adm_accountancy

Director’s Salary 2025/26 – what you need to know

Thu, 27 Mar 2025 13:44:48 GMT

All you need to know about paying directors’ salaries in 2025/26

What is the optimum director’s salary for 2025/26?
The optimum director’s salary for 2025/26 is £12,570 per annum. The is due to the changes in National Insurance Contribution (NIC) rates from April 2025, which are summarised below:

Employee NICs
The Employee NIC Secondary Threshold will decrease from £9,100 to £5,000. The Primary Threshold earnings limit for NICs in 2025/26 is £12,570 per annum, which is in line with the personal tax allowance.
Employer NICs
The rate of Employer’s NICs will rise by 1.2%, bringing it to 15%. The Employer’s NIC Secondary Threshold will decrease from £9,100 to £5,000. This change, alongside the rate increase, means a higher NI burden for many businesses.

Why not pay a director’s salary of £5,000?
In previous years, it has been recommended to pay optimum salaries up to the Secondary Threshold. It was £9,100 in tax year 2024/25 and paying a salary up to the secondary rate avoided PAYE, employee’s NIC and employer’s NIC. However, the Secondary Threshold has dropped to only £5,000 for 2025/26.

Our recommended optimum salary of £12,570 will mean employers are liable to employer’s NIC, but this level of salary saves more in Corporation Tax.

What is the Corporation Tax saving?
The extra employer’s NIC totals £1,136 (£7,570 at 15.0%) but the Corporation Tax saved is at least £1,654 (£7,570 at 19% + £1,136 at 19%).

The Corporation Tax saved increases to £2,307 at the higher tax rate of 26.5% (calculation is £7,570 at 26.5% + £1,136 at 26.5%).

Should I pay nil salary?
A company can pay a director (who is also a shareholder) through either salaries or dividends. However, in most cases we recommend a salary should be paid as it is a tax-deductible expense. A dividend paid is not a tax-deductible expense for the company.

Therefore, paying a salary of £12,570 to the director saves Corporation Tax of anywhere between £2,388 and £3,331. There is no Corporation Tax saving if dividends are paid. Also, by paying a salary of £12,570, you are ensuring another qualifying year for the state pension is added.

Should I pay a higher salary?
All taxpayers have personal allowances in which they can earn income tax free. As soon as these allowances are used up, tax rates are applied. When income exceeds £12,570 per annum, both NICs and Income Tax are payable.

The NIC and Income Tax rates combined are higher than the dividend tax rate. Even when accounting for the Corporation Tax reduction on the salaries, paying dividends is still more tax efficient.

Can I claim the employment allowance?
The employment allowance allows a company to reduce their employer’s NIC liability by up to £10,500 per annum. This is a significant increase from the 2024/25 tax year, which was only a £5,000 reduction.

Unfortunately, the employment allowance is not available to all businesses. A company must have more than one director or employee to be able to claim the allowance, so a Limited company with a sole director cannot claim the employment allowance.

If your company is eligible for the employment allowance, we will automatically submit the claim with your payroll.

Conclusion
The optimum salary for a director in 2025/26 is £12,570. This ensures the taxpayer qualifies for the state pension but does not need to pay any employee contributions. The increased employer’s NICs will be offset by savings in Corporation Tax.

Need more help?
ADM Accountancy has been supporting businesses with tax advice and planning since 2009. If you would like more detailed remuneration planning, for example if you have other sources of income, such as pensions, we’d love to hear from you.

Please call us on 01242 679797 or email andrew@admaccountancy.co.uk or visit our website to find out more: admaccountancy.co.uk

Six steps to creating an effective business budget

Wed, 30 Oct 2024 10:05:19 GMT

Every business owner must know where the money in their company comes from and where it goes. That’s why financial management is one of the most important things to keep in mind.

What is a business budget? Simply put, it's a financial plan that gives a company relevant information on revenue, expenditure, and capital. Business owners also use them as guides to forecast earnings and expenditures and perhaps to hold someone accountable for mistakes and such.

If you want an accurate budget estimate, follow the six steps below.

Step 1 – Estimate fixed costs

The first step is to work out the fixed costs, which is relatively easy. Simply list all expenses and then identify those that show repetitive costs that don't change by the month. These include expenses such as rent, equipment leases, insurance, manufacturing costs, etc.

Add up all the fixed costs to get the number and use it for a period of 3, 6, or 12 months.

Step 2 – Identify variable expenses

Variable expenses are those that are not constant - the complete opposite of fixed costs. Although it's easy to identify variable expenses, it's harder to forecast the numbers as they vary every month. To identify and get an accurate prediction of variable costs, it's critical to record and tally them for a period of time. You’ll soon get an average number of each variable expense.

Step 3 – Work out one-time costs

Most businesses also have one-time expenses. And although it’s not nearly as frequent as fixed and variable costs, a business budget wouldn't be complete without accounting for the 'sunk costs'. Buying new software or equipment are examples of one-time costs, so is something like getting new furniture for the office.

Step 4 – Project your revenue

The next logical step is to project your future revenue. After all, one of the reasons to build a business budget is to have something that would allow business owners to compare actual and projected revenue. This particular step allows for the setting of clear goals and understanding how to meet those objectives.

Step 5 – Track profits and losses

Working out the net profit margin is another necessary step. You can do this by deducting expenses, taxes, and any accrued interest from revenue.

The money left over, as a percentage of revenue, indicates the net profit margin. This is a key indicator of profitability and can help highlight issues in cash flow, management, marketing, operating costs, and other areas.

Step 6 – Adjust the budget

No one should see a business budget as set in stone. It’s because the changing market trends, consumer demand, and other factors can influence the budget. Therefore, the final step is to make the necessary tweaks. A business budget is not static but rather a flexible estimation.

By tweaking the budget, you can position your company to adapt to exterior changes. It can also help in changing goals or diverting funds towards meeting the most important objectives faster.

Remember, having a business budget is not enough to ensure financial stability. Every business also has to set up an emergency fund with the budget as a guide. Continually revisiting the budget is a must. And failure to re-evaluate can affect the company's financial health and lead to overspending in all the wrong places.

If you need help with budgeting and business accounting, the team at ADM Accountancy would love to hear from you. Call 01242 679767 or visit www.admaccountancy.co.uk .

Four steps to a successful profitability analysis

Wed, 23 Oct 2024 13:40:47 GMT

Are you uncertain about the level of success you achieved? There's a quick way to get an overview of your finances.

Not enough companies run a profitability analysis - a defining indicator of profit. Such an analysis relates to costs and overall revenue and it can provide insights into how a business runs.

The occasional analysis can also indicate if it's time to make some changes.

Maybe some clients require too much time for the money. Perhaps there are other opportunities around the corner that you can jump on.

Either way, it should be on your list of tasks if you want to ensure long-term business growth. And here's a simple blueprint to follow for a successful profitability analysis.

Step #1. Calculate Margins

Two of the most important variables in a profitability analysis are gross and net profit margins.

You can get the gross profit margin by knowing your sales revenue minus the cost of labour.

For the net profit margin, you must subtract all expenses from your revenue to get the magic number - the margin - and then divide the previous result by your revenue

Don't forget to look at the segment profits, too.

Odds are you offer a suite of services that each has its own revenue stream. Take the numbers for each segment, subtract the costs, and include overheads in your calculation.

If you do this, you get a more detailed insight into how money moves in your business.

Step #2. Perform Client Valuation

Here, you must look at each client and figure out how much each of them brings.

Performing a client valuation essentially means to determine the worth of each client. So, subtract from the revenue all of your costs, such as marketing, hourly labour, travel expenses, and so on.

After all, you want to find out the costs of keeping each client satisfied.

Some clients may not pay a lot for your services. But you may have a better profit margin with them if their projects take very little time from you or your team.

Maybe you have good cash flow. But it's possible that when you draw the line, there's not a lot of profit in it.

Step #3. Look at the Past Numbers

A thorough profitability analysis looks at past quarters over the years.

Why?

Although your current numbers may look good on paper, you need something to compare them to if you want to know where you stand.

Step #4. Benchmark Industry Ratios

Your numbers only mean something in the context of your niche. It’s because profitability numbers aren't the same in accounting as in health care, education, e-commerce, etc.

If you look at your past and current numbers, you can figure out your business's progress so far. But what about compared to your competitors?

What about your position in relation to the market?

Always be sure to check average industry ratios to give you a better sense of where your company is as opposed to where it should be.

Do It for Peace of Mind and Direction

A good profitability analysis can help curb anxiety when it comes to your business. At the same time, it can tell you what you should be doing to improve and grow it.

If you ever find your business lacking direction, remember that an analysis can help you spot issues that you couldn't otherwise.

It’s a game changer.

Speak to one of the team at ADM Accountancy about creating a personalised analysis for your business on 01242 679767.

4 key strategies to manage business growth

Tue, 08 Oct 2024 08:52:12 GMT

Rapid business growth is incredibly exciting but there are some pitfalls, too. In fact, when poorly managed, rapid growth can actually damage your business. That’s no reason to shy away from growth, but it is important to understand how to best manage it so that you can keep customer satisfaction high as your company expands. Let’s take a look at four key strategies to employ.

1) Hire the Right Team

The right team will make all the difference to your business growth. Focus on hiring employees who demonstrate a great attitude. You can train an employee up, but it’s very difficult to change a negative mindset. Of course, the right skills are important but in order to keep turnover rate low and morale high, you need to make sure that new hires fit in well with your company culture. Research by the BDC Network found that a positive company culture can increase operating income by 19% and earnings growth by 28%.

2) Stay on Top of Your Finances

When your profits and revenue are rising, it’s tempting to sit back, relax and let your finances take care of themselves, but that would be a big mistake. No matter how well your company is faring, it’s important to create a budget and review it regularly. In fact, the faster your business is growing, the more attention your finances need.

Growth, revenue and cash flow changes mean that you will have to implement changes to your current system of financial management. Growth often comes with big costs, too, such as equipment repairs and new hires.

You may find yourself in need of financial guidance as your business expands. The time for DIY money management has well and truly passed. Now that your needs are more complex, it may be time to hire a virtual CFO so that you will have access to top-level financial advice without taking on the cost and commitment of an in-house hire.

3) Utilise Working Capital

Cash flow management is one of the biggest challenges of business growth. Often, a significant amount of spending is involved in preparation for growth and you may find your reserves running low, even as your profits and revenue soar.

A working capital loan can help enormously with funding a high volume of orders, securing new inventory, purchasing new equipment or hiring new team members. There are many different options available, so it’s best to speak to your accountant about the right one for your business.

4) Focus on Your USP

As you grow, it’s important that you don’t lose sight of what makes your business unique. Your USP is what will make you stand out from the crowd and continue to attract success. Continue speaking directly to the audience that has gotten you this far and look for new and innovative ways to meet their needs.

Data and analytics are enormously helpful with this. AI tools can provide you with valuable feedback to show you what you’re doing well and which activities generate the most profit. This data can then inform your next steps. Keep an eye on this data, too, as new patterns may be revealed as your business evolves.

Business growth puts significant demands on business owners, but by hiring the right team, keeping a handle on your finances, utilising working capital and staying focused on your USP, it can be an amazing and exciting process that leads you towards success.

Call ADM Accountancy for expert advice with your business accounting on 01242 679767.

How to spot and prevent cash flow problems in your small business

Wed, 14 Aug 2024 10:47:10 GMT

If your business is a car, then cash is the fuel in the tank. Without it, you’ll break down. Furthermore, if you have to stop every few miles to refuel then it becomes very difficult to pick up any significant speed. As a result, the journey will take twice as long.

When you’re driving, it’s important to keep an eye on your petrol gauge. Similarly in business, you need to monitor your cash flow closely to identify any problems before they impede your progress.

For small businesses, even one unexpected cash flow shortage can lead to a myriad of issues. For example, you may miss payment deadlines and then end up incurring penalty fees and interest. This in turn eats away at your profit margins.

The sooner you can spot a potential threat to your cash flow, the more time you will have to prevent it and take steps to minimise the impact. Here’s how to spot an upcoming cash shortage in your business, and what to do about it.

Cash flow forecasting

In order to create a cash flow forecast, you first need to know how much money is actually entering and leaving your business each month.

Once you have this data you can then forecast your cash flow over the coming months. Remember to factor in any additional upcoming expenses and seasonal spikes or slumps in sales. Note that your variable costs will change in accordance with seasonal fluctuations, too.

Creating a cash flow forecast will allow you to identify potential problems and create a plan to protect your business.

Compare forecasts to real data

It’s important to measure how accurate your cash flow forecasts prove to be by comparing them to real data. This will help you to identify issues you may have failed to account for and create more accurate forecasts going forward. It also helps you measure your performance - were your sales significantly higher or lower than predicted? If so - why?

Update your figures

Don’t create a cash flow forecast once per year and consider it a job done. It’s important to regularly update your forecasts when any changes occur that could affect your cash flow, such as emergency costs, late payments, price increases or new sources of revenue.

Prepare for multiple outcomes

One problem that new business owners face is a lack of past data upon which to base their cash flow projections. In this case, you should create cash flow forecasts for multiple scenarios so that you will be able to keep a handle on your numbers whatever happens.

First, take an educated guess at what your outcome will be. Then, create a second projection with 10% higher sales and a third with 10% lower. Finally, create a best and worst case scenario. There are no guarantees in business but being prepared for multiple outcomes puts you in a stronger position to handle whichever prediction proves true.

Emergency measures

It pays to prepare for the worst. Even if you’re in a strong cash position right now, it’s important to arrange multiple safety nets in case things to do go south. Ways to do this include:

Arranging a line of credit, which is a preset borrowing limit that you can use at any time and pay back in a similar fashion to a traditional bank loan.
Creating an emergency cash reserve. It’s always useful to create a cash buffer, and this could prove enormously helpful if disaster strikes. Ideally, you should aim to put aside enough to cover 6 months’ worth of operating expenses.
Securing a business credit card. High interest rates mean that business credit cards are not suitable for long term borrowing. However, your card should offer a certain amount of days interest fee, which makes a credit card ideal for smoothing over short term blips.

Cash flow shortages can present big problems for business owners, but by creating, updating and comparing forecasts regularly, it’s possible to take steps to prepare for upcoming issues and minimise the impact upon your business. The worst cash flow issues are the ones that take you by surprise, so it really does pay to be one step ahead.

Contact ADM Accountancy on 01242 679767 to discuss accountancy solutions for your small business.

How to stay on top of your small business' transactions

Tue, 09 Jul 2024 09:02:15 GMT

As a small business owner, it is important to stay on top of your financial transactions. This means tracking every sale and expenditure, in order to keep your business' finances organised. However, this can feel overwhelming when you first get started.

You need to track your transactions in order to stay on top of your business' finances and ensure that you are paying the right amount of tax.

In this article, we'll take you through how to track your business' finances and the different types of transactions that you need to be aware of. Let's dive in.

Daily business transactions

There are several different types of transactions that you need to track day-to-day for your small business. These include:

Customer invoices
Vendor invoices
Payroll
Banking transactions
Customer cheques or deposit slips
Cancelled cheques

These are just a few of the transactions that you need to track on a daily basis. Depending on the type of business you run, there may be other transactions that you need to track as well. For example, if you sell products online, you will also need to track inventory and shipping costs.

It's important to keep on top of these transactions, as they will give you a clear insight into your business' finances. This way, you can make sure that you are keeping accurate records and that your business is running smoothly.

Month-end transactions

At the end of each month, you will also need to track some additional transactions. These include:

Bank reconciliation
Accounts receivable
Accounts payable
Cheques and deposit registers
Sales report
Inventory ageing report
Payroll register
Monthly income statement
Balance sheet

Tracking these transactions will give you a clear picture of your business' financial health. This way, you can identify any areas where you may need to make changes or improvements. You should also compare these transactions against the previous month, as well as the same month last year, to get a clear picture of your business' growth.

Year-end financial transactions

At the end of the year, you will need to track some additional financial transactions. These include your annual:

Income statement
Balance sheet
Cash flow statement

These documents are important for tax purposes. They will also give you a good indication of your business' financial health for the year. This way, you can identify any areas where you may need to make changes or improvements before problems begin to pile up.

Cloud accounting software

It may seem impossible to keep track of all these transactions, but thankfully there are some tools that can help. Enter: cloud accounting software.

Cloud accounting software makes it easy to track your business' finances and see where your money is going. This way, you can make sure that your records are accurate and up-to-date.

With cloud accounting software, you can automate invoices, upload receipts via your smartphone, keep an eye on cash flow and generate detailed financial reports with the click of a button. This way, you can gain detailed financial insight into your business whilst also saving time.

There are many different cloud accounting software options available, we recommend Xero as our preferred software for business.

Each of these software options has different features and pricing plans. It’s best to speak to your accountant or financial advisor about the program and subscription package that best suits the needs of your business.

Keeping on top of your small business' financial transactions is essential for keeping accurate records and ensuring that your business is running smoothly. Trust us, in three months’ time, you’ll be extremely glad that you started tracking today.

Speak to one of the team at ADM Accountancy on 01242 679767 about our accounting packages.

Five vital components that a good cash flow forecast must have

Sun, 09 Jun 2024 09:46:26 GMT

Before listing the components of a cash flow forecast, it’s crucial to understand the concept of what this kind of forecast is. Essentially, it’s a vital tool that helps you understand your finances.

To be precise, a cash flow forecast is an estimation of how much money comes in and goes out of your company. And it can be as detailed as you need it to be and for whatever period.

But for a cash flow forecast to be useful in any business, it needs to have the following components.

1. Projected Sales

This is what all cash flow forecasts depend on.

A good way to come up with projected sales figures is to look at historical data. You must use seasonal patterns, promotions, market trends, and past figures to estimate future sales.

But if your company is new, it’s possible to make sales projections from competitor, supplier, and industry data.

2. Projected Expenses

Every business has expenses, including rent, insurance, manufacturing, and others. That’s why it’s a key component when making a cash flow forecast.

It’s essential to have a firm understanding of what goes out of the company for the next month or year, depending on the term of the forecast.

3. Projected Outgoing Payments

To make an accurate cash flow forecast, you must know when payments have to go out. Make sure to check with suppliers, vendors, investors, banks, and service providers.

Include that information in the forecast to know e xactly when you have to pay more. It should also give you a good idea of any delayed payments.

4. Projected Incoming Payments

When working with repeat customers and clients, it’s easy to see patterns with your cash inflow.

Look at historical data to see how people pay and identify how many of your customers pay upfront. You also have to figure out how many of them delay payments or perhaps often pay late fees.

Knowing when money comes into your business will help you make a more accurate cash flow forecast.

5. Communication and Good Software

Working with numbers isn’t as hard as it used to be, thanks to all the technology available today. That’s why software is a vital component when it comes to making a cash flow forecast.

Of course, the accuracy of a forecast also depends on communication between various individuals and departments. If people don’t input the right numbers and ignore concerns or inefficiencies, you will end up with bad information in your database.

Although cash flow forecasts rely on numbers to give you the desired projection, those numbers come from people. That’s why having clear lines of communication in a business can help ensure the accuracy of the data that you work with.

Don’t Sleep on Projections

You can’t rely on a single cash flow forecast for the whole duration of the business, especially if it’s a longer-term one. Lots of things can happen from year to year and month to month. And a forecast that looked promising two months ago may not hold true two weeks from now.

That’s why it’s critical to create one early on, ideally at the start of every financial year. As you proceed, revisit the projection and adjust accordingly since cash flow forecasts are flexible.

If you'd like support with Cash Flow Forecasting, contact the team at ADM Accountancy on 01242 679767 or visit: www.admaccountancy.co.uk

Why bookkeeping is vital for the success of your business

Wed, 10 Apr 2024 11:57:52 GMT

Bookkeeping is essential for tracking and understanding your business's financial performance. It helps you better understand where your money is coming from and where it’s going, and empowers you to make informed decisions that will help your business succeed. It also helps you stay compliant with tax laws, manage budgets, and make better decisions about how to allocate resources.

