Business management tips

It is not enough to complete work for a customer and to invoice them. Sometimes there are problems, such as the customer being slow to pay or even going out of business before you can receive payment. This can cause big problems as you are still incurring expenses while not seeing any income generated for it. In order to assist with this common problem, we have provided a few useful tips below.

·         Ensure that customer terms of payment are crystal clear. Obtain signed terms and contracts which, where possible, contain guarantees of payment.

·         Ensure you fund projects by asking for a payment/deposit up front before work commences.

·         Do not let a customer run up a large debt. Set a credit limit and make sure that the customer understands that work will cease if your invoices are not paid.

·         Borrowing money from banks can be difficult, so be sure to plan for this in advance.

·         If a customer goes bankrupt, (especially with a Limited Company) it will be unlikely that you will see any money for your work, so obtain stage payments and deposits.

·         Try not to rely on a single large customer. A larger number of smaller customers ensures continuity of income and spreads the risk.

·         Look for work with a recurring element to it, for that repeat business.

·         Review competitors prices and the quality of their product or service. Make sure your prices are competitive, and that you provide a better quality product or service.

·         Expect that some customers may cease over the next year, so always be looking for new customers, make use of selective advertising, marketing and existing industry contracts.

·         Cash advances on customer invoices, sometimes called factoring, should only be used as a last resort. There is no guarantee that this will solve your cash flow problems and is really an expensive form of bank borrowing secured by way of a personal guarantee by you. Seek professional advice before going down this route.

·         Where possible, stock should be purchased on a ‘just in time’ basis. The opposite means having your cash tied up in unsold stock, which does not help with cash flow.

If you need any help, or would like further explanation of any of the above, please contact us now.

Mark

Advice on record keeping

It is important to keep records, so that organisations such as the Inland Revenue can be clear on how you received your income, and what income is taxable.

Multiple Bank Accounts

When you perform work, you know that you must raise an invoice for payment. Try to ensure this all gets paid into one main bank account so that all money can be easily accounted for. Record keeping is vital to ensure that when the Taxman or Vatman comes visiting, that he does not tax you on any unexplained income which cannot be tracked back to a sales invoice.

This situation could occur where a business account exists but amounts are paid into any number of other personal bank accounts. The genuine self employed income gets mixed up with other income and information to support income in those personal records is non-existent.

We’ve seen it happen and the Inland Revenue will want to try to tax you on this other income, if you cannot provide evidence as to what it is.

Sales Invoices

Each sales invoice raised for work done should have an invoice number. Ensure that the numbers follow on from each other and keep any that have been spoilt or had to be amended. If any are missing, the taxman will assume that you were paid in cash and that you immediately destroyed the missing invoices to reduce your income. Keep all invoice records even where you have had to make out a new invoice as a replacement.

Other Records

If you are in business it is a good habit to keep ‘other’ records, for example, diaries, quotes etc. also keep all personal bank statements and make a special note of any monies paid into these accounts and from where they came e.g. loans or gifts from family members. Record this as soon as possible after the event – it is always more difficult to remember details at a later date.

The Inland Revenue often treats unidentified amounts as additional income unless you can prove otherwise. This is a classic attack used by the Revenue to get their hands on your money.

If you really feel that record keeping is not your cup of tea, and would rather not worry about the hassle, then why not get us to do it for you?

If you are in doubt as to which records to keep, why not give me a call?

Mark

Tips for start up businesses

Starting your own business can be an extremely rewarding experience, but it can also prove a significant challenge.

Many small businesses fail in the early stages, which is why it is essential to plan your venture carefully. You should start by including us in your initial planning.

The more forethought you can give to the task of running your business, the more likely you are to succeed.

BEFORE YOU BEGIN

Before you begin, you’ll need to consider such questions as:

Are you suited to running your own business?

While being your own boss certainly has its advantages, it also brings extra responsibilities, hard work and probably long hours, especially in the early stages of the business. There might also be an element of personal finance risk. To be successful, you will need dedication and determination.

What are your key objectives?

