statutory right to charge interest on late payments, with this interest rate currently set at 8 percent. With that said, you should be wary of applying interest to late payments by your regular clients and customers (as well as newer customers spending a lot of money), as you’ll want to preserve a good relationship with them. Should late payment continue, however, you should look into sending a late-payment reminder letter, followed by a second reminder letter, followed by a final reminder letter detailing the interest they are about to be charged, and any legal proceedings and debt collection services you are intending to employ.

You'll be glad to know that in addition to these top tips, managing your businesses cash flow has recently been made a whole lot easier with a ban on anti-invoice finance terms. Click the link to find out more.

Experienced SME Accountants

To speak with a professional accountant to discuss how we can help you keep track of any late and non-payments by your clients and customers, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.

Alternatively, feel free to read our blog for industry information from the experts perspective.

by Donovan

Financing Your Small Business in 2016

We appreciate that, in this day and age, financing your small business can be difficult. That's why we're here to help guide you along the way.

Though not all of the below options will be available to you and your business, they each provide options for financing SME growth that have either been long-time favourites (see: investment finance, loans and overdrafts), or that are becoming more popular every year (see: crowdfunding and presales).

Keep in mind that before looking too deeply into any of these options, you should consider exactly how much financing your business needs (a monetary value) to achieve its current growth goals.

Investment Finance

Investment financing comes in many forms, from angel investors looking to help get your startup off the ground in exchange for a (potentially) 10 percent or greater stake in your business, to  venture capitalists offering you a much greater amount of investment income, for a much smaller stake, once your startup has begun to prove itself. Both of which can prove a lucrative solution to financing your small business. 

If you're interested in the different types of business financing, click here.

Loans and Overdrafts

Financing your small business with loans and overdraft income provides you with the benefit of getting necessary financing without having to give away any of your company, but unlike receiving investment finance, loans and overdraft financing can be very inflexible and, in the case of overdrafts, you may have to repay them on demand. This presents a company wide risk that could leave you on the back foot. 

Government Grants

Government grants are an excellent source of SME and startup financing, especially if you’re lucky enough to be rewarded one with no strings attached. Naturally, however, competition for these grants is tough, and although it’s good to apply for any grants your business could potentially be considered for, be sure to look into other methods of financing as well.

The EIS and SEIS

We’ve spoken about the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) numerous times on Tax Agility in the past, so we’ll keep this section short. For more information on both, follow the links above.

Invoice Financing

Though arguably the least exciting method of SME financing on this list, invoice financing consists of:

- Factoring: An invoice financier pays you a percentage of each invoice owed upfront, then collects the money owed by your customers, before handing you the remainder and you paying them their fees, and

- Invoice Discounting: Similar to factoring, except an invoice financier lends you money against your unpaid invoices, with you paying them a fee. Once your customers pay these invoices, the remainder goes directly to your invoice financier.

Update: Ban on Anti-Invoice Finance Terms makes Invoice Financing even easier.

Crowdfunding

Online crowdfunding has been with us for several years now, and it doesn’t look set to go away any time soon. The draw is obvious: for a startup looking to get off the ground, crowdsourcing provides them with a platform from which to advertise their products and services while raising finance relatively quickly from around the world.

Presales

Similar to crowdfunding, online presales allow startups to raise financing before they even produce their product by successfully advertising your soon-to-be product on their platform, asking for your customers to pre-order (and pay for) the product before it’s made, then using the money generated to go away and physically produce your product.

Experienced Accountants

To speak with a professional accountant to discuss the preferred methods for financing your small business or startup, 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.

by Donovan

Expanding Your Small Business Overseas?

If you’re a small business owner wondering about the potential of doing business overseas, you’ll be pleased to hear that this is something the government are currently trying to get behind as a part of their ‘Business is Great Britain’ campaign:

“Businesses who choose to sell overseas become 34% more productive in their first year while those already selling overseas achieve 59% faster productivity growth than non-exporters. UKTI can help you succeed overseas. The figures are compelling: on average businesses earn £100,000 in additional sales within 18 months of working with UKTI. This could be you.”

