Managing Creditors

When times are tough, as well as making sure you get in all the cash that’s owed to you, and managing your cash flow, you also have to deal with your creditors. Unless you manage and pay for your taxes and procurement efficiently, nasty things can happen. If you have clear business policies for managing creditors that you follow consistently, you are less likely to reach crisis point. Even if you do run into cash flow problems, they will be easier to deal with if you have set the right priorities and kept up good relationships with your suppliers.

Get Your Priorities Right

Enlist the help of your bookkeepers to decide which creditors are most important to you. If you have outstanding loans or anything on hire purchase, your lenders will probably top the list. If you rent your premises, your landlord will be up there too, as well as any providers of the essential services needed for your business to operate.

Other creditors likely to penalise non-payment heavily include HMRC which has to be satisfied at the right time on PAYE, NIC and VAT as well as corporation tax and personal tax. Don’t forget your local authority’s business rates.

Next on the list are those specialist suppliers without whose goods you cannot operate. Sadly for suppliers of small consumables that you can always purchase elsewhere, they will usually be placed last.

Payment Policies

Every business should have a general policy on payment, such as making a batch of BACS payments or signing and sending cheques on a certain date each month. Your bookkeepers will tell you that you still have to maintain some flexibility though, so that these payment procedures can be adjusted and one-off payments made where necessary.

Communication

Making time to keep in touch with suppliers is as important as talking to your debtors. You need to be sure they are aware of your payment policies and are in agreement with them, or that other arrangements have been made to accommodate them. Staying in touch can have advantages for you: if they understand your business, they may be able to make helpful suggestions you haven’t already considered. Agreements with suppliers can have mutual benefits if both parties communicate and understand each other.

Market testing is something you should do periodically. If you discover alternative suppliers who offer better terms, check if your current ones will match them or improve their own terms enough for you to want to remain with them. Don’t forget that your outsourced bookkeepers probably know of the best suppliers of commonly sought items.

HMRC Make RTI Easier for Small Businesses

The requirement for real time information (RTI) to HMRC on payment to employees was phased in on 6 April. This means that details must be sent to HMRC every time a payment is made to a member of staff. The method of doing this is to send this information electronically using payroll software as part of the routine payroll process. The Revenue was aware that this has been causing headaches for many small businesses.

                                                                                                

Those finding it most difficult run a payroll once a month, but actually pay staff more often, so to comply with RTI they would have to completely change their procedures. Many were just not able to do it by 6 April.

Easement Arrangements

HMRC has therefore temporarily changed the rules for businesses with fewer than 50 employees. They can report all payments as and when the monthly payroll is run, as long as it is before the 6^th of the following month.

At present, this just gives organisations an extra six months to get ready for RTI as it only applies until 6 October. It will, however, be reviewed in the interim. The chairman of the Federation of Small Businesses, John Walker, has said that he hopes it will become a permanent measure. This is not a sure bet so, in the meantime, all small businesses need to consider how to be ready by October and be able to take appropriate action.

Reminder of the RTI Requirements

Whether you are subject to the real time requirements or are allowed to report monthly, your business must be registered for PAYE online, and it is no longer possible for the in-house payroll function to be manual unless the details are passed to a payroll bureau to make the returns. If you want your outsourcedbookkeepers to do this, they must be given your PAYE login details. Payroll software providers are building in the RTI function to their products and existing systems have had to be updated to include it.

It is vitally important to have complete and accurate information on each member of staff, however often, and however much, they are paid. Even temporary staff must be included if your business pays them. RTI may mean that additional information is required on your payroll system. Full guidelines on the reporting requirements are posted on the HMRC website.

Even if you outsource your payroll operation, RTI is your own responsibility, so you need to be sure that your provider is RTI ready. If you use your outsourced bookkeepers, they should have already informed you of what you need to do to be ready. Do talk to them if you have any concerns about RTI. 

Taking Part in a Pop-up Shop Project

If you trade online, would you like an opportunity to meet some customers face to face and let them see and touch your products, and recognise their quality? There would be a number of advantages to this, not least the invaluable feedback you could get, and the opportunity to promote your website first hand.