Let's take a deeper dive into how bookkeeping can be beneficial for your business.

1. Better budgeting

Bookkeeping can help you create and manage accurate budgets. It allows you to assess how much money is coming in from customers, expenses, and other sources, and gives you a better understanding of where your business stands financially. With this information, you can create more effective budget plans that will help you jettison your business to success.

2. Accurate financial reports

Bookkeeping allows you to easily generate accurate financial reports that give you a better understanding of your business’s financial performance. This information can then be used to make more informed decisions about how to allocate resources, spot financial trends, and identify areas where you can save money.

3. Tax compliance and savings

Bookkeeping helps you ensure that you are in compliance with tax laws by providing accurate financial information. This allows you to avoid costly mistakes and potential penalties from the IRS and other regulatory agencies. Additionally, bookkeeping can help you save money by enabling you to take advantage of deductions and other tax benefits that apply to your specific business.

4. Cash flow management

Bookkeeping also helps you manage your cash flow more effectively. With accurate records of expenses and income, you can better plan for cash flow needs and avoid potential problems such as overdrafts or insufficient funds. This will help you make sure that your business has the money it needs to succeed.

5. Confidence

One key benefit of bookkeeping is that it can give you peace of mind. Knowing exactly where your business stands financially will give you the confidence to take risks and make decisions that will help your business grow and succeed.

6. Setting targets and goals

It's difficult to set specific goals when you have no idea what your numbers are, but bookkeeping can help you identify your current financial performance and help you come up with realistic targets to strive towards. You'll also be able to accurately measure your progress along the way because you'll have the data you need to track your progress.

7. Organised records

Unorganised records are a ticking time bomb. Bookkeeping helps your business by keeping records organised and up to date, enabling you to quickly access the financial information you need when you need it. This makes it easier to answer questions, identify trends, and make decisions that will help your business succeed.

If you let your records become too chaotic, you can be sure that your business won't reach its potential. That's why bookkeeping is so essential to the success of any business. With accurate and up-to-date financial information, you'll be able to make better decisions and take advantage of every opportunity that comes your way.

As you can see, bookkeeping is an essential component of a successful business. It can help you stay compliant, manage budgets, and make better decisions. With accurate financial records, you'll be able to take your business to the next level.

If you need help getting your bookkeeping in order, consider working with a professional bookkeeper or accountant to ensure accuracy and consistent record-keeping. With the right help and strategies in place, you can be sure that your business will be on its way to success.

Contact ADM Accountancy for all your bookkeeping requirements on 01242 679767 or visit admaccountancy.co.uk

How to boost profits without increasing sales

Wed, 20 Mar 2024 11:39:33 GMT

Increasing sales volume is a significant profit driver for businesses, but it’s not the only way to earn more profit. Furthermore, increasing sales isn’t always a manageable strategy for small business owners and entrepreneurs who are just getting started, since it often requires a large inventory and hiring more staff. Let’s take a look at how you can boost your profits without selling more.

What is profit margin?

Your profit margin is the percentage of your turnover that you actually get to keep; it’s the margin by which your sales exceed your costs. So if you sell £1,000 and spend £600, your profit is £400, making your profit margin 40%. Bear in mind that average profit margins vary widely across industries and business models.

Low profits

Low profits are bad news because they make it difficult to invest in growth and protect your company during difficult times. There are many factors that can cause low profits including:

Low sales
High operating costs
Poor inventory management
Low customer retention rate

Many business owners believe that selling more is the answer to the problem of low profits, but that’s not always true. There are several more efficient ways that can help you increase your profit margins and make more money without increasing your sales volume.

Negotiate with suppliers

Negotiating with suppliers can help you to reduce your expenses and thus create bigger profit margins. Shop around and speak to your suppliers about the possibility of bulk discounts or early payment incentives.

Monitor inventory

As mentioned, poor inventory management often plays a role in low profits. If you overstock on a product that doesn’t sell fast, you may lose money over time due to depreciation, expiration and misplacement.

Increase prices

Raising your prices is a straightforward way of increasing your profit margins. Underpricing your products in order to drive sales reduces your margins and makes it more difficult to cover your costs. Competing on price works well for big businesses because they can afford to focus on sales volume rather than high margins, but many small businesses will achieve greater success by focusing on quality, convenience and excellent service.

Eliminate unprofitable items

It’s important to understand the gross profit that you make from a particular product or service. If an item is making you very little in terms of profit then it may be worth getting rid of it so that you can replace it with something more profitable, or simply streamline your selection for simpler inventory management.

Of course, you must weigh up profitability against sales volume. If you sell a very large volume of a product with a fairly low margin, it still may be worth keeping it.

Get rid of slow-selling items

Conversely, products and services with a very high gross profit margin are only actually profitable if they sell. Otherwise, they’re simply bulking up your inventory and tying up your assets. Reducing your supplies is an effective way of keeping your operating costs low and maximising your margins.

Systemise

Systemising your business will help you operate at maximum efficiency and thus reduce your costs. This means putting clearly defined processes in place and using technology to automate many menial tasks to save time. Essentially, it means having your business run like a well-oiled machine rather than a slow, spluttering engine.

There are multiple ways to boost your profits without increasing sales, and many of these strategies may be better suited to the needs of a small business. Remember that it’s not about the money you make, it’s about the money you get to keep.

ADM Accountancy specialises in supporting small businesses and SMEs within the Professional Services sector, with all their accountancy needs. Call us today on 01242 679767.

5 ways to ensure your small business is financially sound

Wed, 06 Mar 2024 09:58:21 GMT

Keeping your small business financially sound is one of the most difficult - and important - aspects of running a successful company. When something is amiss with your financial management, it can quickly spiral out of control and threaten the very existence of your business.

We've put together a list of the most basic steps you need to take to ensure that your small business stays on track financially. Of course, seeking expert advice is always recommended, but these tips will help you get started in the right direction.

1) Track Your Expenses Carefully

This should go without saying, but it's important to keep a close eye on your expenses. In fact, you need your records to be impeccable.

Many small business owners make the mistake of letting their spending get out of control, without realizing how much it is actually impacting their bottom line.

Create a budget and stick to it as closely as possible. You should know exactly what you're spending and why. This will enable you to understand which costs are generating a sufficient return and where you may be able to cut costs.

2) Keep Your Personal and Business Finances Separate

One of the biggest financial mistakes you can make is commingling your personal and business finances.

Not only does this make it much more difficult to track your expenses, but it can also lead to serious legal problems down the road.

If you want to keep your small business financially sound, it's crucial that you maintain a clear separation between your personal and business finances.

3) Manage Your Taxes Properly (from Day One)

Another mistake that many small business owners make is failing to properly manage their taxes.

This can be a complicated process, but it's important to ensure that you're paying all of the taxes you owe and taking advantage of any deductions or credits you're entitled to.

Failing to properly manage your taxes can lead to significant problems down the road, so it's important to get this right from the start.

4) Put a Solid Invoicing System in Place

Late payments and unpaid invoices are one of the biggest financial problems faced by small businesses.

If you want to ensure that your small business is financially sound, you need to put a solid invoicing system in place.

This should include sending invoices out in a timely manner and following up with clients who are late in paying.

You may also want to consider using software that can help you automatically send reminders and track payments. This is especially useful if you need to send a large volume of invoices each month.

5) Build a Healthy Cash Reserve

One of the best ways to ensure that your small business is financially sound is to build up a healthy cash reserve.

Now, this is certainly easier said than done, but it's important to have a buffer of cash on hand in case of unexpected expenses or slow periods.

Ideally, you should aim to have enough cash to cover 3-6 months of operating expenses. This will ensure that you're prepared for anything that comes your way.

Of course, these are just a few of the most important steps you need to take to ensure that your small business is financially sound. For more detailed advice, be sure to seek out the help of a qualified accountant or financial advisor.

Speak to one of the team at ADM Accountancy on 01242 679767 , who would be happy to help.

7 ways that cloud accounting makes your life so much easier

Wed, 07 Feb 2024 09:28:38 GMT

If you're not using cloud accounting software for your small business accounts, then you're making your life much more difficult than it needs to be. The days of having to manually enter accounting data into outdated software programs are long gone. Cloud accounting simplifies the process by providing a range of features that make managing your finances much easier. Let's take a closer look at how.

1 - Easy access

In the past, accessing accounting data could be difficult when there was no one at the office. With cloud accounting, you gain easy access from anywhere in the world, so you can review and manage your accounts no matter where you are. You can do it from your smartphone, tablet, or laptop, so you can keep up with your finances even if you're away from the office.

2 - Automated processes

With cloud accounting, you can automate mundane tasks like invoicing and bill payments. This eliminates the need to enter data manually, saving you time and energy that can be put towards other activities. Automation also helps to prevent human errors, making your financial data more accurate.

3 - Real-Time collaboration

Cloud accounting allows multiple users to access and collaborate on financial data at the same time. This makes it easier to have real-time conversations about financial issues and make timely decisions that can help your business grow.

4 - Automated data entry

No more manually entering data into a system. With cloud accounting software, you can automate data entry for receipts and invoices so your workspace is always up to date. This also reduces data entry errors, giving you greater control over your finances. Plus, let's be honest: data entry is boring and time-consuming. Automation makes it easier and more efficient so that you can put your time and energy to better use.

5 - Security

Cloud accounting software keeps your data far more secure than if it were stored locally. It's also updated regularly, so you can be sure that your data is always secure and up to date. And because multiple users can access the data at the same time, you don't have to worry about keeping track of multiple copies of documents.

Should disaster strike and your system go down, your data will still be safe and secure in the cloud.

6 - Third-party app integration

Cloud accounting software integrates with other third-party apps and services, allowing you to automate tasks like payroll and tax filing. For example, you can connect your cloud accounting software to an online payroll provider and have it automatically calculate employee salaries, deductions, and taxes. This integration also makes it easier to track expenses, giving you greater control over your finances.

7 - Simplicity

Cloud accounting software simplifies your books and makes the process of managing your finances easier than ever. By automating mundane tasks, you can free up more time to focus on other important aspects of your business. Plus, simplified and centralised data makes it easier for you to understand what's happening in your business, meaning that you can make better and more informed decisions.

Final thoughts

Using cloud accounting software can make managing your business's finances easier and more efficient. With features like easy access, automated processes, real-time collaboration, automated data entry and third-party app integration, you can rest assured that your financial data is secure and up to date. Plus, you can use the extra time saved to focus on other aspects of your business, giving you a competitive edge.

Founded in 2009, ADM Accountancy Services Ltd specialises in supporting small businesses and SMEs within the Professional Services sector, with all their accountancy needs. Speak to one of the team at ADM Accountancy on 01242 679767.

What to do if you've missed payroll

Wed, 17 Jan 2024 09:00:43 GMT

Missing payroll can be a nightmare for any business owner. Not only do you have to worry about the financial repercussions of not paying your employees, but you may also have to deal with legal consequences, too. However, if you find yourself in this situation, there’s no need to spiral because there are a few things you can do to mitigate the damage.

Missing payroll

There are a few common reasons why businesses miss payroll. The most common reason is simply that the business doesn't have enough money to pay their employees this month. This can be due to a slow period or unexpected expenses, or due to poor budgeting.

Businesses also sometimes miss payroll because of a mistake somewhere in the payroll process. This could be due to using outdated software, an error in calculating hours worked, miscalculating taxes, or failing to properly process payroll deductions.

Whatever the reason for missing payroll, it's important to take action immediately. The longer you wait, the more damage you'll do to your employees and your business.

Better budgeting

If you're missing payroll because you don't have enough money, then you need to take a close look at your budget. See where you can make cuts in other areas so that you can free up some cash to cover payroll. You may also need to take out a loan or line of credit to cover the shortfall.

You should also take a close look at your budget to see where you can make changes so that you don't find yourself in this situation again. Ideally, you should have a cash reserve to act as a buffer so that even when an unexpected expense occurs or you have a quiet month, you still have enough funds available to pay your staff on time.

Cash flow forecasting

Another tool that can help you avoid missing payroll is cash flow forecasting. This involves estimating how much money will be coming into your business and when, and then using that information to plan your spending. This can help you identify potential problem areas so that you can take steps to avoid them.

Payroll mistakes

If you've missed payroll because of a mistake in the process, then you need to take steps to correct the mistake and prevent it from happening again. Being paid late or incorrectly angers and frustrates employees, so it's important to take action to make sure that this doesn't become a regular occurrence. Otherwise, you risk losing good employees.

If you're using out-of-date software, consider upgrading to something more modern that will automate some of the payroll process and help you to avoid mistakes. If you're miscalculating hours worked, consider using time tracking software so that you have a more accurate record of employee hours.

It's also worth considering outsourcing payroll to an accountant who can handle the process for you. This will help you to avoid the hassle and stress of dealing with payroll yourself, which can be a huge help when you're busy with other aspects of running your business.

Communication

Whatever the reason for missing payroll, it's important to communicate with your employees. They need to know what's going on and when they can expect to be paid. Be honest with them about the situation and keep them updated on what's happening.

If you're having financial difficulties, let them know and explain what steps you're taking to rectify the situation. In the wake of a payroll error, transparency is key to maintaining employee trust.

Missing payroll can cause a lot of damage to your business and employees, but there are steps you can take to mitigate the damage. Better budgeting, cash flow forecasting, and payroll mistakes can help you avoid missing payroll in the future. Communicating with employees is also key during these difficult times.

If you're really struggling with payroll, hiring an accountant to advise you and manage your payroll is the easiest and most effective way to ensure that your business can stay afloat. In addition to putting efficient payroll systems in place, they will also help you to budget and forecast your cash flow properly to ensure that you always have enough money to meet your financial obligations.

Call ADM Accountancy on 01242 679767 or visit www.admaccountancy.co.uk

How to identify your most valuable customers (and what to do next)

andrew@admaccountancy.co.uk (Andrew Moss) — Wed, 20 Dec 2023 11:36:12 GMT

When it comes to running a business, it's important to focus on the customers that are the most profitable. Not all customers are created equal, and some customers may even be dragging your business down. In this blog post, we will discuss how to identify your most profitable customers, and the next steps to take once you've established who your biggest profit drivers are.

Differentiate Between Revenue and Profit

Just because a customer spends a lot of money with you does not mean that they generate a lot of profit. To get a clear understanding of who your most profitable customers are, you need to take a closer look at your profit margins.

To do this, you need to calculate your gross profit margin for each customer. This number will tell you what percentage of revenue is left after accounting for the costs of goods sold.

For example, let's say that you have a customer who spends £100 with your company every month. To calculate your gross profit margin, you would take the total revenue (£100) and subtract the cost of goods or services sold (£40). This would leave you with a gross profit of £60.

To calculate the gross profit margin, you would then take that £60 and divide it by the total revenue of £100, and this would leave you with a 60% margin.

On the other hand, if a customer spends £300 per month with you but it costs you £250 to deliver their goods or services, you would be making a profit of £50. Despite the higher customer spend, your profit margin would stand at 16.6%.

In this case, the customer who spends less with you is actually more profitable. So, while customer spend is important to consider, it's not the be-all and end-all when determining who your most valuable customers are.

Sales Volume

However, while one customer may generate an impressive profit margin, they may not necessarily drive a high volume of sales. In this case, you might want to consider customers who generate a high volume of sales, even if their profit margins are slightly lower.

For example, let's say that you have two customers - Customer A spends £100 with you per month and has a gross profit margin of 60%, while Customer B spends £2,000 with you per month but only has a gross profit margin of 30%. Customer B is still generating twice as much profit for your business, even though their profit margin is lower.

Consider Customer Lifetime Value

When determining who your most profitable customers are, it's also important to consider customer lifetime value (CLV). This metric looks at the total amount of revenue that a customer will generate for your business over the course of their relationship with you.

To calculate CLV, you need to take into account a number of factors, including the average purchase value, the number of purchases per year, customer retention rate, and the profit margin.

For example, let's say that the average customer spends £100 with you per year, makes two purchases per year, and has a retention rate of 50%. Additionally, let's say that your profit margin is 50%.

To calculate the CLV, you would take the average purchase value (£100) and multiply it by the number of purchases per year (2). This would give you a customer value of £200. You would then multiply this by the customer retention rate (50%), which would give you a CLV of £100.

As you can see, the customer lifetime value can give you a more holistic view of how profitable a customer is likely to be in the long run.

Trimming the Fat

Sometimes, if a customer or client is simply not profitable, you might have to let them go. This can be a difficult decision to make, but it's important to remember that not every customer is going to be right for your business.

Your time, and your staff's time, is a valuable resource. If you're spending too much time and effort trying to service a customer who isn't generating enough revenue or profit, then you may well be better off without them. By focusing on customers who really drive value for your business, you can free up time and resources to better serve your most profitable clients. This helps you to create a leaner and more profitable business that is ultimately more enjoyable and rewarding to run.

Final Thoughts

When it comes to determining who your most profitable customers are, there is no one-size-fits-all answer. It's important to take a variety of factors into account, including customer spend, gross profit margin, customer lifetime value, and more.

By taking the time to analyse your data and understand how different customers contribute to your business' bottom line, you can make more informed decisions about where to focus your efforts – and increase profits in the process.

ADM Accountancy Services Ltd is a Chartered Management Accountants based in Bishop's Cleeve, Cheltenham. We support clients' businesses throughout Cheltenham and the surrounding areas, including Tewkesbury, Gloucester, Stroud and Evesham. Call 01242 679767 or visit HOME - ADM ACCOUNTANCY SERVICES

Net profit: a need-to-know guide

Wed, 22 Nov 2023 15:47:25 GMT

If you're running a business, then you need to understand net profit margin. In fact, this metric is one of the most important indicators of a company's financial health. In this quick guide, we'll explain what net profit margin is, how to calculate it and various factors that affect it.

What is Net Profit Margin?

Put simply, net profit is the amount of revenue that a company keeps after all of its expenses and taxes have been paid.

The net profit margin is the percentage of revenue that the company keeps. So, if a company turns over £100,000 and keeps a net profit of £20,000, the net profit margin would be 20%.

To calculate net profit margin, you first need to calculate net profit. You do this by subtracting all expenses from total revenue. This gives you the net profit figure.

To get the margin, you then divide this figure by total revenue, and multiply by 100.

With operating profit, you only subtract expenses that are directly related to the running of the business. This includes things like cost of goods sold, labour and rent. With net profit, you also subtract things like taxes and interest payments.

Here's an example:

Let's say a company has total revenue of £100,000 in a year. If its expenses total up to £60,000, then it's left with a net profit of £40,000.

To calculate the margin, we divide the net profit by total revenue and multiply by 100. This gives us a net profit margin of 40%.

Now that we know how to calculate it, let's take a look at some of the factors that can affect a company's net profit margin.

Costs

One of the most important factors affecting net profit margin is costs. The lower a company's costs in relation to revenue, the higher its margin will be. There are two main types of costs:

Reduce variable costs. Variable costs are things like raw materials and labour that change in relation to production levels. If a company can find ways to reduce these costs, then its margin will increase.
Reduce fixed costs. Fixed costs are things like rent and insurance that don't change in relation to production levels.

Revenue

Another important factor affecting net profit margin is revenue. The higher a company's revenue in relation to its costs, the higher its margin will be. There are two main ways to increase revenue:

Increase prices. This is probably the most direct way to increase revenue. If a company raises its prices, then it will make more money on each sale.
Increase sales volume. This is the other main way to increase revenue. If a company can sell more products or services, then it will make more money overall.

