Business Survival in Hard Times

The business world is about to get even tougher. Everyone is talking about it. The coalition government has announced where their levels of support will drop. Public sector building and maintenance projects have been abandoned. Responsibility for managing public services with less devolves down.

Contracts will be terminated. Less work will be done. Fewer materials will be needed. Fewer goods will be purchased and distributed. Competition will get fiercer. Not many businesses will be unaffected.

Being Prepared

Now is the time for an in-depth review of your business plans and cashflow forecasts. Why not meet with your bookkeepers and office managers for a brainstorming session on potential problem areas and where costs might be reduced? You could find it well worth the cost of the time and effort involved.

Consider your customers and their survival chances. Your own could depend on theirs. Will they need to reduce their orders? Will they be able to pay your invoices? Do you need to amend your terms or their credit status in your company?

Will they test the market to see whether other suppliers are cheaper? Are your prices going to be driven down in order to compete?

Back Office Help to Cope

Keeping your financial records up to date is going to be even more crucial. If you outsource this aspect, make sure your outsourced bookkeepers understand how important it is for them to flag anything unusual and look at the implications of the figures they are processing. Then they can warn you if they see problems looming.

Let them know that you are open to their suggestions. Because they have multiple clients, they will have experienced many problems that could be similar to yours, and seen how they were overcome. That experience could be invaluable to you.

The Payroll Basics

Payroll is an important task that must be completed accurately and on time. An inaccurate payroll system could mean that staff go unpaid and taxes go undeclared – potentially costing your business money in unnecessary fines and penalties.

There are many payroll systems – by hand or by an in house computerised system to name only a few. Whatever the system in place, there are a few key basic procedures and rules that businesses should be aware of and understand.

Registering With HMRC

If you are a new employer, then the first job you will need to do is register as new business with Her Majesties Revenue and Customs (HMRC). You will be sent a series of information books and guidelines on how to correctly operate a PAYE (Pay as you earn) system and how to calculate National Insurance contributions for your employees.

Tax Deductions

Once the business is registered with HMRC it is necessary to calculate how much tax each employee will be required to pay. This must be calculated accurately and must take into consideration the tax code of each employee, as tax free periods may be apply.

Statutory Payments

As an employer there are several payments that you will have to pay from time to time. Payments such as maternity and paternity leave and sickness pay are required by law. Do not overlook these requirements. Read any information that is sent form HMRC regarding these statutory payments.

Penalties and Fines

As with most tax issues, there are stiff penalties for those who choose to ignore the rules. HMRC can and will impose penalties businesses that do not comply with the necessary regulations. Remember to keep all the necessary records as outlined in the guidelines. Failure to operate the PAYE system or National Insurance contributions correctly can lead to fines being imposed, as will the failure to present all of the required forms on time to HMRC.

This whole process has proved to be confusing and time consuming for many small businesses and sole traders in particular. If this is the case, the best course of action is to consult a book keeping service that can set up and mange a payroll systems for all types of businesses, both large and small. This way, all the payments and tax returns will be taken care of each month by trained and experienced bookkeeping professionals, leaving employees paid and the HMRC happy.

The Importance of creating a Budget

There is a fine line between success and failure, as the saying goes. For businesses, especially of small and medium size, this line can become even finer. One way of making sure that financial mismanagement does not cost you your business is by having a budget that is rigorously followed and professionally created.

Creating a budget is vital. But how does it help businesses?

Setting Targets

By establishing a well researched and clearly outlined budget, businesses can set targets and goals for achieving a certain level of income, whilst at the same time monitoring expenses. It requires the business to look ahead into the future and understand, for example, how much produce or products needs to be sold per month for the budget to be met. Budgets work hand in hand with targets and many businesses find that it is only once a budget is created that accurate goals can be achieved.

Helps understand Cash Flow

A budget allows the business leader to understanding the company's cash flow, which is an essential task that is often overlooked. By failing to get to grips with financial records, a company could face bankruptcy, simply because they have failed to understand where their money is coming from.

By monitoring cash flow, companies can for example get to know which clients pay quickly and who doesn’t, allowing for additional pressure to be placed on the slower clients so that the funds are invoiced on time.

Controls Costs

It is vital that businesses know how much they are spending and on what. A budget allows for limits to be set on costs. By breaking down costs and actually seeing where the money is going businesses usually find that savings can easily be made. It is important to address any areas of concern immediately to stop the business haemorrhaging money it cannot afford to lose.

An Unavoidable Process

Budgets are an important element for every business. Skip this essential task and there will be trouble in the future. Every business, whether big or small, must live within its means and know where every penny comes from and goes to. Small businesses and sole traders in particular however may find that budget creation is a time consuming or confusing task.

If this is the case there are professional services that can help you and they would be a sound investment. To trained bookkeeping and accountancy professionals this is an easy and simple task. Investing in help could save time and, in drastic circumstances, the business itself.

Emergency Budget 2010 – What it means for the Small Business

The Chancellor George Osborne’s Emergency Budget was a mixed bag for small businesses with varying ramifications. How will the key announcements affect your business?

Corporation and Small Companies Tax Rate Cut

It is estimated that over 850,000 small businesses will benefit from the small companies tax rate cut which will be lowered to 20% from April 2011 onwards. Corporation tax will be reduced to 24% over the next four years. This news has been welcomed by many business leaders, and the idea is this will spur on private sector growth and make the taxes businesses pay the lowest out of the whole of the G20, making the country more business friendly to outside investors.