You should define the main aims of your business, including what you hope to achieve. This might be fulfilling a personal ambition, or providing a range of new services to a particular target market. What is the nature of the business, and what needs in the marketplace do you aim to meet?

What are your expectations?

Many small businesses do not make significant profits in the first two years. Before you begin, make a realistic estimation of your expected profits, and the potential rate of growth of the business.

How much finance will your business require?

Have you and funds you can put into the business, and do you need help raising finance for your business?

STARTING A BUSINESS PLAN

Creating a business plan is one of the most important things you will do when starting up. An effective plan will help you to gain funding from potential investors, but it will also help you to clarify your business objectives.

Your plan should include:

A business description and a mission statement – Identifying your primary business objectives, and a basic explanation of how you intend to meet them.

Management and people profiles – potential investors want to know that your people are competent and can deliver results.

A financial portrait and strategy – it is important to provide details of funding sources, and projections of such things as cash flow and potential profit, as realistically as possible. We will be pleased to help you with this.

Sales and marketing objectives – describe in detail your intended market and how you will bring your product or service to it. Research your competitors – their products, pricing service and market penetration.

An executive summary – potential investors may initially read only this, so provide a concise overview of the essential points from each section of the business plan.

A business plan should be honest and realistic. Research your market thoroughly and avoid over-optimistic forecasts. Do not ignore competitors and potential risks. If you do a ‘SWOT’ analysis, pay as much attention to your threats and weaknesses as you do your strengths and opportunities.

Your presentation should be professional and clear, with graphic and charts where possible. The plan should be comprehensive, but concise enough to maintain the interest of the potential investor.

Which business structure?

You will need to decide which business structure best suits your needs: Sole trader/Sole practitioner, partnership, limited liability partnership or limited company.

There are both advantages and disadvantages for each trading structure in terms of control, perception, support costs and tax implications. Care needs to be taken, and we can help you through this important decision making process.

CHOOSING A YEAR END

It is important to choose the right year-end for your business. To what extent is your business seasonal? Is there a time of year when it will be more convenient to close of your accounts, ready for us to prepare your financial statements?

From a tax viewpoint, the choice of a year end early in the tax year for an unincorporated business often means that an increase in profit is more slowly reflected in an increase in tax bill.

RAISING FINANCE

When you are starting a new business, the likelihood is that you will need to raise finance from an external source. Like everything else, this requires careful planning and a knowledge of lending sources.

It is often advisable to consider a number of finance sources, to afford greater flexibility in the long term. Some of the more common sources include: overdrafts; loans; mortgages; share issues (for companies); assistance from government-backed schemes and from regional authorities; and venture capital. We can help you identify the costs and tax implications, before making a final decision about who to approach.

Most lenders will require some form of security from you, such as a fixed or floating charge over your business assets. If the lender requires personal guarantees, you should proceed with caution, as important personal assets may be at risk.

OTHER THINGS TO CONSIDER

As your enterprise grows, you will need to consider a whole range of issues. These will include:

Trading name or style – have you checked that your trading name does not conflict with that of another business?

Premises and location – should you be working from home, or renting or buying premises?

Keeping records – you will need to keep adequate business and accounting records. This is the starting point for plans to minimise taxes and manage cash flow.

Patents and trademarks – do you need to protect your idea, invention or brand name?

Production – are your suppliers and manufacturers offering the best deal? What needs do you have for plant and machinery?

Marketing and branding – how are you raising awareness of your product or service in your target marketplace? Do you have strong enough differentiation from your competitors?

Insurance – are you covered for such things as disaster, loss of profits, product liability or loss of key staff?

Managing finances – can you manage your cash flow effectively? Can you cope with outstanding debtors?

Taking on Staff – having the right people working in your business can mean the difference between success and failure. As well as ensuring that your recruitment and interviewing systems are effective, if you are employing staff you must observe a raft of legal and tax rules.

If your reading this, then your lucky as you're talking to a friendly advisor who has seen it all before, therefore you know that you will be in safe hands.

Mark