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TaxAssist Accountants
• Based on Sundorne Avenue in Shrewsbury• Started October, 2003• 400 clients• Team of 7
– Nigel (FCMA), Melanie, Liz (ACA), Craig, Julie, Natalie and David
Nigel Lomax FCMATaxAssist Accountants
• Wide business experience– Finance and general management– Many industries
• Approachable, friendly and responsive
• Fixed Fees
• Interest-free Direct Debit
• HMRC enquiry protection
My Objectives• Choosing most appropriate structure• Getting finances right• Business planning• Record-keeping• Using your management accounts
Most appropriate structure... depends on
• Business volatility• Your approach to risk• Your intentions (selling or passing on)• Taxation
Most appropriate structure• Sole trader
– Simple, inexpensive but with risk
• Partnership– Similar to sole trader (consider partnership agreement)
• Limited Company– More bureaucracy but usually most tax-efficient and
less personal risk
Other important considerations• Inform HM Revenue and Customs• Consider VAT position• Consider PAYE/CIS position• Set up a record-keeping system• Lots of penalties lurking
Getting finances right • Have a business plan (not just numbers)
– include a cashflow and profit forecast– Use it to critically examine the risk in your
business
How can a plan help?• Gives a structure to develop ideas.• Helps identify risks and opportunities.• Leads to growth through extra finance.
Tips for a solid business plan - 1• Be clear on what you will achieve and
what you need.• Make sure the words are reflected in the
numbers.
Tips for a solid business plan - 2• Start with an assessment of your finances and
your monthly minimum income.• Present profit and cash-flow statements,
explaining differences by referring to capital employed.
• Explain business risk, sensitivities and “hotspots”.
Tips for a solid business plan - 3• Look at it as if you were being asked to
invest.• Explain how the plan will be monitored.• Be clear about fixed and variable costs,
short and long-term commitments.• Understand the various sources of funding.
Tips for presenting your business plan
• Be well prepared.• Explain your track-history.• Be honest.• Understand what the lender wants.
Getting finances right • Develop an appropriate and useful
business record-keeping system
Business record keeping - benefits• Improved control
– e.g. Credit control
• Improved decision-making– e.g. Customer pricing
• Improved planning– e.g. Investments and cashflow forecasting
• Confidence– you know why you have so much or so little
money in the bank
Business record keeping - principles• Use bank accounts and credit cards solely
for your business• Have a clear audit trail• Ask you accountant for advice on record-
keeping systems• Talk to your accountant a month before
your year-end about debtors, creditors and documentation required.
Business record keeping - options• DIY
– Manual – Excel– On-line– Sage50
• Accountant managed– On-line – Sage50 : from prime documents– Sage50 : client input
Management Accounts
• Management accounts report trading performance (P&L Account), capital employed (Balance Sheet) and cashflow
• Cashflow is the result of profit and how much money is tied up in the business
Trading account analysis
• Supports decision-making (fixed asset investments, marketing projects, new products/markets.
• Prevents expenditure drift• Break-even point analysis• Allows benchmarking• Makes obtaining finance easier and the
business more valuable
Cashflow• Cashflow is the change in your bank
balance. Sole traders will add back drawings to measure the business cashflow.
• Most businesses measure cashflow... Fewer businesses explain cashflow... Fewer still predict cashflow
• Cashflow is important as poor cashflow rather than poor profitability can be fatal
Working capital
• It is influenced by the “speed” of the “production” cycle and the strength of the supply chain.
• How quickly you invoice and how quickly you get paid.
Speeding up customer payments (1)• Only trade with businesses that can pay• Take every opportunity to publish your
trading and payment terms• Invoice immediately, send invoice by post
and e-mail• Make sure systems exist to prevent
invoicing delays (sales pricing system)• Send reminder before payment is due• Offer a variety of payment methods
Speeding up customer payments (2)
• Put your bank details on all invoices and statements
• Reward prompt payment / discourage late payment
• Find out who will authorise payment• Explain that your prices do not include
administration cost to collect late payment.
Speeding up customer payments (3)
• Have a collection routine and stick to it• Be firm but polite when requesting
payment. We are all busy and sometimes things get missed.
• Involve a 3rd party when required• Management attention
Warning signs
• The sudden big order• Broken promises/non-availabilty• Requests for extended payment terms• Deteriorating payment performance• External information (e.g. Google)
VAT registration illustration
VAT regNot VAT
reg
Labour 100 100
Parts (£100 plus VAT) 100 120
VAT 40 0
Cost to customer 240 220
Cost to VAT reg buyer 200 220
Cost to Non VAT reg buyer 240 220
Payroll
• Must run where employees earn above NI LEL limit.
• Strict definition of casual employees• Beware of paying net and grossing up
Other common questions
• What can I claim• Using own car• Use of home
TaxAssist Accountants01743 366669
• 1 Sundorne Avenue, Shrewsbury. SY1 4JW• [email protected]• www.taxassist.co.uk/shrewsbury• http://taxassistshrewsbury.wordpress.com• http://twitter.com/taxassist_shrew• http://www.facebook.com/pages/TaxAssist-Accountants-
Shrewsbury/110149602385926