The Importance of Keeping the Cash Flowing

Anything that disrupts a business’ cashflow is a serious problem that needs to be solved quickly. But, although they are more likely to be affected by late payers than large companies, many small and medium sized businesses do not take positive action against debtors.

There are a number of reasons for this:

Fear of losing customers

A large company will probably be better off without its late payers. In contrast, a small business that relies on only a handful of customers for most of its income will be reluctant to risk offending them.

No credit control system in place

Credit checks on new customers, prompt invoicing, timely reminders and a clear strategy for dealing with late payers are all common practices in large companies. Many smaller businesses deal with each problem as it arises and might treat individual late payers in different ways: with varying results.

Lack of staff / time

Large companies employ qualified credit controllers whose only role is to ensure that payments are received on time. In a small business, responsibility for invoicing, collecting and monitoring payments might fall on people who have several other duties to fit into a busy day. Late payments can go unnoticed and the person who eventually spots them might not know what action to take.

Chasing late payers is time-consuming, especially if the culprit is difficult to contact and doesn’t respond to polite requests. It’s a task that can easily slip to the end of a long ‘to do’ list. An experienced bookkeeper could always provide the support you need in this department.

Whatever the reasons – or excuses – for late payments, the consequences for a small business owner are the same. Money, which is rightfully yours, is not available to pay your own bills or invest in growing your business. In the worst cases, you could end up in debt or even lose your business.

Can you afford to ignore late payers? If not, using the services of a qualified bookkeeper, experienced in credit control, could be one business expense that will pay for itself many times over.

Why you should Keep your Business Plan Up To Date

Every business, no matter how small, needs a business plan. It’s an essential tool if you need a loan or want to attract a business partner, but its usefulness doesn’t end there.

In the early days, a plan that includes a description of your business, its goals, strategies to achieve those goals, assets, competitors and detailed financial information will help to turn vague dreams into a realistic enterprise. Thoroughly researching facts and figures to include in your business plan will highlight potential problems and spark new ideas. Remember to seek help from a bookkeeper for extra support if necessary.

Once the business is up and running, many business owners put their business plan aside and forget about it. This is a big mistake. No matter how busy you are, occasionally reviewing and revising your business plan allows you to look up from the day-to-day details of your business and see the whole picture again. In particular, it should make you ask some of the following questions:

• How close are you to your original goals?
• If those goals are in sight, what next?
• How accurate were your financial forecasts?
• If you’re struggling to meet targets, what’s going wrong?
• Are you still enthusiastic about your product or service?
• Has the market changed?
• What are your competitors doing?
• Have you reacted to customers’ feedback?
• What can you do to improve anything you’re unhappy with?

Nothing stands still in business, and it’s impossible to plan for the unexpected: a new competitor suddenly appears, you win a big contract, or new government regulations mean you have to redesign your main product. Anything that affects your business, for better or worse, should be added to your plan. You can then make adjustments where necessary and use that information to steer your business on a different, but still successful, course. If you do not have the time to create a business plan yourself, you could always get an outsourced bookkeeper to do it for you.

Research Highlights the Importance of Holidays for Business Owners

New research from business comparison service Make It Cheaper has indicated that 29% of business leaders are reducing their holiday time this year, citing financial worries and lack of trust in their staff as the main reasons.

Worryingly nearly 60% of those who were interviewed said that they recognised the risks of not taking time off work at some point during the year and openly admitted that they fear that they could be affected by stress or exhaustion.

Lack of Trust

Many small business leaders and sole traders fear that their business may suffer if they leave the business in the hands of someone else and take time off for themselves. Being able to leave the business in the capable hands of a trusted employee is a luxury that many believe they do not have.

If this is something you can relate to, it is important to remember that a lot of the admin side of the work can be outsourced to a professional bookkeeping service that can keep on top of the financial and accounts side of your business whilst you are away. Do not ignore these types of services, as they are there to help in situations such as these.

An Importance Balance

It is important that there is a balance between work and leisure time. If you are tired or worn out you will not be able to perform to the best of your ability and ultimately this could harm the business more than taking the odd holiday throughout the year.

Professional Help

Seeking help and advice from professionals is vital for every small business. If you genuinely believe that you cannot leave the business in the hands of an employee, using an outsourced professional office assistant service is the best answer. These services can take the strain and leave you free to relax and enjoy a well earned break.

Exploring the bookkeeping services out there that are designed to help small business in a similar position is vital to the long term success of your company.

The Different Ways of Paying your Staff

Paying staff a fair wage on time is a vital element of business, no matter the size of a company. Failure on the part of the employer to pay staff can have catastrophic consequences for employees, many of whom rely heavily on being able to get paid so that they can keep on top of bills themselves. If your business struggles to pay staff on time, the problem must be rectified by looking at local bookkeeping service that will be able to assist you each month.

But what is the best way to pay staff? Is it more advantageous for your business and staff to pay hourly or a salary? Are there business advantages of paying one way or another?

Paying an Hourly Rate

An hourly rate of pay means that your staff will be paid a set amount for each hour that they work. There are many advantages to this method. If for some reason an employee does not complete a full week’s work, they do not need to be paid. Also, if a staff member is not required to work in certain periods of the year, you will not be left paying for a member of staff that you do not actually need. This method allows for flexible hours to be worked and is relatively easy to calculate.