Taxes

Another important factor affecting net profit margin is taxes. By working with an accountant to create a good tax strategy, businesses can minimize the amount of taxes they have to pay and take full advantage of any incentives or breaks available to them.

Comparing Net Profit Margin to Other Metrics

Net profit margin is a useful metric, but it's important to put it into context. Here are some other financial metrics that can give you a more complete picture of a company's financial health:

Gross profit margin. This metric measures the percentage of revenue that a company keeps after paying its cost of sales only.
Operating profit margin. This metric measures the percentage of revenue that a company keeps after paying its operating costs. These are the costs associated with running the business, like labour and rent, as well as cost of sales.
Return on assets, which is how much profit a company makes in relation to its assets.
Debt-to-equity ratio. This metric measures a company's debt relative to its equity.

As you can see, net profit margin is just one piece of the puzzle. To get a complete picture of a company's financial health, you need to look at a range of different metrics.

Final Thoughts

As you can see, net profit margin is a very important metric for businesses. It's a good idea to calculate it on a regular basis to track your company's financial health. By understanding the factors that affect it, you can gain a clearer picture of your business' overall financial health and make strategic decisions to improve your business's bottom line.

Need help with your business accounting? Call ADM Accountancy on 01242 679767 or visit www.admaccountancy.co.uk .

7 top tips for successfully scaling your small business

Tue, 17 Oct 2023 18:42:39 GMT

Scaling your small business is incredibly exciting, but there’s a lot to think about. It’s important to have solid rules and guidelines in place, and a clear plan to follow. If you’re ready to scale up your small business then read on for seven top tips to help you do it.

1) Hold onto your values

Your values should always be at the heart of your business, so be careful not to lose sight of them as you scale up. After all, these values have been instrumental in helping you achieve success so far, so don’t sacrifice them as your company grows.

2) Identify your barriers

What is getting in the way of your growth? What could go wrong as you scale up?

Take a step back, put your emotions to one side and take an honest, objective look at your business. Do you lack funding? Are you experiencing cash flow issues? Do you have a high staff turnover rate? Are there problems with your current premises?

Identifying your barriers to growth is the first step to overcoming them so don’t be afraid to take a long, hard look at your business. Every business has its weaknesses, so don’t be disheartened by yours but instead view them as an opportunity to improve.

3) Run the business you want, not the business you have

In order to scale up successfully, you need to bridge the gap between where you currently are and where you want to be. What works for you right now might break as you begin to grow, so it’s important to put systems and SOPs in place that will continue to work seamlessly as you scale up. Take a look at your cash flow, team, IT systems, workflows and supply chain to see what is going to creak or even break as your business expands, and prepare accordingly.

4) Build the right team

Leading on from the previous point, building a strong team of employees is an essential part of scaling your small business. You will need to take on more staff as you grow and ensure that they share your values. When hiring, place special importance on attitude and willingness to learn; you can teach an employee new skills but it’s very difficult to fix a negative mindset.

Staff morale is essential to productivity and a low turnover rate, so it’s in your best interests to create a supportive company culture that helps each team member reach their potential. Remember that making your staff feel seen, heard and appreciated goes a lot further than fancy merchandise or an extravagant Christmas party ever will.

5) Learn from the competition

Study your competitors who have successfully scaled up - how did they do it? What worked well for them, and what could they have done better? How did they change as they grew? Your competitors constitute a valuable learning opportunity, particularly when it comes to business growth.

6) Stay focused on customer service

The last thing you want to do when scaling up is antagonise your customers. You must remain consistent with the quality of your customer service; scaling up will do more harm than good if it causes all of your customers to flock elsewhere.

Of course, mistakes do happen but it’s important to rectify them as soon as possible, maintain honest communication with your customers and make them feel valued to keep them coming back.

7) Monitor your cash flow

Many of the biggest challenges businesses face during the scale-up phase are cash flow related. Whilst you do have to spend in order to grow, it’s important to keep a close eye on your cash flow throughout this process so that you know where every penny is going. This way, you can identify and solve any issues as soon as they arise, and see off potential threats before they come to fruition. It’s also important to prepare an adequate cash reserve for emergencies and unforeseen costs so that bumps in the road don’t cause a total breakdown.

Summary

Whilst the scale-up phase can be challenging for small business owners, it’s also exciting and provides a great opportunity to build an even better business. Whilst we can’t promise that employing the above seven tips will make scaling your business 100% worry free, they can make the process significantly smoother and easier.

Call ADM Accountancy for advice and support with your business accounts on 01242 679767.

A basic guide to bookkeeping for small business owners

Wed, 04 Oct 2023 09:16:44 GMT

Bookkeeping might not be the most exciting part of running your small business, but it is an absolutely essential task that undoubtedly plays a big role in your financial success. Bad bookkeeping can lead to myriad problems down the line, such as missing out on tax deductions or having to pay unexpected penalties. Meanwhile, great bookkeeping helps you to maintain control and visibility of your finances, plan for the future, and make accurate decisions.

What is bookkeeping?

Bookkeeping is the process of tracking and recording all your financial transactions and is the foundation for all your accounting tasks. The end goal of any bookkeeping system is to have accurate financial records that you can use to make informed decisions.

Bookkeeping terms to know

Accounts Payable

Accounts payable are the amounts of money that you owe to vendors and suppliers. This typically includes things like the bills from the website hosting service or your office supplies provider.

Accounts Receivable

Accounts receivable are the amounts of money that your customers owe you. This includes things like customer invoices, deposits, and payments towards services or products that you provide.

Assets

Assets are the items that your business owns. This includes physical assets such as computers, furniture, or vehicles, as well as intangible assets like intellectual property or software.

Balance Sheet

A balance sheet is a financial statement that summarizes the assets, liabilities, and equity of your business.

Cost of Goods Sold

The cost of goods sold (COGS) are the direct costs associated with producing goods or services, such as materials and labour.

Expenses

Expenses are the costs incurred in order to run your business, such as rent, office supplies, salary, or advertising.

Equity

Equity is the amount of money that your business has earned through profit or reinvestment.

Liabilities

Liabilities are debt that your business has taken on, such as loans, credit card balances, or lease payments.

General Ledger

The general ledger is the main record of your financial transactions, and it serves as a master account book for your business. It includes all accounts for your income, expenses, assets, liabilities, and equity.

Journals

Journals are used to record financial transactions in chronological order. These include cash disbursement journals, accounts payable journals, and accounts receivable journals.

Reconciliation

Reconciliation is the process of making sure that your financial records are accurate and up-to-date. This involves reviewing transactions, statements, and other documents to verify that they match up.

Revenues

Revenues are the income that your business earns from sales, services, or other activities.

Payroll

Payroll is the process of calculating and distributing wages to your employees.

How to get your bookkeeping right

Now that we've established some basic bookkeeping terms that you need to know, let's turn our attention to the actual process of getting your bookkeeping right. Here are some tips to help you get started.

1. Choose the right bookkeeping software

There are plenty of great cloud software solutions and apps that make bookkeeping easier. Choosing the right one for your business will depend on a few key factors such as budget, features, and ease of use.

2. Set up a separate business bank account

If you're using the same bank account for your business and personal transactions, or two businesses at once, that's a surefire way to make your bookkeeping far more complicated and frustrating than it needs to be. Setting up a separate bank account for your business will help you to keep everything organized and make tracking expenses much easier.

3. Automate as much as possible

Having chosen the right bookkeeping software, it's important to take full advantage of its features. Look for ways to automate tasks like recurring bill payments, credit card charges, and customer invoices. Automating these processes can save you a lot of time and effort.

4. Stay on top of your records

Bookkeeping is an ongoing process, so it's important to stay on top of your records. Make sure to update your accounts regularly, reconcile discrepancies in your bank statements, and review any invoices or receipts.

5. Create a process for document management

Accurate bookkeeping requires that you keep up with all of your incoming and outgoing documents. Creating a process for document management will help you stay organized and make filing your taxes easier.

6. Budget for taxes

One big mistake that many new business owners in particular tend to make is failing to budget for taxes. Set aside some money each month so that when tax season comes, you won't be caught by surprise.

7. Daily records

A little-and-often approach to bookkeeping is the best way to ensure that you stay on top of your records. Make sure to keep a daily record of all transactions and reconcile your accounts weekly.

8. Track expenses carefully

Having a clear record of all your expenses can help you to identify any potential problems or areas for improvement in the future. Take some time each month to review and categorize all your expenses.

Bookkeeping is an essential part of running any business, and it's important to stay on top of it by taking the time to understand the basics and setting up a system that works for you. With the right tools and processes in place, bookkeeping can be manageable and empower you to make smarter decisions, creating a stronger and more financially solid business.

Speak to one of the team at ADM Accountancy about our Bookkeeping service on 01242 679767 or visit: BOOKKEEPING - ADM ACCOUNTANCY SERVICES for more information

6 steps to securing a business loan

Wed, 13 Sep 2023 12:32:07 GMT

A business loan can propel your company to new heights but the process of securing one can seem daunting.

By preparing and taking the proper steps, you can increase your chances of approval and get the financing you need to grow your business. Let's take a look at the six steps you need to take to secure a business loan.

1. Know your credit score

Knowledge is power, and your credit score is one of the most important factors in securing a business loan. Your credit score is a number that lenders use to assess your creditworthiness. The higher your credit score, the better your chances of securing a loan and getting a lower interest rate. You can check your credit score for free with sites like Experian.

If your credit score is low, you may want to work on improving it before you apply for a loan. You can do this by paying your bills on time, using credit responsibly and keeping your debt-to-credit ratio low.

2. Get crystal clear on your finances

Lenders will want to see a clear picture of your financial situation before they approve a loan. This means having a firm understanding of your revenue, expenses, and cash flow. You should also be prepared to provide financial statements, such as your balance sheet and income statement.

If you don't understand your financial situation or don't have all the necessary documentation, now is the time to get organised. This will not only make the loan process easier but will also help you run your business more effectively.

3. Consider different types of loans

There are a variety of loans available for businesses, so it's important to do your research and figure out which one is right for you. Some common types of business loans include SBA loans, term loans and lines of credit. It's best to consult your accountant or financial advisor about which type of loan is best for your business.

4. Find the right lender

Not all lenders are created equal. You'll want to find a lender that offers loans specifically for businesses in your industry. This way, you can be sure that they understand your business and have experience lending to companies like yours.

This is also a good time to compare interest rates and terms. Be sure to shop around and get multiple quotes before you make a decision.

5. Gather the required documentation

Once you've found a lender, you'll need to gather the required documentation. This can include things like your business licence, financial statements, and tax returns. Your accountant can help you put together the necessary paperwork and make sure everything is in order.

6. Make a compelling case for your loan

When you're ready to apply for a loan, you'll need to make a strong case for why your business needs the financing. This means putting together a detailed business plan and loan proposal. Your business plan should outline your company's goals, financial situation, and how you plan to use the loan.

If you take the time to prepare and follow these steps, you'll be in a much better position to secure a business loan for your business. Having the right financing in place can be the key to taking your business to the next level and achieving the growth you're looking for.

Contact ADM Accountancy for advice on taking out loans for you business, on 01242 679767 .

5 tax reduction tips for small business owners

Mon, 17 Jul 2023 11:23:51 GMT

If you run a small business, it is very likely you will be paying too much in tax. So, here are our top 5 tax tips to help reduce your tax bill and save wastage.

The key to reducing your tax is to be organised with your bookkeeping ( speak to one of our qualified accountants if this proving difficult). If everything such as receipts and invoices are kept up to date in a straight forward system – such as Xero , this will be much easier for you to know where you can make savings.

1. Start-up costs can be claimed later

Starting up a business is usually expensive, but many small business owners overlook start-up expenses. However, it may not be too late to claim, as limited companies can claim relevant start-up costs for up to seven years before the business officially begins operations.

2. Claim if you use a home office

If your primary place of business if from a room in your home then you may be able to claim a home office deduction. Internet, telephone, electricity and gas will all usually be deductible based on the percentage of your home used for work.

You can also claim expenses such as office furniture, depending on usage portions. If you buy an office desk for £100 and use it exclusively for work, then you can claim the full amount. However, if you use it for personal reasons 40% of the time then you will only be able to deduct £60 from your taxable income.

3. Capital and net operating losses can be counted

Capital and net operating losses can often be overlooked as tax deductions. It’s possible to carry these losses over into future tax years to reduce taxable income. With the impact on small businesses due to COVID-19, this is definitely a deduction to remember. Carryovers can be used to reduce either the business’s or the owner’s income. Your accountant will help you work out how to benefit from this type of tax deduction.

4. Claim for losses on bad debts

If your business loses money owed, for example, due to a customer who won’t pay, you may be able to claim this amount as a tax deduction. You’ll need to prove that you’ve taken reasonable action to collect this money without success. While this situation isn’t something we want, it may help to soften the impact of a bad debt when it does happen.

5. Staff training costs

Many business owners forget that training their employees is a deductible tax expense, so keep a record of your spending in this area to receive a smaller tax bill.

If you’re unsure whether an item qualifies for tax deductions, speak to one of the team at ADM Accountancy who will be happy to help.

7 key advantages of outsourcing your bookkeeping

Wed, 28 Jun 2023 18:03:30 GMT

Bookkeeping is a necessary task for any business, but it can be time-consuming and overwhelming. That's why many businesses choose to outsource their bookkeeping. Outsourcing your bookkeeping can save you time and money, and it can also help improve your business' efficiency and productivity. In this article, we will discuss seven key advantages of outsourcing your bookkeeping so that you can make the right decision for your business.

1 - Financial Insight

One of the key advantages of outsourcing your bookkeeping is that you will gain financial insight. When you outsource your bookkeeping, you will have a team of professionals to help you track your finances and ensure that you have access to accurate, real-time financial data. This enables you to make informed decisions about your business which can be invaluable in helping you grow your company and achieve your goals.

2 - Avoid Penalties and Interest

Another key advantage of outsourcing your bookkeeping is that it can help you avoid penalties and interest. Late or missing payments can result in late fees and interest, which quickly add up. When you outsource your bookkeeping, you will be able to stay on top of your payments and avoid accumulating penalties and interest.

In addition, when you outsource your bookkeeping you can also take advantage of Early Payment Discounts (EPDs). By outsourcing your bookkeeping, you can ensure that you are taking advantage of all available discounts so that you can save money on your business expenses without hurting your cash flow.

A professional bookkeeper will also be able to help you identify areas where you can save money. They can also negotiate better rates with vendors on your behalf so that you can get the best possible price for the goods and services that you need.

3 - Business Continuity

Another key advantage of outsourcing your bookkeeping is that it can help to ensure business continuity. When you outsource your bookkeeping, you will have a professional to take care of the task even if you step away from your business for a moment, whether you’re sick or just in need of a vacation.

4 - Saving Time

Bookkeeping is a complex and time-consuming process, and many business owners find themselves tearing their hair out trying to get it right.

However when you outsource your bookkeeping, you can say goodbye to long evenings stressing out about your books. A professional bookkeeper will be able to handle the task quickly and efficiently, freeing up your time to focus on what matters most to you, whether that’s in or outside of the business.

5 - Greater Accuracy

Another key advantage of outsourcing your bookkeeping is that it can help to improve the accuracy of your financial data. When you outsource your bookkeeping, you will have a team of professionals who are experienced in working with financial data who can spot mistakes that you aren’t able to see. They will be able to catch errors and ensure that your records are accurate, which will save you a huge amount of time and money in the long run, as it can help to prevent problems down the road.

6 - Cash Flow

Outsourcing your bookkeeping can also help to improve your cash flow. When you outsource your bookkeeping, your invoices and payments are taken care of for you. This can help to ensure that you are paid on time and that you have the funds available when you need them.

In addition, outsourcing your bookkeeping can help you to better manage your inventory. Your bookkeeper can help you to track your inventory levels and ensure that you are not overstocked. This improves your cash flow by reducing the amount of money that you have tied up in inventory.

7 - Taxes

Outsourcing your bookkeeping can also help you to save money on taxes. When you outsource your bookkeeping, you will have a team of professionals who can help you to maximize your deductions and minimize your tax liability. This can save you a significant amount of money over the course of the year, leaving you with more capital to invest in business growth.

As you can see, there are many key advantages to outsourcing your bookkeeping. If you are looking for a way to save time and money, then outsourcing your bookkeeping may be the right solution for you. Contact us today to learn more about how our bookkeeping services can help your business to thrive. Call 01242 679767 or visit https://www.admaccountancy.co.uk/

The no. 1 financial mistake that business owners make

Wed, 24 May 2023 08:56:08 GMT

The biggest financial mistake that business owners make isn't about credit cards or spending or savings accounts. It's DIY accounting. If you're like most business owners, you try to do as much as you can yourself in order to save money. However, when it comes to your finances, this is a huge mistake. Not only can accountants take care of your accounts better in far less time, and they can offer valuable advice to take your business to the next level.

Let's take a closer look at the benefits of investing in an accountant for your business, and dispel some of the myths that may be keeping you from doing so.

Accountants Save You Time

The most obvious benefit of hiring an accountant is that they save you time. When you're trying to do everything yourself, it's easy to let your finances fall by the wayside. Suddenly, it's tax season and you're scrambling to get everything together. An accountant can take care of all of your financial needs on an ongoing basis, so you can focus on running your business.

Accountants Save You Money

Another common misconception is that accountants are expensive. While it's true that you will have to pay for their services, the truth is that an accountant can actually save you money in the long run. They can help you take advantage of all of the deductions and tax breaks that you're entitled to, and they can ensure that you're not overpaying. In the end, a quality accountant will more than pay for themselves.

Accountants Make You Money

Accountants can not only save you money, they can also help you to build a more successful and profitable business. A good accountant will be up-to-date on all of the latest changes in tax law and financial regulations, and they can advise you on how to structure your business in the most advantageous way. They can also help you to create a budget and forecast for your business, so that you can make informed decisions about where to invest your money. They will also identify areas that are in need of improvement and help you understand which products, services and activities are most profitable so that you can hone in on those.

Accountants Save You Stress

Hiring an accountant will save you so many headaches. Trying to keep on top of your finances can be overwhelming, and it's easy to make mistakes when you're doing it yourself. An accountant will take care of all of the details for you, so that you can relax and focus on what's important - running your business. When your attention is being pulled in a million different directions, it can feel very overwhelming and negatively impact your mindset. However, when you know that your accounts and finances are in expert hands, you can enjoy greater peace of mind and focus on building your business.

Accountants Help You Secure Financing

If you're looking to secure financing for your business, an accountant can be a valuable asset. They can help you put together a strong business plan and financial forecast that will give lenders the confidence they need to invest in your business. They can also help you to understand and manage your debt, so that you can make smart decisions about how to grow your business.

Hiring an accountant is one of the best decisions that you can make for your business. They offer a world of benefits and can take your business to the next level. If you're still doing your accounts yourself, then you're probably holding your business back, and it's time to make a change.

Call ADM Accountancy on 01242 679767 .

4 small business accounting mistakes to avoid

Tue, 02 May 2023 09:14:40 GMT

Starting your own business is exciting but it’s also extremely risky. There’s a lot to think about when you first start out on your own – stock, premises, staffing to name a few. It is tempting to put accounting at the bottom of the list, but that would be a big mistake. Good accounting is crucial to the financial health of your business and mistakes can be devastating, especially in the early days. It’s important to know which mistakes to avoid to ensure your business is around for years to come.

1. Not prioritising bookkeeping

New business owners are often overwhelmed and tend to neglect bookkeeping. However, from the outset, it’s essential that you keep the books up to date and record your earnings and expenses. Without this data, you won’t have a clear picture of how you’re faring financially, which can lead to numerous problems.

Meticulous bookkeeping allows you to spot trends, understand your spending and examine which practices generate the largest ROI. You can then leverage this data to improve the financial health of your business, maximise your profits and manage your cash flow. Staying on top of the books allows you to stay one step ahead and put out fires before they start.