But what exactly are the benefits, risks, and considerations you should keep in mind before taking the plunge and expanding your (hopefully already successful) small business into new lands? According to the above-mentioned UKTI (UK Trade & Investment):

“With global online retail sales increasing by 17 per cent per annum, the opportunities for British businesses are huge.”

That’s reason enough, to start. So, here at Tax Agility, we decided to produce an informative piece on doing so. 

The Benefits of Doing Business Overseas

There are, as we’ve already touched upon, many benefits to expanding your small business overseas, some of which are downright obvious, while others you may not even have considered:

• You open your small business up to more customers and, with it, more revenue.
• Your business won’t be dependent on the British market alone.
• You’ll improve your business’s efficiency abroad and at home.
• You’ll gain a competitive advantage at home thanks to the inspiration, learnings, and general skills you learn from the overseas side of your business.

The Risks of Doing Business Overseas

Of course, as with any reward comes risk, with the risks of expanding your small business overseas numerous. It’s always important to go into a foreign situation (both literal and metaphorical) with your eyes wide open:

• Do your research: Thoroughly research the countries you’re looking to expand your small business into. Contact an International Trade Adviser at UKTI; they’ll help you to research your target markets and new potential customers. 
• Speak with your bank: There’s a good chance you won’t gain a return on investment in your first year.
• Perform a strong risk assessment: Assess the risks of everything from the likelihood of your new customers actually paying you on time (or at all), to the quality of the insurance options that are available to both you and your suppliers.

Considerations When Doing Business Overseas

There are an enormous number of things to consider before expanding your small business overseas, some of which were touched upon in the ‘risks’ section above, while others must be considered on a case-by-case basis.

If you haven’t already we would recommend you meet with an International Trade Adviser at UKTI. According to their website you can usually get an appointment with one within just a few weeks. In general, these advisers have all worked at senior levels in international commerce. Quoted from the UKTI website:

”Think of an ITA as a ‘facilitator’ to help you make an honest assessment of the potential of your business to sell overseas. An ITA can also point you in the right direction to take these conversations further.”

Your ITA can work with you on issues such as determining demand for your product or service overseas, researching suppliers, translators, and going through due diligence processes, as well as the helping you to look into tax withholdings and any dual taxation treaty between the UK and the country you’re looking to expand into.

Experienced Tax Accountants

To speak with a professional accountant to discuss the potential tax implications of expanding your small business overseas, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.

Alternatively, if you're just reading our pieces out of curiosity in a bid to broaden your horizons, feel free to have a read of our blog for the latest information on the industry.

by Donovan

Financial Forecasts for Your SME

As a small or medium-sized business (SME) owner, it’s essential that you create financial forecasts for your business so to ensure you have a firm grasp of how your business is performing financially, and thus you are better placed to make business decisions going forward.

There are many types of financial forecasts that you could choose to employ; with the three most significant for SME owners being your sales forecast, profit and loss forecast, and cash flow forecast:

Sales Forecast

Your journey into business forecasting should begin with a basic sales forecast for your company. You can predict your sales revenue for a given month, for example, by multiplying the number of units (products or services) you expect to sell next month by the retail price per unit.

When you perform a sales forecast month after month you’ll begin to notice how accurate your forecasts are compared to your actual sales for the period in question, and adjust your upcoming sales forecasts respectively.

When making your sales forecasts in the very beginning you’ll have to base them on a number of factors, such as your share of the market (local, regional, or global, depending on what you’re selling), and the prices of your products or services compared to your competitors.

Profit and Loss Forecast

One step along from sales forecasting is performing a profit and loss forecast; where you take into account not just your sales, but also the costs (both direct and indirect) you incur in achieving these sales.

These costs will include the cost of sales; which can be everything from the raw materials that are formed into your products, to the monthly salary costs of any employees who work for your business in assembling your products, or performing your services.