On the other side of the coin however, paying an employee hourly requires their monthly hours to be calculated manually each month.

An experienced bookkeeper will be able to keep on top of hours worked and make sure that your staff are paid on time and exactly what they are owed. These services can save you valuable time so are worth investigating.

Paying an Annual Salary

Paying an annual salary is perhaps the easiest way of paying staff. Paying a salary is easy to calculate: a fixed annual amount is evenly spread over the payroll months. Due to its simplicity, it is time friendly and saves on administrative costs. Employees also benefit from knowing exactly how much they will receive each month, allowing them to plan ahead financially.

However, the problem of a salary is it does not take into account overtime. Working out and then paying overtime can take away some of the time saved by having a salary pay scheme.

Additional Help and Advice

Paying your staff is extremely vital. Whichever way you pay your staff, it will take up a considerable amount of time each month. One way to overcome this problem is to employ an outsourced bookkeeping service who will take away the hassle of multiple calculations and working out tax and National Insurance contributions. These services can make a huge difference for pushed employers.

How to Get Your Bank Lending to Your Business

Loans awarded to small businesses are being slashed according to figures released in the past week (12th August 2010). Despite banks such as RBS and Lloyds recording monster profits, they are being accused of not supporting Britain’s 4.5 million small businesses. New lending to this sector has fallen from an average of £991million a month in 2008 to £564million in 2010 - down 43per cent according to figures published in the Daily Mail.

But there are ways in which small businesses might be able to secure a business loan from prudent banks. Presenting themselves as a reputable business that is on a sound financial and business ground will go a long way to securing the funding required. But what are banks looking for in a business in order to award finance?

Solid Customer Base

If your customers are themselves good, reliable businesses then the banks will feel secure in knowing that they will be unlikely to default in payments to you, and in turn you will not default on repaying them. It is well worth investigating a good bookkeeping service who can keep a detailed record of all your customers and the dealings you do with them to present to your bank.

A Well Presented Business Plan

With the help of a local bookkeeping service, create an easy to read, straightforward business plan that lays out exactly where the business is, where it is going and how it can get there. This will make the business look professional and will show the lenders the sound financial position of the business.

Approach the Banks in a Strong Position

It is important to plan ahead in business. Remember that banks are risk averse and are much more likely to lend with the business in a strong position rather than one acting out of desperation. Banks will be happy to lend, in theory, to businesses that are showing growth or a potential for growth.

If these three rules are followed, the chances of banks lending to your business should be increased. All of this can be achieved, especially with the help of a qualified bookkeeper who will be able to provide quality management accounts so that you and in turn the lender will know exactly where your business is and where it could go financially.

With banks being prudent during this economic downturn, make sure your business ticks the essential criteria boxes for which the banks will be looking.

Recognising When Your Customers Are in Trouble

The fewer customers you have, the more it will affect your business if one of them flounders and sinks. You won’t always be told about this until it’s all washed up and you are left with a bad debt and a big hole in your income.

Clues

Have your bookkeepers told you that their payments have been getting later? Have you tried to call your contact and found the person is always in a meeting and never rings you back? If you do get to talk to them, do they seem distracted and evasive?

Perhaps their cheques been unsigned or contained errors so they’ve had to be sent back and reissued, delaying the moment the cash is removed from their account. You or your staff might have picked up rumours going around about them.

Seeing How the Clues Add Up

If your instinct tells you that something is wrong, it’s time to research their financial status. Talking to them isn’t likely to be enough to allay your fears, so your first port of call could be the Companies House website, where you can see the accounts they have filed. But remember that these will not give the whole picture as they won’t be completely up to date.

The most current information will lie with the credit agencies. You have to pay for the services of the likes of Experian or Equifax, but their information is reliable and useful. If you don’t have time for tasks like this, why not ask you bookkeeping service to do it for you?

Reduce the Risks to Your Business

With this information, you can decide whether to reduce the credit you allow the customer, offer them different payment terms, or sever the connection altogether. There are many ways to reduce the risks of not receiving payment for the goods or services you supply.

Fewer Strands in the Tax Spaghetti Bowl

According to George Osborne, our recently appointed Chancellor of the Exchequer, Britain’s tax system is one of the most “complex and opaque in the world”. It is so difficult to sort out that he has likened it to a bowl of spaghetti. Most people would agree with him, and we can all breathe sighs of relief at his announcement that he will simplify it.

Our Complicated System

It’s currently bad enough for bookkeeping professionals to keep their heads around it, so there’s not much hope for the rest of us if we try to go it alone. You only have to glance at the home page of the HMRC website and see the lists of tax areas for individuals, employers and businesses.

Notice that the last item of every list is a link to more topics. We have to get every one of those areas right or be liable for hefty penalties.

The Job of the Tax Simplification Office

Sorting out the mix, while ensuring the treasury coffers can do their job, will not be an easy task for the Chancellor’s team in the Office of Tax Simplification that he is setting up. It will take a while, and won’t happen all at once.

We can probably expect rafts of ongoing changes over a long period of time. So how do you cope with that, and what do you do in the meantime?

Who is on Your Team?

The answer, of course, is to have your own team. But do you want to employ people full time to spend all their days keeping themselves up to date on the regulations as they change, and making sure you stay compliant?

You’ll find it much more cost effective to have outsourced bookkeepers and tax advisers on your team. They will keep up to date in their own time and only charge you for the hours they spend assisting you.