2. Not understanding the difference between cash flow and income

The money you take isn’t the money you make. £100,000 in revenue sounds great, but if you had to spend £35,000 on equipment, insurance and employees to make that money, you’re actually left with £65,000 profit. You’ll then have to pay tax on your gross profit, so the net amount will be smaller again.

It’s important to know not only how much money is coming into your business, but how much is going out. Getting carried away with gross numbers is a common mistake that new business owners make, and it quickly lands them in difficulty. It’s important to stay grounded in reality and know how much you’re really making so that you don’t overspend.

3. Using outdated practices

You’re a 21st century business and your accounting practices should reflect that. Online accounting and bookkeeping software, such as Xero , are faster, easier and more efficient than ledgers and Excel spreadsheets.

Online accounting software is easy to learn and significantly reduces the margin of human error by automating processes and calculations for you. This means that you’re much less likely to make mistakes on your tax return. It also reduces the risk of making the wrong financial decisions due to inaccurate information.

With this type of software, you won’t have to spend hours updating and organising your financial information. Another benefit is that it allows you to locate and cross-reference information quickly and easily, without having to spend hours searching for the right files. It may be more expensive than the DIY approach initially, but using online software will save you many man hours.

4. Trying to manage with DIY accounting

Accounting is complicated; there’s a reason it takes accountants years to fully qualify. Trying to manage your accounts all by yourself is a sure-fire way to waste time and stress yourself out. Besides, without extensive financial knowledge it’s unlikely you’ll be able to save a significant amount of money on your tax return. Furthermore, you’ll be heavily penalised for making even a minor mistake on your return, which could cause financial problems for your business.

Trying to manage on your own is a drain on your resources so the sooner you seek professional help, the better. Investing in the services of a qualified and chartered accountant is one of the best decisions you can make regarding the financial health of your small business.

In order to set your business up for success, it’s important to avoid these accounting mistakes. Neglecting or mismanaging your accounts can have serious consequences, so it’s best not to take any risks. Whilst it’s tempting to put accounting off ’til later, you need to make it a priority right from the start. Good businesses and bad accounting just don’t go together.

To talk to one of our team about your small business accounts or your new start-up idea, call 01242 679767 .

Keeping your personal and business finances separate

Wed, 26 Apr 2023 09:55:04 GMT

Many new business owners delay opening a separate business bank account. If you’re a sole trader, legally you don’t have to separate your personal and business finances, but it’s definitely sensible to do so. Keeping track of multiple accounts might seem like extra work, but in the long term, keeping your personal and business finances separate will make it a lot easier to manage your money.

Accurate financial records from the outset

If you use the same bank account for personal and business expenses, you’re guaranteed to find yourself with a headache when tax season comes around. It can take hours to go back over your accounts and try to remember which transactions were business-related. It’s also a lot easier to make mistakes, which can come back to bite you later on in the form of a fine or an audit. Separating your personal and business finances renders tax season much more straightforward.

Also, mixing your personal and business finances makes you more likely to create inaccurate cash flow projections or miscalculate your profits. This can then result in overspending or a skewed view of your growth. These mistakes compound over time and your murky records may land you in hot water.

Clear distinction between business and pleasure

Creating a successful business means treating it like a business from day one. Keeping your business and personal finances separate goes a long way in helping you achieve this. It creates a sense of professionalism and helps you to feel like a serious business owner. Furthermore, clients will take you more seriously when they make payments to your company bank account.

Financing your business more easily

Having a separate business account makes it much easier to secure finance for your business. When attempting to obtain business credit, any lender will require evidence that your enterprise is financially healthy and that you manage your money well. If your statements show a confusing combination of business and personal transactions, you’re unlikely to be taken seriously.

Furthermore, mixing your personal and business finances can negatively affect your credit score, which may prevent you from obtaining credit in the future. It’s much more prudent to separate your finances early on so that you don’t get into difficulty and can maintain a safety net.

Preparing for an audit is a breeze

An audit may be the furthest thing from your mind right now, but in the future you may face one and it’s vital that you’re prepared to do so. When your business undergoes an audit, it’s crucial that you provide accurate, easy-to-follow financial records that demonstrate that you are an honest and law-abiding organisation. If your records are confusing, you’ll have to endure a barrage of admin and office visits in order to set them straight, and you may face a hefty fine.

Protect your business against fraud

Cybercrime soared during the COVID-19 pandemic and online fraud is something you should take seriously as a business owner. Of course, having your bank account breached is always bad news but if you use a single account to manage your personal and business finances, you’ll essentially be hit twice. Separating your personal and business finances offers more of a safety net against cybercrime and may allow you to continue operating even if one of your accounts does fall prey to fraud.

Separating your personal and business finances is an essential step in ensuring the financial health of your business. Not only does maintaining separate accounts render it far easier to keep accurate records, it can also help you to grow your business by securing credit and creating a sense of professionalism that puts you in the right mindset for success.

It’s a worthwhile step for any new business owner to take, and when tax season rolls around, you’ll be very glad that you did. Talk to us today to discuss how we can help you set up a business bank account and manage your new business finances to make your life easier from day one.

5 ways Xero can streamline your business

Tue, 11 Apr 2023 19:03:09 GMT

Xero is a leading cloud-based accounting software that provides businesses with a streamlined and efficient way to manage their financials. With its user-friendly interface and robust features, Xero has become a popular choice for businesses of all sizes, from small startups to large enterprises. Its automation capabilities, integrated payment solutions, and real-time collaboration features make it a powerful tool for businesses looking to streamline their financial processes.

Whether it's automating bookkeeping tasks, managing expenses, or generating insightful financial reports, Xero empowers businesses to stay on top of their finances, make informed decisions, and achieve greater financial efficiency.

Here are our top five benefits of using Xero for your business accounting:

Automated Bookkeeping: Xero's accounting software can automatically import and categorise bank transactions, reducing the need for manual data entry and making bookkeeping faster and more accurate.
Cloud-based Collaboration: Xero is a cloud-based accounting solution, allowing business owners and their accountants or bookkeepers to collaborate in real-time. This streamlines communication and ensures everyone has access to the most up-to-date financial information.
Integrated Payment Solutions: Xero integrates with various payment gateways, allowing businesses to easily send and receive payments from within the software. This streamlines the payment process and eliminates the need for manual payment reconciliation.
Expense Management: Xero has built-in features for managing expenses, including capturing receipts using a mobile app, automatically matching expenses with bank transactions, and creating expense claims for reimbursement. This helps businesses keep track of expenses and streamline reimbursement processes.
Reporting and Analytics: Xero provides a wide range of financial reports and analytics tools that can help businesses gain insights into their financial performance. This allows for informed decision-making and helps streamline financial planning and analysis processes.

Overall, Xero's cloud-based accounting software offers numerous features that can streamline various aspects of a business's financial management, including automated bookkeeping, cloud-based collaboration, integrated payment solutions, expense management, and reporting and analytics. These features help save time, reduce manual errors, and provide better visibility into a business's financial health, ultimately leading to more efficient and streamlined financial processes.

Speak to one of the Xero experts at ADM Accountancy to discuss how we can help you maximise this software and streamline your business processes. Call 01242 679767 .

How to know if your business is profitable or not

Wed, 29 Mar 2023 09:23:21 GMT

As a business owner, you’ll want to know whether your business is operating at a profit or not and have data on hand that will allow you to stay on track and strengthen your business. So, here’s four ways to know if your business is profitable.

1. Work out your net profit margin

Calculating your net profit will help you determine profitability. This is straightforward, so long as you have been maintaining accurate records. The equation is as follows:

Revenue - Expenses = Profit

If your answer is positive, then you’re turning a profit. If it’s negative, then you’re losing money.

‘Net profit’ is the amount of money you keep after paying taxes and interest on debt, as well as business expenses, so you must include those numbers in your calculation.

It’s important to remember that turnover doesn’t reflect your profitability. For example, a business that makes £100,000 per year and spends £30,000 on expenses has a net profit of £70,000. However, a business that makes £150,000 but spends £170,000 has actually lost £20,000, despite having a larger revenue.

Your net profit margin should be reviewed more than once per year, ideally monthly, so that you can monitor how your profit margins are changing and spot seasonal trends. This will prove enormously helpful in predicting future profit and creating a realistic business budget. It will also show you when your profit margin is decreasing so that you can take action before it’s too late.

2. Understand your gross profit margin

Gross profit margin is another important indicator of profitability, especially if you sell products rather than provide services. You calculate gross profit as follows:

Sales Revenue - Cost of Goods Sold = Gross Profit

Gross profit differs from net profit, though many confuse the two. Gross profit refers to the percentage of profit you keep after the cost of goods sold, whereas net profit includes other costs such as tax and interest paid on debt.

Again, it’s important to review this on a monthly basis and compare your gross and net profit. This can help you to identify areas of improvement or concern. If your gross profit margin remains healthy but your net profit is decreasing then product cost isn’t your problem and you need to look closely at your overheads, taxes and debts.

3. Keep an eye on your operating expenses

If your revenue is increasing but your profit margins are decreasing then you need to take a look at your expenses. It’s easy for expenses to outpace revenue as your business grows, so you must keep a close eye on these numbers to ensure that you remain profitable.

Some expenses, such as new equipment and employees, are unavoidable during a period of growth but be sure to review your costs regularly and look for areas where you may be able to save.

4. Work out your profit per client

Working out your profit per client will help you understand which clients generate more profit than others for your business. The answers may not always be obvious: the clients who pay the most in fees may have a poor revenue-to-expenses ratio.

Take the total project fees and subtract all project expenses to calculate the gross profit of a client project. Then, divide this time by the total number of hours worked on said project to calculate the hourly rate. This will provide you with actionable data to help you identify the most lucrative clients and projects going forward.

As a small business owner, regularly reviewing and analysing your numbers will provide you with valuable data that you can leverage to become or remain profitable. To grow your business, you must first get clear on your current reality. If you want to increase profitability, it’s time to start crunching those numbers.

ADM Accountancy are experts at number crunching! Take a look at our Management Accounts services – all of which can be tailored to meet your specific business needs.

Overspending traps for small businesses to avoid in 2023

Tue, 07 Mar 2023 19:43:37 GMT

2023 is well and truly here and the question on many business owners' minds is how to avoid overspending in this new era. With so much uncertainty looming in the near future, it is important to prepare for anything that might happen by being cautious with your finances. In this blog post, we will discuss some of the traps that small businesses should try to avoid when they are making their plans for 2023 and beyond.

#1 - Review Your Recruitment Process

An inefficient hiring process can lead to wastage and costly bad hires. Review your process and make sure that you are only hiring the best of the best for your company. Do not be afraid to invest in training and development programmes for your employees, as this will lead to a more productive team.

It's also important to get a clear understanding of your company culture so that you can identify which candidates will be the best fit. Finally, remember that hiring based on mindset and potential, rather than experience, can often lead to better results.

#2 - Keep an Eye on Office Supplies

Overspending on unnecessary office supplies and services is another trap that small businesses should avoid in 2023.

Make sure to do your research and find the best deals before committing to any contracts or agreements. It might also be helpful to create a budget for your office supplies and stick to it as closely as possible.

Digitisation can also reduce the need for physical office supplies, so be sure to make use of this if your business can afford it.

#3 - Re-adjust Your Marketing Process

Marketing is essential for any business, but it's important to be mindful of the costs involved. Make sure that you are targeting your efforts towards the right audience and that your marketing campaigns are effective.

It's also important to track your results so that you can adjust your strategies as needed. We're not saying you need to spend less on marketing, but rather ensure that you are investing your resources in activities that generate a solid ROI and trim the processes that aren't delivering results.

#4 - Use Expense Management Software

Technology can be your friend when it comes to avoiding overspending. Expense management software is a great way to keep track of your spending and ensure that you are not going over budget.

This type of software can also help you to identify areas where you might be able to save money. If your business isn't already using expense management software, it's definitely something to consider in the new year as it will give you end-to-end control over your expenditure.

#5 - Automation

Automating menial tasks can save you a serious amount of time and money over the course of 2023.

Automation can be used in a number of areas, such as marketing, accounting, and HR. By automating these processes, you will not only save time but also reduce the chances of human error.

Automation can also reduce the need for hiring new members of staff and help you get more out of your existing team. This technology is becoming increasingly affordable and accessible, so now is the time to take advantage of it.

#6 - Unnecessary Office Space

Leasing or renting unnecessary office space is another trap that small businesses can fall into. Make sure to take the time to assess your needs and only lease or rent as much space as you actually need. It might also be helpful to consider working from home or utilising co-working spaces, which are often available on flexible contracts so that you only pay for the time you actually need.

We hope that these tips will help you to avoid overspending in 2023 and beyond. If you would like more information or advice, please don't hesitate to get in touch with the team at ADM Accountancy on 01242 679767. We're always happy to help!

How to get the most out of your business advisor

Wed, 22 Feb 2023 10:06:10 GMT

How do you get the most out of your business consultant/advisor? This is an important question to ask before hiring a consultant/advisor. You want to be sure they are providing the right kind of advice for your needs. The following post will share some tips on how to find and retain high-quality consultants/advisors, as well as getting the most value from them once they are working for you.

Be selective

Don't just hire the first consultant/advisor that comes along - be selective! Take the time to interview several consultants/advisors and ask them questions about their experience and what they can do for you. Make sure to look for industry acumen and social proof that they have successfully worked with business owners in a similar position to you.

Know what you need, and don't be afraid to ask for it

It's important to know exactly what your specific business needs are in order to hire the right consultant/advisor. They should be able to clearly communicate how they will help solve these issues or problems – if not, it might be a sign to look elsewhere.

Be prepared for change

When working with consultants/advisors, there is often change required in order for them to help you reach your goals. Be prepared for this and be willing to make the necessary changes. They should provide clear guidance on what needs to happen, but ultimately it will be up to you to make the changes happen.

Follow up and evaluate regularly

Make sure to follow up with your consultant/advisor regularly, and evaluate their work along the way. This will help ensure that they are meeting your expectations, as well as helping them adjust their services if needed. It's also a good idea to document what has been accomplished and what still needs to be done in order to track progress.

It's about more than numbers

Your business consultant/advisor is so much more than a number cruncher, so remember that. They can provide valuable insights and recommendations based on their industry experience. They should also be able to help you strategize, prioritize tasks, and develop a plan of action.

Open lines of communication

The most important thing to remember when working with a business consultant/advisor is that open lines of communication are key. They need to be able to communicate effectively with you, as well as provide regular updates on their work. This will help ensure that both parties are getting the most out of the relationship.

Take their advice

The best thing you can do is take the advice of your consultant/advisor and run with it. Implement their recommendations and see how they help your business grow. Remember, these professionals have a lot of experience and know what works - so trust them. If you don't put their advice into action, you can't expect to see a transformation.

Give honest feedback

Being a good client means delivering honest and constructive feedback. If you're not happy with the work your consultant/advisor is doing, let them know. They need to be able to improve their services if needed, and your feedback will help them do that. Give them the opportunity to adjust and improve. They won't know something is wrong unless you tell them.

Conclusion

If you want to get the most out of your business consultant/advisor, it's important to be selective and know what you need. Be prepared for change when working with consultants/advisors; this is required in order for them to transform your business and help you reach your goals. Most of all, make sure that both parties are getting the most out of the relationship through open lines of communication and remember to actually put their advice into action – otherwise, all you’re paying for is “shelf help”!

At ADM Accountancy, we believe every business owner deserves the opportunity to be successful and we work hard to help manage our clients' business startups through to growth and beyond! Call us on 01242 679767 to arrange an appointment.

How to streamline accounting workflows within your small business

Wed, 25 Jan 2023 15:01:10 GMT

Workflows tend to grow organically over time within small businesses. However, this does not always lead to the most efficient results, especially when it comes to accounting. When you first launch your business, your requirements may be relatively straightforward but they inevitably grow more complex as you scale up. Fortunately, cloud accounting software can help you to create more efficient accounting workflows to save time and ensure more accurate records.

Problem #1 - Using spreadsheets

In this day and age, using spreadsheets to manage your accounts is almost akin to relying on pen and paper. Spreadsheets cause you to waste a lot of time on data entry and organisation when a cloud accounting platform could do all of that for you. Time is a valuable resource and every hour you spend managing a spreadsheet is an hour you could have invested elsewhere in your business.

Instead of recording your income manually, you can link up your cloud accounting software to your electronic payment methods so that your income is automatically recorded as it enters your business. It can also help you to keep track of invoices created and identify which ones haven’t been paid.

Problem #2 - Piles of paperwork

Big piles of invoices and receipts don’t exactly scream 'efficiency'. Many steps are involved in organising and recording your expenses, and this is a huge drain on productivity. Fortunately, automating this process can save you a huge amount of time and make it easy to stay organised. This allows you to easily access your financial information whenever you need, instead of wasting time rifling through filing cabinets. It could save you a few papercuts, too!

Cloud accounting software can create and send invoices for you. If you bill a client at regular intervals, you can even automate the entire process. You will also be able to view a dashboard displaying the status of each invoice, which helps you to better understand your cash flow situation. This also makes it easier to see which clients are yet to pay you and thus allows you to send reminders where necessary or chase up those who have missed their deadlines.

On top of this, accounting software allows you to digitise your receipts by uploading photos of them, which not only saves you time but also makes it easy to find them again later on. Lost receipts equal missed tax deductions, so this is a big help.

Problem #3 - Getting paid

Late payments can cause huge cash flow issues, especially for small businesses. Streamlining your accounting workflows can really help with the collection process.

If you manually invoice clients and track your receivables using a spreadsheet, it can be difficult to keep track of who owes what and which invoices are past-due. Unfortunately, you can’t blindly trust that your clients will pay you on time and so it’s important that you keep a close eye on your receivables.

In fact, a study by Atradius found that the older an invoice is, the less likely it is to be paid and that businesses lose over 50% of the value of their receivables that aren’t paid within 90 days.

Fortunately, cloud accounting gives you a greater insight into the status of your receivables and helps you to follow up with clients in a prompt and timely manner. It’s important to be consistent to ensure that your clients take you seriously.

It’s also worth introducing late payment fees to incentivise your clients to pay you on time. Your accounting software can calculate these charges for you and automatically add them to the total.

Using cloud accounting software to streamline your workflows helps you to stay on top of your finances and better manage your cash flow, which is vital for building a successful and sustainable business. On top of this, accounting software frees up a huge amount of time and allows you to focus on the profit-generating tasks that truly require your expertise.

As a Xero Gold Partner, ADM Accountancy can help you get up to speed with the latest cloud accounting software. Speak to one of the team on 01242 679767 or visit www.admaccountancy.co.uk

5 things you need to scale up your business

Tue, 10 Jan 2023 20:38:36 GMT

Are you ready to take your business to the next level? There is no denying that the scale-up phase is incredibly exciting but it’s important to make sure you are prepared. You need to get your affairs in order before you scale up and ensure that your business won’t start to creak and break as it expands. Let’s take a look at the five things you need to successfully scale up your business.

1) Great leadership

Your business will be rudderless without a powerful and effective leader. Think about it for a moment, what is the first thing you think of when you think of companies like Microsoft, Apple and Google? It’s their leaders. People like Bill Gates, Steve Jobs and Larry Page are behind every great company’s success story. They have become cult figures in our society with legions of fans all over the world.

You also need to be a strong and decisive leader in order to succeed. You can’t be wishy-washy about everything or your company will slowly fall apart. Your team needs someone they can look up to, admire and follow without question. They don’t need their hands held but they do need clear direction from the top.

You also need to prepare for the process of scaling up your business by working on your communication with employees. If you want to be a strong leader who is respected, then you have to communicate clearly and effectively.

