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• nigel.lomax@taxassist.co.uk• www.taxassist.co.uk/shrewsbury• http://taxassistshrewsbury.wordpress.com• http://twitter.com/taxassist_shrew• http://www.facebook.com/pages/TaxAssist-Accountants-

Shrewsbury/110149602385926