Prepare for the VAT Rise

As of January 4^th 2011, VAT will rise from 17.5% to 20%, bringing the UK in line with other major European nations such as France and Italy. Although businesses up and down the country will be bracing themselves for the effects to hit, what are you actually going to do to combat it? Has your business tweaked its plans and budget to help deal with the rise?

Most businesses might be wondering what this VAT increase will actually mean and what the options are. Consider the following ideas:

Let the Business Bear the Brunt

One option is to let your business shoulder the rise in VAT. By doing so, it is imperative that marketing and sales focus is increased so that the rise does not result in your business losing money. If you decide to take this option it is probably a good idea to contact a professional bookkeeper so they can go over your accounts and work out what level of sales increase is needed to cover the VAT rise.

Pass the Rise onto Customers

If it costs more to run your business as a result of increased VAT charges you may consider passing the rise onto your customers. Nobody likes to do this, especially if you have a number of loyal customers, but it may be necessary in the long run. You may be able to swallow the VAT rises for a year or two, but the pressure to do so year after year may be too much for many businesses. Management accounts are often the speciality of local bookkeepers so invest in their services to ensure all accounts are totally accurate throughout the year and that your business does not lose any profit made to tax at the end of the year.

There are contradictory claims in the business world presently as to what the best option is to take. Whatever you decide, remember to get your numbers and calculations right with the help of a bookkeeper. Do not underestimate the effect this rise could have on your business and your customers.

Avoid Staff Entitlement Confusion in Your Business

Whether a fresh recruit in a small family run business or the CEO of a large company, everyone needs time off for holidays as well as the occasional sick day. It is a right that you and your employees deserve and should use.

But if you run a small business, how do you know what your employees are entitled to? How do you pay somebody who is on maternity leave? What about sick pay – who qualifies and for how long? These are common questions that can be easily answered if you know who to turn to.

Holiday Rights

If you employ somebody who works full time, five days a week they are entitled to a minimum of 28 days holiday a year. But this is only the basic entitlement. For part time workers this needs to be calculated separately by taking into account how long they have been working for you and how many hours they work each week. It can take detailed knowledge of the rights of workers as well as a head for figures to calculate this.

A qualified bookkeeper will be geared up to help you in this area.

Sick Pay

Employees who are unable to work because of illness are entitled to Statutory Sick Pay. It is paid by the employer and can last for up to 28 weeks. Tthe standard rate of payment needs to be worked out and eligibility depends on the length of time the employment has lasted. The person who is sick needs to earn over £97 per week to qualify and must be ill for 4 days continuously before sickness payment can start.

According to small business experts, calculating statutory annual leave entitlements is a confusing area for most small business leaders. Remember that a local bookkeeper will be an expert in all matters relating to personnel and that it’s worth seeing what they can offer you in terms of outsourced assistance.

Shortage of Accounting Staff Affecting Small Businesses

Finding trained, qualified and reliable accounting staff is always difficult. No matter your sector, finding somebody perfect for a role that involves number crunching can be a real slog.

In fact, according to a survey of staffing in finance and accounting by recruiter Poolia, 38 per cent of employers have had problems finding the right person for the job in the past. This is worrying, especially as the survey also revealed that 30% of those interviewed were actually looking for an accounting or finance employee.

But why are accounting employees important and what should you do if you cannot find someone to fill the void?

The Problem: Payroll

Every business calls for some form of accounts or finance assistance; whether it’s to manage the payroll, take care of the bookkeeping or control the sales and purchase ledger.

Payroll

If you are struggling to complete the payroll every month you will need to employ someone who can. This could be an accounts manager who you employ to carry out this type of work. Alternatively, it often works out cheaper and more reliable to outsource this work to a local bookkeeper.

Cash Flow

Knowing how much money is coming in and going out is a vital part of any business. Fail to get a grasp of this and your business may not survive for as long as you envisioned. Ideally, you should have someone on board whose job it is to keep on top of income and expenditure so each month you know just where your business is and how healthy the accounts look.

Again, do not despair if you cannot hire a full time member of staff to take care of it. A local bookkeeper will have many years experience in doing this kind of work and can do so offsite on your behalf. Sometimes they even provide a special service for sole traders and owner managed businesses that have little time to do anything but work and earn money.

Look out for an outsourced bookkeeper if any of these problems are currently affecting your business. Remember that you are not alone – there are services out there that can help you.