How you Can Do it

PopUp Britain is one of the organisations that recognised all this, plus the fact that at the moment there are lots of empty shops in our High Streets. It was launched in July 2012 by StartUp Britain to try to do something about it. It introduced the pop-up shop project, for which it persuades landlords to make shops available to local small businesses for two weeks at a time. The businesses pay £150 to share the space with, typically, five others, so the landlord gets £450 a week rent instead of nothing for the empty premises.

For those small businesses who don’t want the hassle of long leases or can’t take the risk of renting shop premises long term at present, it’s an excellent way to dip a toe in the water. Those who have had the experience feel it was well worth while.

The Pop up Shop Experience

An entrepreneur who was able to promote her child product business in pop-up shops  reported that people want to see what something feels like and what the quality is like, and then, once they have seen you in the flesh, they’re no longer hesitant to visit your website. She emphasised the importance of talking to the customers and explaining the project and the aims of your business. If they like you they are more likely to do business with you, both at the time and online in the future.

A clothing retailer had been using market stalls for her sales but decided to try a pop-up shop for two weeks. She said that it brought a lot more customers and that more people heard about her, tried on the clothes and looked online. On the first day she had more than covered the fee for the two weeks rent. Another benefit was that she came into contact with other local entrepreneurs that she hadn’t met before. Using the pop-up shop brought them a shared camaraderie they hadn’t experienced before while they operated in isolation.

Preparation Is the Key

Before setting up in the store, it’s wise to prepare carefully. You’ll need to have cards or flyers to hand out, as well as clearly priced products to demonstrate and be available to buy. If possible, organise a launch event with some small freebies to draw people in.

You’ll also need to let as many people as possible know about it in advance. Blog about it and give it a prominent place on your website. Email your local customers and ask them to tell their friends and family. Ask your outsourced bookkeepers to spread the word too. Get your own friends and family committed to attending a launch. Promote it on as many social media platforms as possible.

It’s probably worth a try. What have you got to lose?

Where Does Your Money Go?

Everyone would like to cut their business costs. The starting point is knowing exactly where every penny goes. Your outsourced bookkeepers can help you with this, and when you have this accurate information, you’ll be able to see where you might be able to shave off a few pounds. Here are a few possibilities.

Staffing

If you need more help or someone leaves, instead of recruiting another employee, consider outsourcing to a freelancer. While the hourly rate may be higher, you only have to pay for the time needed, and you won’t have to pay tax, NI, sick, maternity or holiday pay. This also saves on reporting time to HMRC.

The VAT Reclaim

When you make your VAT return, do you know exactly what can be reclaimed on expenses, what is allowable and what is not. For example, if you have to hire a car, as long as it’s not replacing a company car which is under maintenance, and you have it for 10 days or less, you can reclaim all the VAT. Otherwise you can only reclaim 50% of the VAT.

Rules like this on VAT reclaiming are complicated and you need to get them right. Overclaiming can bring costly penalties, but don’t be among those who don’t reclaim because they are not sure what is allowed. Ask your bookkeepers for advice and get your head round the rules. Get your money back where you can. It all adds to the bottom line.

Advertising

If you have a budget for this, there may be ways to cut it. Social media gets the word around and can even be more effective than traditional and expensive advertising. If you have a presence on Facebook or Google+, Linked In and Twitter, and use it wisely, you could find the results far exceed what you get back through the advertising you have been paying for. Of course, using it wisely means taking time to post regularly, or paying someone to do it. Outsourcing it to an expert copywriter could replace some of the advertising in the budget and bring a better return on the investment.

Purchasing

There are almost always ways to save in this area. Do some market testing and keep you suppliers on their toes. Negotiate but be wary of volume discounts of supplies that might lose their quality before you can use them. One way that you could take advantage of these is to join a buying consortium of local small businesses. Not only could you buy amounts that attract lower prices, you’ll be in a much more powerful negotiating position.