2) Funding

As your business starts to grow and generate more revenue, it will also start to suffer from growing pains. This is where many businesses end up failing because they can’t keep up with demand. You may need to look at new funding strategies. This could involve getting a bank loan, securing a line of credit, crowdfunding or looking into angel investors.

3) Sales and marketing

Scaling up a business means expanding your sales and marketing team, however, many business owners often overlook the importance of this. You can’t sit back and hope that your product or service sells itself. You need to be purposeful and take action with a solid strategy.

It's important for your sales and marketing team to be agile , flexible and adaptable. You want to make sure that they are able to meet the needs of your customers quickly and efficiently, all while making sure you get a return on investment from your marketing efforts.

4) Technology

Your IT infrastructure needs to be well-managed, competent and not prone to crashing or failure at critical points. The technology your business uses will need to be scalable and able to adapt as the business changes and grows. This means investing in software and services that can handle growth and any future problems.

Businesses often turn to cloud-based services for all their technology needs because they are scalable and are flexible enough to handle fluctuations in customer numbers or workloads.

5) Management structures

As your business starts to grow, you will need to make sure that your management structures are in order. This means hiring experienced managers who can effectively handle the increased pressures and demands of a larger workforce.

You also want to make sure that there isn’t too much red tape in your management practices otherwise your company could grind to a halt. This means making sure that everyone knows what is expected of them and that there are no unnecessary layers between the people at the top and those who are actually taking care of business every day. Keeping your operation as lean and efficient as possible will maximise your profits and allow you to really reap the benefits of business growth.

If you want to scale your business, there are some key things that need to be in place. These include financing and funding options, good sales and marketing strategies, technology solutions which can grow with the company, and scalable management. It’s important that factors work together so that the growth of the company doesn’t end up being a hindrance rather than an asset.

Speak to the team at ADM Accountancy for advice and support with your business accounts. Call us on 01242 679767 or visit www.admaccountancy.co.uk

How to manage business debt

Tue, 13 Dec 2022 19:21:16 GMT

Many business owners find themselves in a precarious financial situation where they owe more money than they have. This is usually the result of taking on too much debt and not making enough to cover it back. It's important that you understand how to manage your debt, so we've got some tips for you.

Take action

Unfortunately, burying your head in the sand isn't going to make your debt go away. Many business owners make the mistake of not taking action until it's too late. If you find yourself in this situation, you need to take action as soon as possible to get your company back on track.

Payment riorities

You will likely need to cut some costs in order to get your business out of debt, but there are some payments you must continue making. It's important to create a list of priorities so that you can make sure you're still able to operate and stay on the right side of the law.

Here are a few suggestions of what to prioritise:

Payroll - failing to pay your employees on time will most likely lead to a decline in morale, resignation and even legal action.
Aged payables - if you fail to pay up, your credit score will be impacted which will make it even harder to get out of debt.
Suppliers - risking these relationships could really cost your business.
Insurance
Credit cards

You should also try to pay off your highest interest debts first so that you can reduce the amount of money you owe over time.

Renegotiate or consolidate debt

You might need to consolidate your debt if you can't afford the repayments on all of them. Consolidating debt means taking out one loan to pay off all of your other debts. This can be a risky move, so make sure you do your research first.

You could also consider renegotiating with creditors, especially those who charge lower rates or are more flexible. If they know that you're taking action about paying off your debts, they'll be much more likely to help out by offering reduced rates or longer repayment periods.

Increase revenue

Increasing your revenue is certainly easier said than done, but there are things that you can do to give your business a cash injection. For example, offering reduced prices or bulk discounts can help you move more product.

You may also want to consider increasing your customer retention rate by personalising your service or creating a loyalty program. Meanwhile, referral programs are a low-cost and low-risk way of acquiring new customers.

Reduce costs

Again, easier said than done but there are some common-sense ways to reduce your costs without compromising the quality of your operation.

Introducing telecommuting, for example, can save you on office space and equipment. You could also renegotiate your energy contracts or switch to a lower rate plan. Finally, consider automating some of your business processes to reduce the need for manual input.

However, don't be tempted to take a "to the bone" approach and zealously hack away at your business, as this could have a negative effect on your staff, customers and operations which will only make it more difficult to get out of debt.

If you're willing to put in the hard work, there are ways to get your business out of debt. By following these tips, you'll be on the right track to financial stability.

Speak to one of the team at ADM Accountancy about how to manage your business debt. Call 01242 679767 or visit www.admaccountancy.co.uk

How your business can manage the cost of living crisis

Mon, 28 Nov 2022 19:03:25 GMT

The cost of living crisis is presenting a huge challenge to businesses across the UK. With the price of everyday essentials rising, and wages failing to keep up, many consumers are struggling to make ends meet. This is having a knock-on effect on businesses, as customers cut back on spending and turn to cheaper alternatives.

So how can your business manage the cost of living crisis?

There are a number of things you can do to help your business weather the storm. Here are some key steps you should take to ensure that your business remains financially viable over the coming months.

1. Prepare a Cash Flow Forecast

One of the most important things you can do to manage the cost of living crisis is to prepare a cash flow forecast. This will help you to identify any potential shortfalls in your finances and take steps to mitigate them.

Cash flow is essential to ensure that your business can meet its financial obligations. If you don't have enough cash coming in to cover your outgoings, you could quickly find yourself in financial trouble.

A cash flow forecast will give you a clear picture of your current financial situation and will help you to plan for any potential problems. You can even siphon off some of your profits into a contingency fund to ensure that you always have money on hand to cover unexpected costs.

The current crisis means that cash flow is slowing across many industries, but by forecasting your finances, you can ensure that your business doesn't grind to a halt.

2. Be Transparent About Cost Increases

You may well need to increase prices in order to cover the rising cost of living. However, it's important to be transparent with your customers and clients about any price hikes.

If you try to sneak in a price increase, you could find that your customers go elsewhere. Be upfront about any changes and explain why they are necessary. This will help to build trust and ensure that your customers remain loyal.

3. Seek Funding

The cost of living crisis is putting immense pressure on many businesses, and so it could well be time to seek out available funding.

There are a number of government schemes available to help businesses through the current crisis. Check out what's available and see if you could be eligible for any financial support.

It's important that your business is appealing to creditors and investors, so you'll need to get your finances in order. Make sure that you have a solid business plan and put together a strong case for why your business deserves funding.

4. Reduce Overheads

One way to manage the cost of living crisis is to reduce your business' overhead costs. Take a close look at your outgoings and see where you can make cuts.

Consider renegotiating your lease or moving to a cheaper premises. Encouraging more of your staff to telecommute could make this much easier and enable you to downsize your office space without creating problems.

If you're paying for services that you no longer need, cancel them. And take a close look at your utility bills to see if there are any areas where you can reduce your costs.

5. Maintain Good Supplier Relationships

Things are probably tough right now for your suppliers too, so maintaining a strong and trusting relationship is essential.

Try to agree on longer payment terms if you can, as this will give you some breathing room when it comes to your cash flow. It's also important to be upfront about any financial difficulties you're experiencing and to discuss ways in which you can both weather the storm.

Rather than squabbling, you and your suppliers should ideally be working together to find solutions that benefit both parties.

6. Review Your Product Range

The cost of living crisis may mean that you need to review your product range. If you're carrying some dead weight, now is the time to get rid of it.

Focus on your most popular and profitable products and ditch anything that isn't selling well. This will help you to free up cash and make your business leaner and more efficient, which is crucial right now.

The cost of living crisis is certainly presenting a challenge for business owners, but it doesn't have to be a curtain call. By taking proactive steps, you can ensure that your business stays strong and continues to operate profitably. Good financial management is key, so make sure that you keep a close eye on your money and make a solid plan for the future.

Call the team at ADM Accountancy on 01242 679767 to get business accounting advice and support.

Is a tax deduction allowable for a spouse’s salary?

Tue, 01 Nov 2022 21:39:04 GMT

You have been advised by your bookkeeper that if you actually pay your partner a salary and claim it back as a business expense then HMRC will not penalise you for the tax deduction. Is this actually the case?

Payment to your other half

The advice given to you was almost certainly based on court rulings where tax deductions were refused as claimants had recorded book entries as expenses, but no wages had been paid and there were no resulting costs.

Even if the above conditions are met, you cannot guarantee that you will receive a tax deduction because not all genuine business expenses are eligible for tax relief.

Payment obligations and the necessary paperwork

There has to be an obligation to pay someone for services or goods used in your business and in the case of wages, you must usually provide paperwork as evidence of this.

It is worth noting that when a member of your family works for your business as an employee, they need to be given an employment contract. If they work for you on a freelance basis then you should provide either a formal contract or written evidence of their agreed services.

A further tax hurdle

If you are going to pay your partner for their work, there is another tax hurdle to overcome. Legally, you need to show that the expense is ‘wholly and exclusively for the purpose of the business’.

It does not make any difference if you run your business in a partnership, as a sole trader or through a company. HMRC often uses this rule to dismiss tax deductions for many different types of expenses and it argues that an expense is not wholly and exclusively incurred if the salary you pay your partner is disproportionate to the type of work and the amount of work that they do.

Testing the ruling at a tribunal

In 2017, this wholly and exclusively point was examined in a First-tier Tribunal (FTT) – McAdam v HMRC. In this case a plumber claimed a tax deduction of £90 per week for his wife, who was responsible for taking phone calls, order processing and writing up his books.

The FTT refused the tax deduction because it was argued that the amount was not commensurate with the going rate for the type of work she did. In addition, the business records were not well maintained and there was no evidence to show how much work his wife did or that she was actually employed by the business. An employment contract would have gone some way to helping the situation but would not have changed the decision.

It is worth noting that HMRC is notoriously sceptical when it comes to including a partner’s wages in your accounts.

Although we are not advocating you try and ‘hide’ anything, terms such as ‘spouse’ provide red flags to HMRC and they are then inclined to look closer. If you just use salary or wages as a description, it will be sufficient.

‘All or nothing!’

With regards to the above case, it is interesting to note that HMRC actually accepted a deduction for about half the claimed amount.

As the law only allows for a partial deduction where an ‘identifiable part or identifiable proportion’ of an expense meets the wholly and exclusively condition, this was generous. It should really be all or nothing, but it does go to prove that if you keep relevant paperwork, and you make sure you do pay the wages at a realistic rate for the work, then you should be OK.

To conclude, a tax deduction is only allowable if you have an obligation to pay your partner and that your business actually incurs costs and the pay must be commensurate with the type of work and amount of work undertaken. You should also have an employment contract or similar document, proving the obligation to pay them.

For advice or support regarding your business tax, contact ADM on 01242 679767 or email andrew@admaccountancy.co.uk

7 ways to grow your business while reducing your debts

Tue, 25 Oct 2022 11:26:52 GMT

Research suggests that 60% of new businesses fail within the first three years . One of the biggest reasons for this is debt. As well as being a financial risk to your business, debt also prevents many businesses from expanding and taking the next steps. However, growing your business and reducing your debts doesn’t have to be an either/or situation. By creating a long-term plan and putting the time you spend paying off debt to good use, it’s possible to grow your business and reduce your debt at the same time. Here’s how ...

1. Build credit

A good credit score is immensely valuable to your business, so it’s in your best interests to make timely repayments. Proving that you are a reliable borrower makes your business much more appealing in the eyes of potential future lenders, which is bound to come in handy when it’s time to secure a loan for further investments.

2. See the bigger picture

It always pays to see the bigger picture in business. Looking at today’s costs and profits isn’t enough to ensure effective financial management. You need to consider how costs may change down the line and carefully estimate the returns you’re likely to see on your current investments. Of course, it always pays to be conservative when calculating your profit margins in order to prevent overspending.

Long-term projections allow you to manage your debt effectively and carefully balance repayments with investments and other expenses.

3. Prioritise your debts

Take a careful look at your debts and prioritise the account with the highest interest rate. It’s worth paying more than the minimum if you can, as this saves money in the long term that you can then use to settle your other debts more quickly, too.

4. Automated payments

As a busy business owner, it’s all too easy for payment deadlines to slip your mind. Setting up automated repayments is an easy and convenient way to avoid this. Some lenders even offer discounts as an incentive to set up this service, so automated payments could save you significant money over time, not to mention stress.

5. Debt consolidation

Debt consolidation is the process of combining multiple loans into one. It means taking out a new loan to pay off all of your existing debt, so that you can then focus on a single account. Debt consolidation loans can lead to a short-term dip in your credit score, but you should be able to reverse this so long as you keep up with repayments. This option may not be suitable for every business but it’s certainly worth looking into if you find yourself overwhelmed or unable to keep track of your finances.

6. Create cash flow projections

Failing to prepare for dry spells is a surefire way to accumulate debt and enter a cycle of feast and famine. It’s important to create cash flow projections so that you can manage your expenditure and create a cash reserve accordingly to tide you over when times get tough. Understanding and managing your cash flow effectively is essential for your business to stay afloat. It also allows you to identify the best times to invest and shows you when to hold back.

Creating cash flow projections can be complicated and time-consuming, so this is definitely something that you should ask your accountant for help with . Furthermore, your accountant will be able to help you understand market trends to ensure that these projections are as accurate as possible. This in turn allows you to continue growing your business without risking further debt.

7. Cost-effective marketing

Marketing is an essential part of growing your business and it doesn’t have to be expensive. Social media allows you to reach potential new customers without spending a huge amount of money. However, bear in mind that whilst social media platforms are free to use, creating content does take time and resources. That being said, content marketing is still a very cost-effective way of growing your business, so it’s worth redoubling your efforts to ensure the growth of your business without spending a small fortune on advertising.

It pays to repay

Paying off debts allows your business to grow and thrive. The sooner your debts are paid off, the stronger your business will be. Debt can cause your business to stagnate, so it’s essential that you manage your finances effectively, and seek the help of a professional if necessary. By being smart about repayments, you won’t have to choose between reducing your debt and growing your business. Making the right decisions today will ensure a thriving, debt-free business for tomorrow.

Talk to the team at ADM Accountancy and get your business off to the best start!

Call us on: 01242 679 767

How to ensure your small business is scalable

Tue, 11 Oct 2022 13:22:34 GMT

No small business wants to stay small forever. However, in order to grow you need to ensure that your company is scalable.

In short, 'scalable' means being able to handle an increase in traffic, customers, or sales without a negative impact on your operations. But how do you know whether or not your business is scalable?

In this post, we'll discuss some tips on how to make your small business more scalable so that you can grow and thrive for years to come.

#1 - Set realistic goals

The first step to making your business scalable is to set realistic goals. This may seem like a no-brainer, but it's important to have a clear idea of what you want to achieve before you can start taking steps to get there.

Are you looking to double your sales in the next year? Or do you want to add a new product line that will attract a whole new customer base?

No matter what your goals are, make sure they're specific, measurable, achievable, relevant, and time-bound (SMART). This will help you create a roadmap for growth that you can actually follow.

#2 - Choose the right sales and marketing strategy

Once you know what your goals are, it's time to start thinking about how you're going to achieve them. The sales and marketing strategy you choose will play a big role in whether or not your business is scalable.

Without the right sales and marketing strategy in place, it will be very difficult to attract new customers and grow your business.

To choose the right strategy, you need to understand your target market and know where they hang out. Once you’re clear on this, you can start planning how to reach them.

For example, if your target market is mostly active on social media, then you'll need to focus your efforts on creating a strong social media presence.

On the other hand, if your target market is mostly offline, then you'll need to focus on things like print advertising and PR.

No matter what sales and marketing strategy you choose, make sure it's one that you can easily replicate as you scale.

#3 - Prepare for demand before it arrives

If you want your small business to be scalable, then you need to prepare for demand before it arrives. This means having systems and processes in place so that you can easily handle an increase in enquiries and sales.

For example, if you're selling physical products, you'll need to have an efficient way to manufacture and ship your items as your sales increase.

Similarly, if you provide services, you will need to ensure that you have enough staff to cope with increased demand.

On the other hand, if you're selling digital products, you can typically scale quite easily by adding more customers without incurring too many additional costs, although your administrative and accounting needs may become more complex.

The last thing you want is for your business to start growing and then suddenly fall apart because you can't keep up with the demand.

#4 - Clearly define job roles and responsibilities

In a scalable business, there's a place for everything and everything is in its place. This means that it's important to have clearly defined job roles and responsibilities from the start for your team, especially since you will need to add new members as your business grows.

When everyone knows their role and what's expected of them, it will be much easier to add new team members and get them up to speed quickly.

It's also important to have systems and processes in place so that everyone knows how things are done. This way, new team members can hit the ground running without having to learn everything from scratch.

Finally, make sure you have a clear chain of command so that everyone knows who to go to with questions or problems.

#5 - Choose the right digital tools

Digital tools and cloud software can help you automate certain tasks and make your business more efficient.

For example, if you're selling products online, you can use an ecommerce platform to manage your inventory, take orders, and process payments.

If you're providing services, you can use project management software to keep track of deadlines, assign tasks to team members, and track progress.

There are digital tools available for almost every aspect of running a business, so it's important to choose the ones that will work best for your needs.

Best of all, there’s no need to purchase and maintain expensive hardware, and you can scale up your subscription packages as your business grows.

Having a scalable business is the key to long-term success. Even when you’re just starting out, it’s important to set yourself up for growth so that you can scale up smoothly, with minimal disruption to your business, and take advantage of lucrative opportunities as they arise.

Talk to one of the team at ADM Accountancy to find out more about our bespoke accountancy services and packages for small and medium-sized businesses on 01242 679767.

5 financial concepts every business owner should understand

Mon, 12 Sep 2022 15:07:40 GMT

As a small business owner, it is important to understand the basics of financial management. This will help you make sound decisions about your business and keep your finances on track. In this blog post, we'll cover five key financial concepts that every small business owner should know. By understanding the following concepts, you will be better equipped to make informed decisions about your business' future.

#1 - Operating cash flow

Operating cash flow is the money that flows in and out of your business from day-to-day operations. This includes things like revenue from sales, payments to suppliers, and employee salaries. It's important to track your operating cash flow so that you can see how much money your business is bringing in and where it's being spent.

#2 - Gross, operating and net profit

Gross profit is the money your business makes after you subtract the cost of goods sold (COGS) from revenue. Operating profit is gross profit minus operating expenses, which are the costs associated with running your business (e.g., rent, utilities, and marketing). Net profit is operating profit minus taxes and interest. Knowing your gross, operating, and net profit will give you a clear picture of your business' profitability.

It's important to understand the difference between the three, because comparing them against one another can help you make decisions about where to allocate your resources. For example, if your gross profit is low, you might want to focus on reducing your COGS. If your operating profit is low, you might want to reduce your expenses. And if your net profit is low, you might want to focus on increasing revenue or reducing taxes.

#3 - Accounts receivable

Accounts receivable (AR) are the amounts of money owed to your business by customers who have not yet paid.

It's important to keep track of your accounts receivable and follow up with customers who are late in paying. If your customers are frequently late to pay, then it's worth introducing late fees or looking at sharpening up your billing and invoicing processes to get cash in the bank more quickly.

#4 - How to read a balance sheet

A balance sheet is a financial statement that shows your business' assets, liabilities, and equity at a given point in time.

It's important to understand how to read a balance sheet so that you can see where your business' money is coming from and where it's going.

There are three main components to a balance sheet:

Assets: this includes things like cash, inventory, and equipment.
Liabilities: money you owe, including loans and accounts payable.
Equity: this is essentially the money that shareholders and investors would receive if your business’ assets were liquidated and all liabilities were paid off.

By understanding your balance sheet, you can get a better picture of your business' overall financial health and make informed decisions about where to allocate your resources.

#5 - Cash vs Accrual accounting

There are two main ways of accounting for business transactions: cash basis and accrual basis.