National Insurance Tax breaks for start-ups

The one-year tax break for the first 10 employees hired for businesses outside London, the southeast and eastern England will provide savings up to a maximum of £5,000 per employee: excellent news for start-ups. However, the tax break is not available for those businesses already in existence or those outside the areas mentioned: something that could well attract criticism.

VAT to be raised to 20%

This rise is expected to hit small businesses hard. John Walker, National Chairman of the Federation of Small Businesses, sent a warning after the announcement saying: “The increase in VAT to 20% will hurt small firms who will have to pass the increase on to their customers, unlike big business which can absorb the cost.” Consumers may decide to put off spending once the rise kicks in after January 2011, potentially causing a drop off in trade and many businesses that are currently loitering on the edge could be pushed over with this rise.

Key Advice – Understand the Consequences

It is important to keep an eye on these developments and seek advice on how the VAT rise and the all the other measures could affect your business. Seek advice is the message, if anything is not 100% clear.

How to become a Sole Trader

The option of setting up your own business and becoming an independent sole trader is a becoming an increasingly popular option mainly because of the easy start up procedures and the obvious appeals of being your own boss! Although relatively straight forward, it is important to follow the steps involved to avoid any unnecessary financial penalties.

Step 1 – Register as self employed
The first requirement is to register with Her Majesties Revenue and Customs (HMRC) as self employed. You should register the moment you become self employed in order to avoid any penalties. If after three months of trading you have still not registered you could be fined. The form required can be found on HMRC website.

Step 2 – Get to grips with VAT and tax issues
As a sole trader you will have to pay income tax on any profits you make. Every year you will be required to fill in a self assessment tax return form. It is advised to get an accountant or book keeper who can help you with these often complex issues, including explaining National Insurance payments. You will be advised to keep a detailed record of all your expenses receipts and transaction records which will make the self assessment a much easier job.

Step 3 – Do you need any special licenses?
The majority of sole traders will not require any licenses. However, businesses such as restaurants, taxi drivers and those who work with children may require a license from the local authority. The construction industry is also subject to special tax rules so it is best to visit the HMRC website for more information on this, or seek advice from your bookkeeper.

If you follow these steps you should be up and running as a sole trader in no time. Use our quick checklist below to see how close you to becoming a sole trader –

· Have you registered as self employed with HMRC?
· Have you set up a financial records system to monitor expenses and profits?
· Have you sought professional advice?

Setting up as a sole trader is red tape and bureaucracy free in the most part. However, it is vital that you firstly register as self employed and understand the tax system and requirements. Seek professional help from a bookkeeper or accountant who can offer you expert help and advice.

How to write a business plan

In simple terms, a business plan outlines your vision for the future of your business, assessing where you are now and where you want to be in the future. By asking yourself a few questions a comprehensive plan will begin to emerge -

· What is the nature of your business?
· What is the market? Who is the target consumer and how many rivals do you have?
· How much money will you need to invest?
· What are the prospects for investors?

It is important to remember that business plan is a persuasive tool so it must make whoever is reading it (especially if you want them to invest) want to keep on reading.

If financial investment is the ultimate goal from an outside investor, make sure your financial figures are accurate and you can back them up – as Dragons Den has shown, they can be easily ripped apart by seasoned investors!

What to include
Essentially, your plan should consist of four key sections:

· A mission statement – Why does your business exist and for what purpose does it serve?
· Objectives – What are your goals and ambitions?
· Strategy - How will your business achieve its goals?
· Budget – How much will it cost to achieve these goals?

Make sure the plan is succinct and compact. Only include the key points and do not go into unnecessary details. It should be short, sharp and concise.

Key benefits of a Business plan
If you thought that a business plan is a waste of time or not necessary to become successful then think again. A business plan is a key element of any business and having a well researched plan can provide many key benefits that include:

· Convincing lenders and investors to invest capital in your business
· Provides an estimate of start up costs and how much will need to be invested
· Helps clarify targets such as where you want the business to be in a certain amount of time

A business plan can make confusion and uncertainties about your business become a lot clearer. By having a plan, you can keep on top of your objectives and allows you to see how far away or how close you are from your goals.

Small Business and the New Coalition Government – What’s in store?

With the new coalition government settling into its seats, how will your business fair in light of the proposed changes on the horizon? Many uncertainties are still lingering, so what can we expect from the new government and how will it affect the smaller business and sole trader? The best way to start is to look at what was promised prior to the election, and see what might be in store if they stick it their promises. A few Conservatives pledges included:

Cut Corporation Tax
This would be good news for businesses, as it means companies will end up paying less tax with the small business rate dropping from 22% to 20% and the standard rate from 28% to 25%.

Simplify Business Taxes
The Tories have pledged to reform the tax system for business, making it in theory a lot easier to calculate taxes and slackening red tape.

Access for SMEs to Government tenders
Under new rules, 25% of Government contracts could be awarded to small and medium enterprises to help stimulate growth and encourage recruitment.

Overall the Tories have pledged to create a new generation of small businesses. Whether this will happen remains to be seen, as the new Liberal Democrat influence may make pushing some policies through more difficult than imagined.

Make sure you keep up to speed with developments, as things could change quickly. Seek expert advice from your bookkeeper if you are unsure of any tax or VAT issues or what changing legislation and policies mean to your business.