Areas to Manage to Prevent Business Failure

The Prime Minister recently made a plea for individuals to continue to set up their own businesses. It is common knowledge, however, that around half of businesses fail within a year and a very high percentage fail to last beyond the five year mark.

However, taking some time to understand a few of the key areas to get right when setting up a business, as well as being aware of support services of which they can take advantage, could make a considerable difference.

Cash Flow

Understanding and keeping on top of your cash flow is important. Late payments and unpaid services can result in poor cash flow management which in turn results in failure. Knowing how much you will owe in tax and national insurance contributions for instance is vital and having a detailed account book of all income and expenditure is a must.

Remember that there are services such as qualified bookkeepers who can help you manage this aspect of your business.

Paying Staff and Suppliers

An important part of running a business is keeping your employees happy, and nothing makes them happier than being paid on time. However, careful cash flow management is vital to ensure funds are available on time to meet the wage bill. The same goes for paying suppliers; fail to pay on time and you could face a frozen account which could lead to services being placed on hold that you need in order to run your business.

Planning

Lack of planning is a cardinal sin that will almost certainly result in a failed business. Knowing where your business is, where you want it to go and how it can get there are questions that you and any potential investor should and will want to know. A qualified bookkeeper will know the ins and outs of business plans so contact one for expert help and advice in putting one together.

Do not be one of the thousands of businesses that fail to stay afloat. Follow these simple rules and you’ll have a better chance of success.

Understand Basic Business Terms to Get Ahead

It is natural to feel confused when faced with a document full of figures and calculations. However, in business, everything revolves around numbers whether you like it or not: profit and loss, payroll, tax, National Insurance and general cash flow management and no matter how nervous you are in this area, if you are to get ahead in business, you need to take control.

Anyone who has seen Dragon’s Den knows that even the best entrepreneurs struggle on questions relating to finance and business figures: profit, turnover, gross profit and the like. Understanding these terms is vital so here are a few tips.

Turnover and Profit: What’s the Difference?

Your company turnover is the value of all your sales before costs are deducted. Profit is what you are left with after all costs are taken away. So for example if you sell £100,000 of goods in a year, your turnover is £100,000. But if you spent £50,000 on supplies, then your profit is £50,000. Remember the difference.

Gross Profit and Net Profit: A Further Complication

Do you know the difference between net and gross profit? Make sure you do otherwise your accounts may make interesting reading at the end of the tax year. In simple terms, gross profit is the total amount of money that your business makes before any deductions are made. You simply have to calculate everything that has been sold or returned a profit over the year and add it all together. To get the net profit, you take the gross profit and take away all your deductions, such as tax, wages, and national insurance. Once everything is deducted, what is left will be your net profit.

Newcomers to business often overlook simple terms such as these and unfortunately it can have a negative effect on their business. It also can make you look unprofessional if you do not know your figures. Local bookkeepers are there to help, so make sure you use them. Whilst hiring the help of a recommended bookkeeper will cost you money, they could save you a lot of worry, and actually save you money in the long run.

Cash Flow Warning Signs

Cash flow is probably the most important thing to keep on top of and understand in business. Whether a small sole trader or a large business, knowing where your money is coming from and going to is extremely important. There are a number of guides and helpful articles available outlining how to calculate and keep on top of your cash flow, as well as qualified bookkeepers who can control it for you.

But even with the help of a professional bookkeeper, business owners must be able to identify potential problems that can affect cash flow before it is too late.

Overstocking Goods

It might seem like a good idea, but over ordering stock can have catastrophic consequences for your business. Having stock that you cannot shift or sell on is a serious waste of funds and points towards poor cash flow management. Only order what you can sell: you can always order more as demand increases.

Poor Ordering and Invoicing Practices

Do you keep meticulously detailed invoices and accounts, outlining who has bought what, when they bought it, how much they owe and whether or not they have paid yet? If the answer is no then this must be fixed quickly. Understanding and getting on top of customer order details and payments is very important. If you have a chaotic ordering system then the chances are you will lose track of who owes you what and in the end you will lose money unnecessarily. Do not be afraid to chase debts, just make sure you know what it is you are chasing.

Invoicing duties can be outsourced to a professional bookkeeper so there is no excuse for poor management in this area.

This is just the tip of the iceberg. Business cash flow management is tricky but is a must. Get help from a qualified bookkeeper, be firm and get the right procedures in place!

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.