With cash basis accounting, you only record transactions when money changes hands. This is the simplest way to track your finances, but it can be difficult to get an accurate picture of your business' financial health.

Accrual basis accounting, on the other hand, records transactions when they occur, regardless of when the money changes hands. This method is more complex, but it can provide a more accurate picture of your business' financial situation.

As a business owner, it's important to understand both methods of accounting so that you can make informed decisions about how to track your finances.

Small business owners should understand the five financial concepts mentioned in this article in order to make informed decisions about their businesses' futures. Understanding your operating cash flow, gross profit, operating profit, net profit, and accounts receivable will enable you to make better financial decisions to drive your business forwards. After all, knowledge, as they say, is power.

Speak to one of the team at ADM Accountancy about your business accounts, on 01242 679767 or visit our website ABOUT US - ADM ACCOUNTANCY SERVICES

Financing your small business: what are the options?

Thu, 11 Aug 2022 13:43:04 GMT

Starting a small business is an exciting venture, but it can also be daunting, especially when it comes to financing. There are a number of different options available to small business owners, but it can be difficult to know which one is right for you. In this blog post, we will discuss the most common types of small business financing and help you decide which one is best suited to your needs.

What is business finance?

Business finance is the process of planning, managing, and controlling the financial activities of a business. It includes the raising of capital, the acquisition of funds, and the management of financial resources.

There are two main types of business finance: equity financing and debt financing.

Equity financing is when you raise money by selling shares in your company to investors. This is often done through a process called equity crowdfunding, which allows you to sell shares in your company to a large number of small investors.

Debt financing is when you borrow money from a lender, such as a bank or an investor, and agree to repay the loan with interest.

Many businesses opt for a mixture of the two options. There's no right or wrong way; it all depends on the particular needs of your business. It's also worth noting that within these two categories, there are many other types of financing.

Calculating how much you need

It's important to have a good understanding of your financial needs before you start looking for financing. This will help you determine how much money you need to raise and what type of financing is best for you.

There are a few key things to consider when calculating your financial needs:

● The amount of money you need to start your business

● The amount of money you need to sustain your business

● The amount of money you need to grow your business

It's also worth considering any hidden or unexpected costs that may arise, and working out a healthy "wiggle room" margin, because as any small business owner knows, things rarely go according to plan!

Once you have a good understanding of your financial needs, you can start exploring the different financing options available to you.

The main types of small business financing

As we mentioned earlier, there are two main types of small business financing: equity financing and debt financing. Let's take a closer look at each one.

Equity financing

Equity financing is when you raise money by selling shares in your company to investors. This can be done through equity crowdfunding, which allows you to sell shares in your company to a large number of small investors.

Another option is to find a venture capitalist, which is an investor who provides capital to companies in exchange for equity.

The benefits of equity financing are that you don't have to repay the money you raise and it can give you the funds you need to grow your business quickly. However, the downside is that you will be giving up a portion of ownership in your company.

Debt financing

Debt financing is when you borrow money from a lender, such as a bank or an investor, and agree to repay the loan with interest.

One option for debt financing is to take out a business loan from a bank, or take out a line of credit. A line of credit is similar to a loan, but has more flexible terms. You can borrow money up to a certain limit and only pay interest on the money you actually use.

The benefits of debt financing are that you don't have to give up any ownership in your company and you can get the funds you need without having to go through a lengthy equity-raising process. However, the downside is that you will have to repay the loan with interest, which can prove costly and eat into your profits.

Other types of small business financing

Of course, you don't have to go down the conventional route. Other types of small business financing available include:

Peer-to-peer lending: borrowing money from a group of individuals, rather than a bank or financial institution.
Invoice financing: selling your outstanding invoices to an investor in exchange for a percentage of the total value.
Asset-based lending: using your business assets, such as equipment or inventory, as collateral to secure a loan.
Friends and family: raising money from your friends and family members.

The benefits of these types of financing are that they can be easier to qualify for and they usually have lower interest rates than traditional loans. However, the downside is that they can be more difficult to find and they may require you to put up collateral. With friends and family loans, you are also putting personal relationships at risk.

Final thoughts

No matter what route you decide to go down, remember that financing your small business is a big decision. Make sure you do your research and consult with an accountant at ADM Accountancy, or a financial advisor, to ensure you are making the right decision for your business. They will also help you to prepare the best possible pitch to attract investors or creditors to negotiate better terms and maximise your chances of success.

The top 5 automation features Xero has to offer

Mon, 18 Jul 2022 20:59:00 GMT

In the world of accounting, Xero is widely regarded as the gold-standard of cloud software. Not only is it cost-effective and easy-to-use, it also offers a range of automation features to save you time and give you access to all the data you need at your fingertips. Let's take a look at the five best automation features Xero has to offer.

No. 1 - Bank rules

One of the most useful automation features Xero offers is bank rules. Bank rules allow you to automate the process of categorising and matching your transactions, so you don't have to do it manually. You can set up bank rules for all your accounts, or just specific ones, and they can be as simple or complex as you like.

This saves you a lot of time and gives you an accurate insight into where your money is going, empowering you to make better spending decisions. When you know exactly how you're spending your money, you can save more of it or reallocate funds to ensure a greater return on investment.

No. 2 - Invoicing

Another great automation feature in Xero is invoicing. With Xero, you can create and send invoices in just a few clicks, and they'll be automatically scheduled and sent to your customers. You can also set up recurring invoices, so you don't have to worry about forgetting to send one.

Xero will also automatically send out invoice reminders for you so that you don't have to waste time working out who has and hasn't paid, and chasing up late payments.

Xero's automatic invoicing features help you to get paid much faster, which in turn is great news for your cash flow. Since cash flow is one of the biggest struggles small business owners face, the importance of automated invoicing really can't be overstated.

No. 3 - Bank reconciliation

Xero's bank reconciliation feature is another great time-saver. With bank reconciliation, Xero will automatically match your transactions to those in your bank statement. This means you don't have to waste time manually checking and reconciling your accounts.

Automatic bank reconciliation also ensures greater accuracy in your bookkeeping, so you can be confident that your financial data is up-to-date. This helps you avoid wasted time fixing errors and possible penalties further down the line.

No. 4 - Real-time financial reporting

One of the best things about Xero is that it offers real-time financial reporting. This means that as soon as a transaction is entered into the system, it's automatically reflected in your reports.

This gives you an up-to-the-minute view of your finances, so you can always make informed decisions about where to allocate your resources.

No. 5 - Automatic backups

This may not sound like a big deal, but trust us, you don’t want to lose all of your accounting data! That would truly be a disaster for your business.

Fortunately, with Xero, you don't have to worry about that because it offers automatic backups. This means that all your data is safely stored off-site, so you can rest assured knowing that it's always there when you need it.

In the event that a disaster does occur, you'll be able to get your data back in minutes, so that you can get on with business as usual.

Final thoughts

Xero's automated features do so much more than save you time - they empower you with a sharper financial insight into your business, so that you can make better strategic decisions. There's a reason so many accountants and small businesses swear by Xero - it simply makes life easier (and more profitable).

As a Xero Gold Partner, ADM Accountancy are able to train and inform our clients on the ways Xero can benefit their business. Contact us today on 01242 679767 to find out more.

Is accounting software essential for your small business?

Tue, 21 Jun 2022 08:37:19 GMT

Are you a small business owner who is looking for ways to streamline your operations? If so, you may be wondering if accounting software is essential for your business. The answer to this question depends on a number of factors, including the size and nature of your business.

In this blog post, we will discuss some of the reasons why accounting software can be beneficial for small businesses and provide tips on how to choose the right software for your needs.

What is accounting software?

Accounting software is a type of computer program that helps businesses manage their financial records. This software can be used to track income and expenses, prepare invoices, generate reports, and more.

There are many different accounting software programs available on the market, so it is important to choose one that meets the specific needs of your business.

In this day and age, a lot of popular accounting software is cloud-based. This means that businesses can access their financial records from any internet-connected device.

Cloud-based accounting software is often more affordable than traditional software, since there’s no need to purchase and install expensive software on each computer in your office. There's also the added benefit of flexibility and scalability, since you can adjust your subscription as needed.

Why use accounting software?

There are many reasons why small businesses use accounting software. Perhaps the most obvious reason is that it can save you a lot of time.

If you are manually keeping track of your financial records, this can be a very time-consuming and error-prone process. Accounting software can automate many of the tasks that are associated with bookkeeping, such as invoicing, tracking expenses, and generating reports. This frees up your time so that you can focus on other aspects of running your business.

Another reason to use accounting software is that it can help you keep track of your finances in a more organized way. When all of your financial information is stored in one place, it is easier to track trends and spot potential problems. This can give you valuable insights into how your business is performing and where you can make improvements.

Using accounting software can help you save money in the long run. This is because it can help you avoid costly mistakes, such as forgetting to bill your clients, missing payments or overlooking tax deductions.

The most popular and widely used cloud accounting programs today integrate with a number of other softwares, such as CRM software, project management software, eCommerce platforms, and more. This gives businesses greater control over their affairs and enables them to manage their finances and operations in a more holistic way.

Choosing the right accounting software

Now that you know some of the reasons why your small business might benefit from using accounting software, you may be wondering how to choose the right program for your needs. There are a few things to keep in mind when making your decision.

First, consider the specific needs of your business. Make a list of the features that are most important to you and your company. Then, research different software programs to see which ones offer the functionality that you need.

It is also important to consider the scalability of the software. As your business grows, you will likely need to add more users and increase your subscription. Choose a software program that can accommodate your future needs.

Finally, be sure to compare the costs of different software programs. Some programs may have a higher upfront cost, while others charge a monthly subscription fee. Consider your budget and choose the option that makes the most financial sense for your business.

It's always best to consult your accountant when choosing an accounting software because they will have a good understanding of your business needs, and may have specific programs that they work exclusively with.

Does accounting software eliminate the need for an accountant?

In short, no.

While accounting software can automate many of the tasks that are typically performed by an accountant, there are still some things that only a human can do.

For example, your accountant can interpret your financial data and convey information to you in a way that accounting software simply cannot. However, using accounting software does save time for your accountant, allowing them to act as an advisor rather than a number cruncher.

Summary

Small businesses can benefit greatly from using accounting software. This software can automate many tasks, such as invoicing, tracking expenses, and generating reports. In addition, using accounting software can help you keep track of your finances in a more organized way and save you money in the long run. When choosing an accounting software program, be sure to consider the specific needs of your business, the scalability of the software, and the costs. And don't forget to consult your human accountant, either!

5 tips for small business growth: strategies to help you succeed

Tue, 24 May 2022 17:08:36 GMT

Are you looking for ways to take your small business to the next level? Successful business growth all comes down to the right strategy. Many SMEs struggle with growth, but it is possible to overcome these challenges and reach new heights. In this article, we've outlined five tips to help you grow your small business smoothly and sustainably.

#1 - Know your target market

The first step is to think about your target market. Who are your ideal customers? Once you know who you're targeting, you can start to craft a marketing strategy that will reach them.

Traditional advertising methods like print ads and television commercials may not be the most effective way to reach your target market. Instead, consider using digital marketing techniques like content marketing and social media advertising. This allows you to get super specific on your audience and create highly targeted content that appeals directly to them.

#2 - Create a sales funnel

A sales funnel is a process that takes your potential customers from awareness to purchase. It's important to have a well-defined sales funnel in place so that you can nurture your leads and close more deals.

The first step of the sales funnel is creating awareness about your product or service. Once you've got potential customers interested, you need to move them further down the funnel with content that educates them on your solution and how it can help them. Finally, you need to close the deal by offering a competitive price and making it easy for customers to purchase from you.

#3 - Increase customer retention

It's much easier and cheaper to keep existing customers than it is to acquire new ones. That's why increasing customer retention should be a key focus for any small business owner. There are a few different ways to increase customer retention rates.

First, you need to make sure that your product or service is high quality and provides value to your customers. Second, you need to provide excellent customer service and build relationships with your customers. Finally, you can keep customers coming back with loyalty programmes and repeat purchase discounts.

#4 - Create a networking plan

Networking is a great way to grow your small business. It allows you to connect with other like-minded business owners and build relationships that can lead to new opportunities. However, it's often easy to let networking slide to the bottom of your to-do list when you don't have a robust plan to keep you accountable.

When creating a networking plan, start by making a list of the events and organisations that would be most beneficial for you to attend. Then, create a schedule of when you will attend each event. Finally, make sure to follow up with the contacts you meet so that you can continue to nurture those relationships.

Similarly, you should create a personal engagement plan for reaching out to contacts via social media. You might set a target of checking in with five prospects per day, for example, and sending one email to a business buddy to keep the relationship strong.

#5 - Investigate new markets

One of the best ways to grow your small business is to investigate new markets that you can enter. This could mean expanding into a new geographic area or entering a new industry vertical.

When considering a new market, it's important to do your research and make sure that there's a demand for what you're offering. You also need to consider whether you have the resources to enter a new market successfully, as it requires significant investment. However, when done right, it can be an incredibly lucrative strategy that takes your business to the next level.

Final thoughts

By following these tips, you can set your small business up for success and start seeing real growth. Just remember to focus on developing a strong foundation, acquiring new customers, and retaining the ones you already have. With a little hard work and dedication, you'll be well on your way to achieving your growth goals.

Founded in 2009, ADM Accountancy Services Ltd specialises in supporting small businesses and SMEs within the Professional Services sector, with all their accountancy needs. Contact us today on 01242 679767 or email enquiry@admaccountancy.co.uk to arrange a consultation about supporting your business accounting needs.

5 invoicing mistakes that are damaging your cash flow

Tue, 03 May 2022 08:58:51 GMT

Are you having a hard time making ends meet? Are you constantly worried about your cash flow? If so, you're not alone.

A lot of small business owners are struggling with cash flow issues, and it often comes down to bad invoicing procedures. In fact, you would be surprised at just how much difference a few simple billing and invoices changes can make to your financial health. Here are our top 5 invoice mistakes that are damaging your cash flow.

#1 - Not invoicing regularly

You need to invoice your customers on a regular basis, and you need to be consistent about it. If you only invoice once in a while, or if you're sporadic with your invoicing, it will be harder to stay on top of your cash flow. Try to invoice customers at the same time every month, or even better, every week.

Getting into a regular invoicing routine will make it easier to predict and manage your cash flow effectively. Furthermore, it means that you're less likely to forget to invoice someone, or to follow up on an overdue invoice.

#2 - Lax payment terms

Your payment terms need to be clear, and you need to enforce them consistently. A lot of small businesses are too lenient when it comes to payments, which can really come back to bite you. If you're not careful, you could end up waiting weeks or even months for payments that are overdue.

As a general rule, you should always try to get paid as soon as possible. That means setting clear payment terms, and sending invoices out as soon as the job is completed.

Don't be afraid to follow up on late payments, either. A simple phone call or email can often be enough to prompt a customer to pay an overdue invoice.

#3 - Not using invoicing software

If you're still using paper invoices and manual billing procedures, then it's time to make a change. Nowadays, there are plenty of excellent invoicing software programs available, and they can save you a lot of time and hassle.

With invoicing software, you can automate many of the tasks associated with billing, such as sending out invoices, tracking payments, and following up on overdue invoices. This can free up a lot of your time, so that you can focus on other aspects of running your business.

Invoicing software can also help you to become more efficient and organised, which will save you money in the long run.

If you're not using invoicing software, make the switch today. It could make a big difference to your cash flow.

#4 - Failing to itemise products and services clearly

If you want to get paid promptly, it's important to make sure that your invoices are clear and concise. That means itemising products and services clearly, and providing a detailed breakdown of costs.

Customers should be able to look at an invoice and understand exactly what they're being charged for. If they can't, they may be less likely to pay promptly.

Invoicing software can be a big help here, as it will often allow you to create professional-looking invoices with itemised line items.

Take the time to set up your invoicing software properly, and make sure that your invoices are clear and easy to understand. Each query you receive slows down the payment process and delays money from reaching your bank account, so it's important to get it right.

#5 - Neglecting branding

Your invoices are a great opportunity to promote your brand, so don't neglect them. Your customers should instantly know that an invoice is from your company, even if they've never seen one before. Make sure that your company logo and contact details are prominently displayed on each invoice. You want it to be memorable; invoices that stand out get paid faster.

You should also consider using branded invoice templates, which you can easily create with most invoicing software programs. Branding will give your invoices an air of professionalism, so don't neglect this opportunity to impress your customers as part of the post-sale journey.

To summarise ...

If you're struggling with cash flow, there are many simple steps that can help.

We recommend taking the time to set up your billing process carefully and effectively so that it's a breeze. That means automating tasks like sending and following up on invoices, and creating a regular schedule that’s easy for you and your customers to follow.

There are also plenty of great invoicing software programs that can save you time and help you become more efficient.

Finally, don't forget to brand your invoices. This is a great opportunity to promote your business and make a good impression on your customers.

By taking these simple steps, you can improve your cash flow and keep your business running smoothly.

If you'd like help with getting started or making the most of accounting software, such as Xero , speak to one of the team at ADM Accountancy today on 01242 679767 .

How to price your services as a small business owner

Mon, 21 Mar 2022 21:22:49 GMT

Pricing your services correctly is one of the most difficult parts of being a small business owner. On the one hand, you understandably want to price yourself competitively, but you don’t want to sell yourself short, either. Profit, cash flow and confidence are all important considerations when pricing your services, so here are five key steps to help you get it right.

Step 1: Calculate your costs

Even if you have a very capital light business, there are always costs associated with running your own business. There are two types of costs: direct and indirect.

Direct costs are the costs that go directly towards providing services for your clients, such as project materials or project-specific software, employee wages and your own wage.

Indirect costs are more general costs that are necessary to run your business, such as:

Rent
Internet
Phone Contract
Devices
Marketing costs
Website
Accounting services
Legal services
Insurance

You need to make sure that you charge your customers enough to cover all of the above expenses and make a profit on top of that.

Step 2: Identify your USP

Your unique selling point (USP) will help you to price your services appropriately. If you’re competing based on price, then affordability will be the name of the game. However, if your USP is based around quality service or your specific expertise, you will be able to charge significantly more. If your clients are investing in you because you’ll add value to their business, then they will be much less likely to question you on price.

Step 3: Market research

It’s important to know how much your competitors are charging, because this will tell you how much prospective clients are willing to pay. Seek out your competitors via Google as well as marketplaces such as UpWork and Fiverr. Remember, however, that the latter sites often feature many providers willing to sell themselves short in order to get started. Pay attention to their target customers, level of experience and location.

Remember that if you’re providing something that your competitors lack, you will be able to charge more than they do, so long as you are able to properly articulate this added value.

It’s also a good idea to try and get some feedback from your network or even conduct a focus group to gain insight around pricing.

Step 4: Consider hourly vs flat fees

Some small business owners charge by the hour whilst others prefer flat fees. The correct path often depends on your industry and also your level of experience. If you know exactly how much time a certain project will take you, then a flat fee might be best, whilst if you’re unsure then it may be better to go down the hourly route.

If you’re just starting out, then you may get faster at your work as time goes on. In this case, flat fees make sure that you’re not punished for becoming more efficient!

In order to calculate an hourly rate, consider the amount of hours you want to work per week and multiply that by 52. Then, subtract holiday and sick time to calculate the amount of hours you’ll actually work.

After that, calculate your billable hours - i.e., the amount of hours that directly generate revenue. Billable hours represent time spent on client work, whereas non-billable hours are the ones spent on admin, marketing, paperwork, and the like.

Next, divide your total expenses by your billable hours. This will give you a break-even hourly rate. Then, multiply this figure by your desired profit margin to find out how much to charge per hour.