Indirect costs are the monthly expenses your business incurs that are not directly related to the products or services you have on sale (you have to pay them, regardless of whether you make any sales that month). These include office/premises rent, utility bills, and general business overheads.

Cash Flow Forecast

Your cash flow forecast is the most complex forecast in this list, yet it’s arguably the most important.

Your cash flow forecast allows you to see when you’re likely to have cash flowing into your business, thus (when compared to when you’ll have a significant number of costs coming out of your business) you’ll be able to see when you’re likely to experience a cash surplus or shortfall, and adjust accordingly.

It’s important that your cash flow forecast paints an honest picture of your business as it stands (and as it’s likely to look in the coming months). For this reason, all sources of income coming into your business should be included in your cash flow forecast, as should all costs, alongside specific dates which detail when payments are likely to come in, and costs are likely to go out.

If you're looking to make progress on the forecasts mentioned above, it would be wise to have a read of some related topics to bring some depth to your knowledge of the financial aspects of business.

Here's some pieces that might help:

SME Taxes You Should Know About

Financing Your Small Business in 2016

Tax Tips and News for 2016

If this isn't enough, there's plenty more information on our blog.

Experienced Accountants

To speak with a professional to discuss your SME’s accounting and forecasting needs, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.

by Donovan

Britain’s SMEs Lack Effective Leadership & Management Skills

Do you lack effective leadership & management skills?

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

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

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

Areas of Improvement

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

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

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

SME Productivity and Employment Growth Held Back

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

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

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

Experienced SME Accountants

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

Contact Us

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

by Robin Brown

The Importance of Cash Flow Management Can’t Be Undersold

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

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

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

Skewed Perceptions

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

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

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

5.5 Million Private Sector Businesses

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

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

Experienced Start-Up Accountants

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

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

by Robin Brown

Three Advantages of Operating as a Sole Trader

If you’re a small (or micro) business owner who plans on keeping things this way for the foreseeable future, there’s a good chance that setting up as a sole trader will be in your best interest going forward.

When you operate as a sole trader there are a large number of advantages that make it an ideal option for smaller businesses, both when it comes to setting up your business and registering with HM Revenue and Customs (HMRC), and once you’ve been trading below a certain threshold for a number of years.

Three of the most significant advantages of operating as a Sole Trader are:

Complete Control

When you’re a sole trader you have complete control over the running of your business, both in terms of your daily workload and the strategic decision making that takes place to determine the direction and (potential) growth strategy of your business.

It’s a common misconception that when you operate as a sole trader you can’t take on staff members. This isn’t true; though you’re the only entity (person or company) that can have a stake in your business, you can take on staff to help you complete your work. Of course, once you take on more than a couple of staff members you may find that incorporating into a Limited Company (Ltd) is a more tax-efficient alternative for your business.

Less Paperwork

Sole traders have to complete far less paperwork than those who run (and are thus director of) a Limited Company. As a sole trader you have no annual accounts to prepare, as your income and expenses are simply entered into an annual Self-Assessment tax return, where you’ll be required to pay Income Tax and National Insurance Contributions (NICs).

If you’ve not done so already you should consider hiring an accountant as soon as possible, as they’ll be able to walk you through the process of registering your business and applying for Self-Assessment in no time, leaving you free to work on making your business a success.

Easy Access to Your Income

One rarely spoken of advantage of operating as a sole trader rather than as a Limited Company is the fact that you have easy access to the revenue you make. Whether it’s paid into a business bank account or your personal account, you can extract this income with ease.

Directors of Limited Companies can only receive the income from their business as a salary, dividend, or loan once your company pays Corporation Tax on it, as the profits your company make are technically owned by your company, not you, a process which slows down your ability to access your income.

Small and Medium-Sized Business (SME) Accountants

There are, of course, several disadvantages of operating as a sole trader compared to operating as a Limited company, many of which we discussed in our recent article on whether you should operate as a sole trader or Limited Company.

To speak with a professional, experienced accountant to discuss whether the advantages of being a sole trader stack up for your business, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no-obligation meeting.

by Robin Brown