Why not ask your outsourced bookkeepers for their ideas. They know your business and may be able to suggest any number of ways that you could cut costs.

Current Government Consultations

Among the government’s latest project consultations are two that will have a direct effect on small businesses which are soon due to close. One is about the regulations surrounding business names, which will affect all business organisations, large and small. The other is relevant to microbusinesses with up to ten employees, and is about the proposals to simplify their reporting requirements. Both come up in the context of The Red Tape Challenge which is now looking at the rules that affect business and commerce.

Business Names

Under current regulations, businesses must comply with certain rules about business names. The government has learnt that these are causing problems for established companies that want to change their names, as well as start-ups. The first question on the consultation asks if you think that all regulations should be repealed, or should be reduced and simplified. If they were repealed, names would be registered more quickly. Action would still be taken if a reasonable complaint was made about a registered name.

In case it is decided to retain some regulation, the second question is whether the list of sensitive words should be reduced and, if so, which ones should go. This list is made up of words which have to be considered by a relevant organisation, such as the Financial Services Authority, The Charities Commission, The Department of Health, Ministry of Justice, before they can be incorporated in a business name.

The third and final question asks the same for the list of ‘same as’ words. These are words which can appear in a number of names and cannot be complained about.

This consultation can be found at:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/94535/bis-13-648-company-business-names-consultation-red-tape-challenge.pdf

Reporting requirements for Microbusinesses

To be classed as a microbusiness, you must match two out of three set criteria: your balance sheet total is not more than £289,415; your net turnover does not exceed £578,830; and you employ up to 10 people. You may want to discuss with your outsourced bookkeepers whether you fall within the category.

The questions in this consultation are, firstly, whether you think the government should implement all parts of the EU’s Micro-Exemption, and if so, which ones and why. Secondly, what costs or savings would apply. A further nine questions go into various technical details of the proposals.

This consultation can be found at:

https://www.gov.uk/government/consultations/simpler-financial-reporting-for-micro-entities-the-uks-proposal-to-implement-the-micros-directive

If you are a micro entity, these possible changes could have a significant effect on your costs and workloads, so it’s worth sitting down with your bookkeepers and talking through the points whether or not you intend to submit responses. But if you would like to respond to either consultation, you have to do it before 22 March, 2013.

Are you Ready for RTI?

Last year we published information about the forthcoming changes to PAYE reporting by employers. The time for Real Time Information (RTI) is now upon us and hopefully, you are already prepared. Starting in April, employers should be reporting on their PAYE records for every employee every time they are paid. Some may be favoured with a window of a few months after that before compliance is expected from everyone in October.

The Seven Day Deadline

Under RTI, electronic returns must be made within seven days. Unless you were in one of the pilots for the scheme that have been doing this since November, this will be a big change from the former annual reports required.

According to the Forum of Private Businesses, many small businesses are still unaware of these new rules. However, HMRC is writing to all employers to explain what they will have to do. They have also published information about it on their website, and have made an explanatory video that is available on You Tube.

How RTI Will Help Business and the Economy

RTI should make records at HMRC more accurate, so that employers can be given the right tax codes to use and people don’t pay too little or too much tax. HMRC also claims that it will save employers some of the money currently spent on administration at the year end. Whether it does or not, all employers must comply with the new arrangements by October 2013.

Lin Homer has been Chief Executive of HMRC since January 2012. She said, "RTI delivers on all fronts. Business costs will be cut by £300 million a year, employees will be taxed more accurately and fraud and error in the tax credit system will be reduced by hundreds of millions of pounds every year."

Get Help if you Need it

It is therefore even more important than ever that your own payroll information is accurate and up to date at all times. If your outsourced bookkeepers are dealing with it, there should be no problem. There are still concerns that some small businesses will find it difficult to meet the deadlines after each payroll is run. But Lin Homer believes “If your data is in good shape then it’s going to be easy for you to access RTI. A small business that is not moving into the digital world is not doing itself any favours.”

So if you have any concerns about your ability to comply with RTI, you need to act now. Why not get together with your outsourced bookkeepers to discuss how they can help.