Conclusion

After reading this blog post, you should be able to calculate the cost of your services and figure out whether hourly or flat fees make the most sense for your small business. Remember that good quality clients will be willing to pay a fair price for a great service, so be confident about the value that your small business adds and don’t sell yourself short.

How to choose the right advisor for your business

Tue, 01 Mar 2022 09:29:46 GMT

There’s a lot to think about when choosing the right consultant/advisor for your business. There are many practitioners out there and technically speaking, anyone can start calling themselves a consultant/advisor. So how do you go about choosing a trusted professional who will really move the needle for your business? Let’s take a look at some of the most important aspects to consider when choosing a consultant/advisor.

Personality

If you're trusting a consultant/advisor with a major project, then you want to make sure that they're of an upstanding moral character and a good fit personality-wise. Your consultant/advisor will act as a trusted ear for your problems and should be in tune with your needs and concerns. Remember that personality is an important component even in professional relationships - business is all about people, and strong partnerships yield the best results.

Industry Experience

Don’t choose just anyone! You want to make sure that your chosen consultant/advisor has experience within your specific industry. If you’re a real estate professional, for example, a consultant/advisor who deals primarily with tech startups wouldn’t be the best fit for your needs. You need somebody who understands what it is that makes your business unique and can help drive value from those strengths, as well as insider knowledge of the pitfalls and challenges of your particular industry.

Communication Style

Communication is central to a consultant/advisor’s job so this is an important aspect to consider. Anyone can cut and paste a deck of slides, but it takes someone special to be able convey ideas in a way that makes sense for your business. If you’re going to invest in advice and guidance, make sure it comes with good communication.

Credentials

There are many professionals out there who will call themselves an expert or a consultant, but lack the proper credentials and/or education to back it up. Make sure that your advisor always has current industry certifications and specialised training in their field of expertise. Look for social proof such as testimonials - how many businesses have they helped? What results have they delivered?

Innovation

You want to choose someone who is willing and able to look at your business with a new set of eyes. It’s not about reinventing the wheel, but rather looking for some fresh insight that you may have never considered before. The best advisors/consultants are the ones who think outside of the box.

Passion

Enthusiasm is a difficult thing to measure, but it’s incredibly important. Consider how much passion your potential advisor/consultant has for their work. Do they have a fire behind their eyes or does it feel like just another job? Make sure that the advisor/consultant you hire is passionate about what they do and can bring that same level of enthusiasm into your business relationship as well.

Summary

Choosing the right consultant/advisor for your business is an important step towards relieving your pain and achieving your goals. It’s important to choose someone who really understands your industry and can empathise with your problems and goals. There are many factors to consider, but if you keep these five points in mind while searching, you’ll have a much better chance of finding someone who will really move the needle with their expertise and guidance.

8 important lessons every business owner needs to learn

Mon, 21 Feb 2022 20:56:31 GMT

Whether you're just starting out in the business world, or you've been around for a while, there are some lessons that every business owner needs to heed. We all want to be successful in our endeavours, so let's discuss five important lessons every business owner needs to learn.

#1 - It Pays to Have a Financial Plan

Whether you are just starting out or have been around for a while, having goals that are tied to your budget will help keep you on track towards success. You need to be prepared for things to go wrong and have a steadfast plan in place to cope in the face of uncertainty. It's important to have all of your bases covered so that you can proceed with confidence.

#2 - Change is Constant

If you want to succeed in business, you need to be constantly learning. Never grow complacent - there will always be something that can improve your ability to serve customers, so keep up with the latest trends and treatments. Being stuck in the past could cost you a lot of money down the line.

#3 - A Business is Only As Good as the People Who Run It

Leave your ego at the door. If you want to succeed in business, it's important to surround yourself with people who are smarter than you. This may mean hiring new employees or working with consultants and contractors. You can't do everything on your own; having a support system will help make things run more smoothly.

#4 - You Can't Do It All Alone

Many business owners try to handle everything by themselves when they first start out, but this is neither wise nor sustainable. The sooner you learn how to delegate, the better. Remember that your time is a very valuable resource and so you need to invest it wisely, rather than wasting it on menial tasks that could be outsourced or even automated.

#5 - Digital Marketing is Powerful

There is a reason why digital marketing has become so popular; it's because it works. If you want to get the results that you need from your business, then implementing an online strategy will be necessary.

Google and social media have totally transformed the way that we do business, so their power really mustn't be underestimated. You can't just show up occasionally and share tidbits with the world; you need a well-thought out and consistent strategy to achieve the results you desire.

#6 - Cash Is King ...

Cash flow problems are one of the biggest struggles that business owners face, and they can cause profitable businesses to go bust. If you want to be successful and chart a steady map to growth, then you need to make sure that you're in control of your cash flow.

#7 - ... And So Is Customer Service

Happy customers become repeat customers, and repeat customers are extremely valuable. Your customer retention rate is directly tied to your profitability, so don't skimp on service in order to save a buck or two. You can have the best product or service in your industry, but if you don't take care of your customers' needs then your competitors will swoop in and offer a better service. Customer satisfaction is paramount to success.

#8 - It Pays to Be Agile

The pandemic has proved that the word "agile" is more than just a catchy buzzword; it's an essential trait of successful businesses. You need to be able to quickly adapt and change in order to accommodate the needs of your customers, so that you can retain them for as long as possible. The world is an uncertain place, and so maintaining strong organisational agility will allow you to navigate economic downturns, new trends and sudden market shifts with greater ease, and enable you to take advantage of new opportunities as soon as they arise.

Success in business is a delicate balance of the right strategy, hard work and perseverance. By putting the above eight lessons into practice, you will be on your way to creating a successful business that is profitable, sustainable and well-prepared for the future.

5 ways to use Xero better

Thu, 03 Feb 2022 09:21:06 GMT

If you’ve just started working with Xero, it is normal to make a few mistakes while you’re learning. We see mistakes that are quite common – and unfortunately costly – so you should be aware of them if you want to get the most out of Xero’s powerful cloud accounting system.

1. Not connecting all the bank and credit card accounts dedicated for your business

Make sure that you keep all your business bank and credit card accounts synced to Xero to ensure that you don’t miss any sales or expenses in your reports.

Also, make sure that you separate your business accounts from your personal ones to avoid hassles during tax season. Trust us…your accountant and bookkeeper will thank you! Doing this also helps you make accurate business decisions.

2. Not reconciling the bank account in Xero to bank statements

Run a reconciliation report in Xero on a regular basis and then compare it to your bank statements to ensure there aren’t any errors or duplications.

Many business owners miss this critical step, which means that they are looking at inaccurate or incomplete data when they check their reports.

3. Not checking user access and permission levels

Many business owners simply give key team members full access to their business’ Xero system and don’t review the user permissions at all. However, the best practice is to provide access on an 'as needed' basis and review who has access to the system and what permission level they have on a quarterly basis.

Also, when your staff members leave, remember to revoke their Xero access immediately.

4. Not setting financial SOPs (standard operating procedures)

Create a proper financial SOP which describes who is responsible for what and by when, as well as the step-by-step process on how to get things done.

For instance, you can assign your operations manager to run the aged receivables report in the system so you’ll know who owes your business money. Then, map out a clear action plan of what happens in specific scenarios such as a payment that’s 2 weeks late. You can also have standard replies that the team can send as needed.

5. Mishandling transactions when you’ve paid with your personal money

We find that many business owners don’t know how to handle transactions when they’ve paid for a business expense using their personal account. There are actually ways to capture such expenses paid on the wrong card in Xero so you can still claim the tax deduction.

You may need to get in touch with your advisors to make the adjustments accordingly.

Avoid Xero mistakes by working with a Specialist Advisor

The best way to ensure that you’re taking full advantage of all the features in Xero and avoiding costly financial mistakes is to work with an experienced advisor who knows the ins and outs of this cloud accounting system.

We’re Xero Certified and would be happy to take a look at your file to give you some suggestions.

Get in touch with us today and let us help you save time and make smarter decisions that are supported by data.

Post shared with permission by SeaChange Accounting .

The 6 biggest business trends to look for in 2022

Tue, 18 Jan 2022 18:21:00 GMT

The world of business is ever changing, and the year 2022 is unlikely to be an exception to this rule. Business owners should always be aware of new trends on the horizon and the challenges or opportunities that may come with them. Let's make sure that you're prepared by diving into the biggest business trends to look out for in 2022.

1. Sustainability

Sustainability isn't perhaps so much a trend as a principle that's here to stay, but that only makes it more important.

As consumers become increasingly conscious, it's important that businesses take purposeful steps to reduce their environmental impact and learn how to communicate this to their customers and clients. Climate issues are only becoming more immediate, so the pressure is on for businesses to step up.

2. Employee Experience & Engagement

In 2022, employers will have a new challenge: how to engage and inspire their workforce. The pandemic has left many workers disillusioned, and this is only compounded by the fact that jobs are becoming increasingly automated. The key to success in 2022 will be finding ways to create value for employees before they leave you behind.

Although automation can, in some instances, alienate workers, it's possible to use AI to make jobs more engaging. By taking care of menial tasks, AI technology allows employees to focus on more complex and interesting issues and increase their sense of value.

3. Greater Organisational Agility

The pandemic proved that the entire world can change in an instant. Businesses that are unable to adapt quickly enough will be left behind, so it's crucial that organisations take steps now to ensure they're agile. More and more businesses are shifting towards leaner management styles and eliminating a lot of middle management to make their businesses more efficient.

4. More Authentic Connections

Chances are that you've already noticed a change in social media and the way we interact with brands over the past few years. The rise of influencer marketing is evidence of this; people want to see who's behind their favourite brand or product and make sure they're getting an authentic connection.

5. Flexible Working

In 2022, flexible working will become a standard feature of most jobs. In fact, it's already happening in some sectors and industries – just look at the huge numbers of gig economy workers that are able to work from home or on their own schedule.

Businesses that are unable to adapt quickly enough will lose out on talented workers who can work from home or even remotely abroad.

Now that many of the pandemic restrictions have been lifted, we'll also see more integration between physical and digital space as remote employees find new ways to interact with their colleagues and customers.

6. Hybrid Events

In a similar vein, hybrid events will also become part of the norm in 2022. In a world where remote working is more and more common, it's becoming increasingly difficult to keep everyone engaged face-to-face at industry events. The solution? Hybrid conferences that take place online as well as offline – think virtual speaker sessions or breakout areas for networking with people from all over the world.

There's a reason why more and more businesses are opting for hybrid conferences. They're an effective way to keep your team engaged in the physical space while also giving them the opportunity to network with colleagues from all over the world online, too.

These are just some of the biggest business trends that we'll see play out over the next few years. By thinking ahead, businesses will be able to adapt as the world continues to evolve around them and even use these changes to gain a competitive edge.

ADM Accountancy Ltd specialises in supporting small businesses and SMEs within the Professional Services sector, with all their accountancy needs. Call us today on 01242 679767 .

HMRC removes penalties for late filing and payment … but here’s our advice!

Tue, 11 Jan 2022 08:00:03 GMT

On 6 ^th January 2022, HMRC that they will not charge:

· late filing penalties for those who file online by 28‌‌th ‌February 2022 or

· late payment penalties for those who pay the tax due in full or set up a payment plan by 1st‌‌ ‌April 2022.

This is intended to give customers and their representatives additional time if they need it, and will operate in the same way as the equivalent waivers last year.

ADM Accountancy Comment

We continue to encourage our clients to file and pay on time if they can and it is worth noting some caution as the following will still apply:

There is no change to the filing or payment deadline and other obligations are not affected. This means that:

a. interest will be charged on late payment. The late payment interest rate from 4th ‌‌ ‌January 2022 is 2.75%;

b. a return received online in February will be treated as a return received late where there is a valid reasonable excuse for the lateness.

This means that:
- there will be an extended enquiry window;

- for returns filed after 28‌‌ ‌February the other late filing penalties (daily penalties from 3 months, 6- and 12-month penalties) will operate as usual;

- a 5% late payment penalty will be charged if tax remains outstanding, and a payment plan has not been set up, by midnight on 1st‌‌ ‌April 2022. Further late payment penalties will be charged at the usual 6- and 12-month points (August 2022 and February 2023 respectively) on tax outstanding where a payment plan has not been set up;

c. self-employed customers who need to claim certain contributory benefits soon after 31st‌‌ ‌January 2022 need to ensure their annual Class 2 National Insurance contributions (NICs) are paid on time – this is to make sure their claims are unaffected. Class 2 NICs are included in the 2020 to 2021 balancing payment that is due to be paid by 31‌‌ ‌January 2022.

Benefit entitlements may be affected if they:

- couldn’t pay their balancing payment by 31‌‌ ‌January 2022, and

- have entered into a Time to Pay arrangement to pay off the balancing payment and other self-assessment tax liabilities through instalments.

What next?

We believe that keeping effective accounts shouldn’t be a headache to any size business. We do our job well, so that you can do yours even better.

At ADM Accountancy, we support SMEs with all their accounting requirements, from bookkeeping to self-assessment and VAT returns, and Management Accounts and Wealth Management. Speak to one of the team on 01242 679767 or email enquiry@admaccountancy.co.uk today.

7 ways to save time and money with Xero accounting software

Tue, 14 Dec 2021 09:50:17 GMT

Cloud accounting software is becoming more and more popular, with many companies deciding to switch over. This type of software can really speed up and streamline your processes and give you a greater insight into your finances. In this article, we're going to look at some of the ways that cloud accounting software can save you time and money.

1) Automated Invoicing

Cloud accounting software enables you to automate much of your invoicing process. This means you can get invoices out faster, which helps to improve your cash flow. You'll also have a digital record of all the information on an invoice, so it's easier to keep track of who has paid and who hasn't. Furthermore, your software will be able to calculate and add late fees for you and send automatic reminders to clients who are yet to cough up.

2) Better Cash Flow Management

Managing cash flow is a vital part of running any business, but it can be difficult when you're only using spreadsheets. With cloud accounting software, you'll have access to much better tools for monitoring and assessing your company's financial health. You'll also save time because the automated invoicing features mentioned above mean you won't have to waste hours chasing late-paying clients.

3) Expense Tracking

Another time-saving feature of cloud accounting software is expense tracking. This feature enables you to keep track of all your expenses and log them into the system automatically. You can then compare your budget against your actual spending at any time so that you can see where money has been spent or saved.

4) Centralised Information

One of the best things about cloud accounting software is that it gives you a centralised view on all your accounts. This is really helpful, especially for companies who have branches in different cities or countries around the world. All this information will be available to employees wherever they are and whenever they need it, meaning everyone can work more efficiently and make fewer mistakes.

5) Real-Time Reporting

Another great benefit of cloud accounting software is real-time reporting. This means that you'll be able to access your reports and information whenever you need it, so if something crops up or a decision needs to be made quickly, it's right there at your fingertips. This enables you to make sage and snappy decisions about the future of your business.

6) Accessibility

Another benefit of cloud accounting software is accessibility. Thanks to cloud technology, you'll be able to access all your accounts wherever and whenever you need to. Most major cloud accounting providers have mobile apps that enable employees to log expenses or update information whilst on the go.

7) Cloud Security

Finally, cloud accounting software provides you with more security than traditional desktop software does. All of your data is encrypted and backed up regularly so if something happens to one version of a file, there are always back-ups available which can be restored in mere minutes. You'll have peace of mind knowing that your important data is safe and secure. Data breaches can cost businesses thousands - or even millions - of pounds, so this is a real advantage.

There are numerous benefits of cloud accounting software, and they impact your entire business. This technology gives you greater financial visibility and thus empowers you to take well-informed steps towards a stronger and more profitable business. Whether your business is well-established or just getting started, it will definitely benefit from the use of cloud accounting software.

Get the most out of Xero for your business. ADM Accountancy are a Xero Gold Partner , so why not speak to one of the team today on 01242 679767 and start your new business year in the best way.

8 signs your business is stagnating

Thu, 02 Dec 2021 11:01:35 GMT

It’s important to keep your business alive and flourishing, but the truth is that most businesses experience stagnation at one point or another. Business owners need to be able to spot the warning signs of stagnation so that they can take action and get the numbers moving in the right direction again. The first step to solving a problem is admitting you have one, so let's discuss the warning signs that your business has stagnated.

You no longer have a clear vision

When you first started out, you knew exactly what your purpose and vision were. However as your business evolves, your vision should too. If you no longer have clear goals beyond making money then it's a sign that your business is stagnating.

You're no longer going all out for your clients or customers

When you first started your business there was nothing that made you happier than exceeding the expectations of your clients and receiving great feedback. You would go above and beyond to make sure they were happy, but now it seems like it is all about making money. If this is beginning to happen then it is a sign that your business is stagnating and you need to find a sense of purpose again.

You're not celebrating the wins anymore

When was the last time that you celebrated with your team? Business owners often get so caught up in making sure everything is running smoothly, they forget to take some time out for themselves and their team. If you no longer celebrate the wins, then it is a sign that your business isn't thriving anymore and needs some TLC.

You're hiring for skills instead of cultural fit

When you first started out, hiring was all about cultural fit rather than skill sets because you were still small enough to know everyone on your team personally. If you're now hiring based on skill sets rather than cultural fit, it is a sign that your business needs to go back to the drawing board and reevaluate how it's running.

You struggle to find new customers or clients

When was the last time you had an influx of new customers? If your answer is anything other than "recently" then it may be a sign that your business has stagnated. If you have lost touch with how to market yourself or communicate the value of what you do, now would be a great time to outsource some help.

You've lost your enthusiasm

You used to love going into work every morning and now you dread it. As a business owner, your energy filters down to every single person involved in your organisation, so if you're struggling to find motivation then it's a sign that there is something fundamentally wrong and it may be time to change direction.

Your employees aren't engaged

Similarly, if your employees no longer care about anything beyond their paycheck then it's a clear indicator that something is amiss. Morale has a direct effect on productivity and quality of output, so if your employees are disengaged it will be apparent in your business.

The numbers just aren't moving

Last, but certainly not least, if your numbers are stagnant or dropping then it's a clear indicator that something needs to change. Ebbs and flows are normal but if you have experienced a prolonged drop or plateau then it's a sign that action is desperately needed.

The next steps

If your business is stagnant, then it may be time to stop asking "what should I do?" and start asking "who can help?"

Hiring a consultant/advisor can make all the difference and get the needle moving again. It can help you get out of your own head and gain perspective on the situation. Moreover, the right consultant/advisor will have seen cases like yours before and know exactly how to kickstart innovation and get you back on track.

ADM Accountancy's Business Advisory service is tailored to our clients' needs. From a light-touch approach, such as advice on management reports for your specific industry, to monthly or quarterly meetings, giving an opportunity to review your current performance and identify actions to make improvements to your business. We are here to help!

5 reasons to hire a virtual finance director

Tue, 16 Nov 2021 09:41:08 GMT

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6 steps to take if your small business is running out of money

Tue, 02 Nov 2021 10:01:22 GMT

It’s always worrying when you notice that your small business’ bank account is running low. Whether you’re scaling up or simply going through a quiet period, negative cash flow can take a significant toll on the financial health of your business. Hard times don’t have to spell the end for your enterprise, however. It’s time to re-evaluate your current practices and employ some of the following steps to ensure that your bank balance bounces back.

1. Re-Evaluate Your Pricing Structure

Difficult financial times are a sure sign that it’s worth reconsidering your pricing structure and making some changes. It’s entirely possible that you’re undervaluing your services and selling yourself short. Take time to consider the value you provide and research your competitors’ rates, too.

Of course, your existing customers won’t be happy if you hike up your prices overnight. It’s fine to charge new customers higher prices from the get-go, but implement more gradual price changes for your existing customers and give them plenty of notice. You deserve to get paid what you’re worth, but during difficult times the last thing you want to do is aggravate your entire customer base!

2. Cull Your Software Subscriptions

Over time, software subscriptions mount up and many business owners continue paying for software that they’ve ceased to use. Make a list of your subscriptions and only carry on paying for the ones which truly deliver value to your business. You’ll be surprised how much money this simple step can save you, especially over the course of several months.

3. Reduce Your Wage

For short-term cash flow issues, taking a smaller wage as a business owner can help to smooth things over. Obviously, you deserve to get paid but foregoing a chunk of your salary for a month or two may be able to protect your business’ bank balance until cash begins to flow more freely again.

4. Go Green

Power usage tends to be one of the largest costs for a small business, so cutting down on energy costs can really help you to save money. Installing energy saving bulbs, investing in insulating blinds and replacing paper towels with hand dryers can significantly reduce your monthly energy bill.

5. Shorten Your Payment Schedule

Many businesses allow their customers or clients up to 90 days to pay invoices, but if your funds are dwindling, it’s time to reduce this window. Cash flow is just as important as profit to the survival of your business and if you run out of available funds now, getting paid in two or three months’ time won’t help you much. Consider shortening your deadlines to 30 days or less to improve your cash flow and create a more continuous stream of funds.

6. Don’t Depend on a Handful of Customers

Of course, loyal customers are important to any small business, but becoming overly reliant on a small number of customers puts your business at risk. In this situation, losing a single customer can do significant damage to your finances, so don’t put all of your eggs in one basket.

Do nurture your existing customers and encourage them to spend more, but make sure your entire organisation doesn’t depend on repeat business from one or two sources. Taking on just a few new, smaller clients can really help when your bank account is suffering.

Summary

A dwindling bank account is never good news for a small business, but it’s not necessarily a death toll. By taking action today and implementing the above money-saving steps, you can get your business back in the green and improve both your profitability and cash flow.

If you need help getting your business finances back on track - talk to the team at ADM Accountancy on 01242 679767 or visit: www.admaccountancy.co.uk for more information.

6 reasons to swap spreadsheets for Cloud Accounting software

Thu, 21 Oct 2021 08:28:42 GMT

Many small business owners have been using spreadsheets to do their accounting for years now. Whilst spreadsheets may seem like a convenient and cost-effective way of managing your finances, advances in cloud accounting software mean that your business could most likely benefit from an upgrade.

Whilst Making Tax Digital for Sole Traders has been postponed by one year until April 2024 , there are still many good reasons to be moving to cloud accounting software.

Let’s take a look at why you should swap your spreadsheets for cloud accounting software, and how to make the transition smoothly.

1. More accurate data entry

Not only is manual data entry mind-numbing, it also makes it very easy to make mistakes. Just one typo could lead to major errors, including mistakes on your tax return which may result in missed deductions or penalties.

Cloud accounting software, however, allows you to upload your receipts and invoices directly and keep accurate records, removing the need for double data entry and reducing the likelihood of mistakes.

2. Never lose data

The larger a spreadsheet becomes, the more likely it is to either crash or corrupt, resulting in lost data. However, your records don’t cease to matter once your tax return is filed. It’s important to keep your records for audits and to track the company’s progress over time. Leaving your data in a spreadsheet leaves it vulnerable, whereas cloud-based accounting software provides multiple layers of protection to keep your information safe.

3. Integration with other software

Spreadsheets don’t tend to integrate well, which can lead to a lot of stress and wasted man hours. Saving a spreadsheet in a new location can corrupt files and break links, causing countless problems. However, cloud accounting software automatically syncs your data across a range of devices and is designed to integrate well with other software, permitting seamless sharing and collaboration.

4. A more complete audit trail

Spreadsheets don’t create a clear audit trail in the same way that accounting software does. For example, you may see that something was changed but be unable to identify the exact details. It’s important to keep a step-by-step record to keep your company safe and your records accurate. Accounting software allows you to easily keep a log of all changes made to your files, dating right back to the moment they were initially created.

5. Save valuable time

Spreadsheets tend to be much more time-consuming than cloud accounting software, especially if you’re working with a high volume of data. Using spreadsheets requires you to spend a lot of time on data entry, preparing reports and verifying information. This could cost you days’ worth of man hours! With cloud accounting software, on the other hand, these processes take mere minutes to complete.

6. Collaboration with others

The sharing functionality of traditional spreadsheets tends to be slow and can become confusing when multiple people try to work on a document at once. Cloud accounting software is designed to be collaborative and, as mentioned previously, automatically syncs across all devices, permitting seamless sharing and creating an accurate audit trail.

How to choose the right cloud accounting software

The right cloud accounting software for your small business will depend on your particular requirements, and it’s worth asking your accountant for recommendations. We recommend considering the following:

Which systems do you want to integrate the software with?
How many people will use the software?
Which functions are most important to your business?
What is the upfront cost or subscription fee?
How much training is required?
What support is provided?
Is the software scalable as your business evolves?

If you’re still using spreadsheets for your small business accounting then it’s most definitely time for an upgrade. In fact, using spreadsheets is almost as outdated as working with pen and paper! Cloud accounting software can save you a huge amount of time and money, as well as protecting your data and maintaining more accurate records. For a relatively small investment, it offers a very large return.

Contact the team at ADM Accountancy today about moving your accounts to the cloud!

Call 01242 679767 or email enquiry@admaccountancy.co.uk

The 6 numbers you need to know to grow your small business

Thu, 23 Sep 2021 09:24:09 GMT

In order to grow your business, you need to understand how you’re faring. Financial numbers provide you with an accurate picture of your performance, but as a busy business owner it’s unlikely that you have the time or the inclination to spend hours pouring over complex numbers. However, ignoring your financial numbers is likely to lead you towards failure. It’s prudent to create a list of key performance indicators (KPIs) to focus on so that you can keep an eye on what really matters. This will then allow you to make informed decisions about the financial health of your business and measure your progress over time.

Profit and Loss Statement

It’s essential that you understand your profit and loss (P&L) report because it tells you whether you are making or losing money, and how much. You need to pay close attention to your P&L report and review it every month so that you get a good idea of how your status is changing over time. Keeping a close eye on these numbers allows you to identify areas where you can cut costs, understand seasonal patterns and know when to raise your prices.

Expense Report

It’s vital that you understand how much you are spending each month. If you don’t know how much you’re spending it becomes impossible to calculate profit and loss. Furthermore, you need to be aware of your spending so that you don’t blow your budget. You should use your accounting software to regularly create expense reports to review and compare against one another. This will help you to identify areas where you can reduce spending and ensure that your expenses are not growing faster than your revenue - although this is acceptable in the short term when preparing for growth, for example by hiring new employees or buying new equipment.

Accounts Receivable

Accounts receivable refers to the money that you are owed in unpaid invoices. If you have a lot of money tied up in accounts receivable then you’re likely to run into cash flow problems, even if you’re operating at a profit. Keep a close eye on accounts receivable by using your accounting software to automate invoices, as this will help you to understand who owes what. Being aware of your accounts receivable allows you to differentiate between cash flow and profit, take action to chase up payments and make informed decisions about when to spend and when to hold back.

Profit Per Client

Some clients generate more profit than others. Your most lucrative clients aren’t necessarily the ones who spend the most, and it pays to know who actually makes you the most money. This will allow you to focus on attracting profitable clients who will earn you more money in less time and thus optimise your business growth.

Calculate profitability per client by taking the total fees received and subtracting the expenses involved. Then, divide this number by the hours that you spent on the work to calculate the hourly wage per client. You may be surprised at just how much this can vary!

Cash Flow

Managing cash flow can be a tricky balancing act. It’s important to produce cash flow statements regularly so that you understand how much is coming in and going out of your business, and how much you are left with. Remember that cash flow and profitability are separate entities. It’s possible to be in profit but run out of cash because your money is tied up in assets and unpaid invoices.

You should create and review cash flow statements regularly and track how your situation is changing. It’s important to stay on top of your cash flow so that you know when you are able to make investments without running out of available funds.

Item Sales

Item sales reports create a clear picture of how profitable each of your products or services are. For example, one product may generate a lot of sales but a minimal amount of profit. This is actionable data that indicates which products or services you should be focusing on, and which to discontinue.

Like it or not, numbers don’t lie. As a small business owner, it’s vital that you stay on top of your financial numbers so that you can assess the health of your company and take action accordingly. You need to review and analyse your numbers regularly to understand how you are performing and give your business the best chance of success.

ADM Accountancy can help you keep on top of the figures. Call us today on 01242 679767.

The tax implications of owning and running an electric vehicle

Tue, 24 Aug 2021 18:03:56 GMT

There has been a significant increase in electric vehicles in the UK. By 2026, they’re expected to account for a fifth of vehicle sales, up from one in ten in 2020, and the ban on the sale of new petrol and diesel cars has been moved forward to 2030. Here, we explore the incentives and other tax consequences associated with electric vehicles.

Buying an electric vehicle

Vehicle excise duty on purchase
Vehicle excise duty is levied on every vehicle using public roads in the UK. First-year vehicle excise duty payments are related to carbon dioxide (CO ₂ ) and nitrogen oxide (NOx) emissions and range from nil to £2,245 per vehicle. No initial vehicle excise duty charge applies to ‘pure’ electric vehicles, being those which produce no CO ₂ and NOx emissions whilst being driven.

Corporation Tax and capital allowances on purchase
Historically, the CO ₂ emissions of a car determine the rate of capital allowances available. As such, most cars (non-electric vehicles) are eligible for either 18% writing down allowances (WDAs) or 6% WDAs depending on the car’s CO ₂ emissions.

An ‘electrically propelled’ car is propelled solely by electric power (i.e. it is an All-Electric Vehicle, or AEV). A car has low CO ₂ emissions where the emissions do not exceed 50g/km (typically, a Plug-in Hybrid Electric Vehicle, or PHEV).

The Government announced in its 2020 Budget that, for expenditure incurred on or after 1st April 2021, the First Year Allowance (FYA) will be restricted to new electrically propelled and zero-emission cars.

The March 2021 Budget introduced a super-deduction first-year capital allowance of 130% on qualifying plant and machinery investments from 1 April 2021 to 31 March 2023. The super-deduction is not available for electric cars; however, commercial electric vehicles such as vans, lorries, buses, taxis and tractors do qualify, as would investment in qualifying infrastructure such as charging points (more details below) and associated engineering works.

VAT on purchase
The same VAT rules apply to electric and non-electric vehicles: VAT is charged 20% on both. As a general rule, VAT on cars cannot be recovered.

However, subject to the businesses partial exemption status, businesses can reclaim the full amount of VAT paid on commercial vehi cles and on cars provided they are not available for private use. Half of the input VAT can be reclaimed on leased cars.

Electric charge points – installation costs

Where the business installs, new and unused charging points for electric vehicles up to 31st March 2023, it can claim a 100% FYA for the installation costs of an electric vehicle charging point. Qualifying expenditure can include the charging point itself and alteration of land for installing it. Plus, it can also include any costs of modification to supply electricity to the charging point.

Some of the expenditure may also qualify for the new super deduction equating to a 130% enhanced deduction of the total cost. In order to qualify for the deduction, expenditure must be on a new, unused electric vehicle charging – not second-hand charging facilities.

VAT incurred on infrastructure costs such as charging points and associated engineering works can be recovered under the normal rules, provided that the charging points are supplied to the business.

If the business pays for the installation of charging points at employees’ homes, then the charging point is supplied to the employee and the VAT cannot be recovered.

Electric charge points – charging costs

Own vehicle – From 6th April 2018, where the company allows employees to charge their own electric vehicles at the workplace, there is no taxable benefit for the provision of that free electricity.

For this tax exemption to apply, the charging facilities must be provided at or near the workplace, which is the same requirement that applies to tax-free workplace parking. This tax exemption does not apply if the employer reimburses the costs of charging the employee’s own vehicle at your home.

Businesses can pay employees an approved amount of mileage allowance payments each year for using their own vehicle for business journeys without having to report them to HMRC. The same rates apply to electric and non-electric vehicles: 45p for the first 10,000 business miles in a tax year; then 25p for each subsequent mile for income tax purposes and 45p for all business miles for NI purposes.

Company vehicle – Where the employer pays for the cost of charging a company-provided electric vehicle there is no taxable fuel benefit for the driver, as electricity is not classified as a fuel for the car or van benefit regulations.

Where the driver of the company-owned electric vehicle pays for the electricity to power it, either from their domestic supply or by charging at a roadside station, the employer may reimburse the employee for that cost. The employer can pay the company car driver 4p per mile, to reimburse them for the cost of the electricity used for business journeys with no tax implications. This rate only applies to company-owned electric cars, not to private vehicles.

Ongoing usage

Fuel duties and VAT on fuel
The headline rate of fuel duty on standard petrol, diesel, biodiesel and bioethanol is 57.95p per litre (and has been frozen at that rate since 2011/12).

VAT is applied after fuel duty and so the price of a litre of petrol reflects the pre-tax price plus 57.95p for fuel duty, plus 20% VAT on the pre-tax price and a further 11.59p for VAT at 20% on the fuel duty.

Fuel duty is not charged on electricity used to charge electric vehicles, but it will be subject to the normal climate change levy rules. Where the electricity is supplied to an individual at domestic premises, no climate change levy is charged. However, where it is supplied for business use, such as charge point operations, the climate change levy is charged at 0.775p per kWh and will form a component of the cost of charging at public charging points. As for fuel duty, VAT is applied after the climate change levy.

Vehicle excise duty
Whilst first-year vehicle excise duty payments are based on emissions, subsequent payments are not. That is to say, the ongoing vehicle excise duty cost of a petrol or diesel vehicle is the same regardless of the level of CO ₂ and NOx emissions. However, no vehicle excise duty applies to pure electric vehicles which produce no CO ₂ and NOx emissions whilst being driven.

VAT
Businesses can usually reclaim the VAT for all business-related running and maintenance costs, such as repairs or off-street parking, even if they could not reclaim VAT on the vehicle itself.

The VAT position on the supply of electricity for charging electric vehicles has long been unclear. On 25 May 2021, HMRC confirmed its policy which included:

sole proprietors may recover input VAT on the business use proportion of home-based charging, and all input VAT on charging that is done elsewhere;
businesses may not recover VAT charged on supplies of electricity to charge employees’ electric vehicles at their home, even where there is business use.

Employees

An increasing number of businesses are providing electric vehicles, or the charging thereof, as part of their employee benefit packages; it can be a tax efficient form of remuneration.

Benefit in kind charge: vehicle
The benefit in kind value for cars provided to employees is calculated by applying a rate to the value of the car. The rate depends on the car’s CO ₂ emissions: the normal maximum is 37%. The rates for pure electric vehicles are 1% for 2021/22, and 2% subsequently. The rates for hybrid electric cars are up to 14%.

The normal van benefit charge is £3,500 per year. From 6 April 2021, the van benefit charge is nil for all company vans that emit no carbon emissions.

Benefit in kind charge: charging
HMRC currently considers that electricity is not a fuel for car fuel benefit purposes. Unfortunately, it is not that simple. The benefit in kind consequences associated with charging electric cars varies significantly depending on factors including whether the car is a company car made available for private use or an employee’s car used for business purposes and whether the charging occurs at work or at home.

Sources:

https://www:taxadvisermagazine.com/article/charging-towards-future

https://www.thefriendlyaccountants.co.uk/tax-treatment-of-electric-vehicle-charging-points/

Photos by Michael Fousert on Unsplash

Get paid faster with cloud accounting

Thu, 01 Jul 2021 09:33:06 GMT

Receiving payment for work completed quickly is one of the best ways you can improve your cash flow and keep your business running smoothly. Cloud accounting software such as Xero is a brilliant way to do this. This article looks at four ways cloud accounting can help you get paid faster.

1. Use automated invoicing

Getting your invoices right is fundamental to getting paid quickly. However, if you prepare your invoices manually, you increase the likelihood of human error. Mistakes on your invoices can then lead to unhappy customers and a lot of unnecessary back-and-forth trying to fix the issue. This means that you’re likely to be waiting for longer for the money you’re owed to reach your bank account.

Cloud accounting software programmes can automate your invoices for you, allowing you to send accurate invoices on time and straight to your client’s inbox.

For clients with a subscription service, your accounting software can automatically send recurring invoices. This ensures your invoices are always sent on the correct date and save you time and effort, too.

2. Know what’s been paid, when

Cloud accounting helps track receivables so at a glance you can see who owes you money and take action accordingly. Your clients are far less likely to pay you on time if they think that you’re forgetful and unlikely to follow up. However, if you consistently send them payment reminders and are prompt to follow up on missed deadlines, your clients will take your payment terms seriously.

If you notice that a client is frequently late with payment, it may be time to consider introducing late fees. Of course, you should give them plenty of notice that you are making these changes. When the deadline is approaching, make sure to send them a payment reminder that clearly states the fees again so that they have time to pay before incurring fees. This will certainly incentivise late-paying clients to respect your deadlines. Best of all, cloud accounting software allows you to easily automate these charges so that you don’t have to do any complex calculations yourself, either.

3. Reduce your payment terms

Many small businesses offer their clients 30 days to pay, but these generous deadlines may soon be a thing of the past. Back when companies had no choice but to mail physical invoices, 30-day payment cycles were necessary. It would take at least a few days for the invoice to reach the client, who would then need to process the invoice and issue a cheque, which would then need to be mailed back to the business owner.

Now, however, thanks to the power of cloud accounting, 30-day payment terms are no longer necessary. It takes mere seconds for digital copies of an invoice to reach a client’s inbox and payments are electronic. Therefore, consider leveraging the convenience of cloud-based accounting software to shorten your terms and get paid faster.

4. Make it super easy for clients to pay

Electronic invoicing makes it easier for your clients to pay you and therefore they are likely to do it far sooner. Cloud accounting software allows you to accept several forms of payment, including PayPal, debit cards and bank transfers. Your clients simply have to choose the option that is most convenient for them and they can click a link to pay your invoice in full. Your cloud accounting platform will then identify each payment according to the customer and invoice number, ensuring that all of your records automatically stay accurate and up-to-date.

As a business owner, getting paid on time is probably one of the most difficult parts of your job – and the most necessary. Take advantage of the capabilities of cloud accounting software to speed up your payment process and improve your cash flow. This will ensure that your business remains in the best possible financial health, whilst saving you a lot of time and energy.

Speak to one of our expert team at ADM Accountancy about cloud accounting software for your business. Call 01242 679767 or email enquiry@admaccountancy.co.uk

5 ways for startups to improve cash flow management

Tue, 18 May 2021 08:51:20 GMT

Cash is king in business and good cash flow management is essential for the success of your startup. Think of cash flow as blood flow and you’ll understand just how vital it is to the health of your business; without it, you’ll die. That sounds bleak, but it really is important to manage your cash flow well from the very beginning and protect your business against any problems along the way.

Even if your business is very profitable, you’ll struggle to cover your costs without sufficient funds available. However, at the same time, an excess of cash suggests that you’re not re-investing enough into scaling your business. Finding a balance takes accuracy and attention, but it can be done by following the steps outlined below.

1. Regularly prepare cash flow statements

Before you can start planning for the future you need to get a clear picture of where you are right now. This is where cash flow statements come in. A cash flow statement provides an overview of how much cash is coming in and going out of your business. This then allows you to perform a detailed analysis of the financial health of your business.

A cash flow statement requires a lot of data and so a cash flow calculator can be very useful in helping you prepare this document. You also might want to think about hiring an accountant to ensure that your statement is accurate, since getting this wrong can lead to bigger mistakes down the line.

2. Create cash flow projections

It’s important to understand what your cash flow is likely to look like in the months to come so that you can plan ahead and manage your finances wisely. Realistic cash flow projections can help you to invest your money at the right moment and account for any potential pitfalls along the way. This process can be time-consuming and complex, so again it’s worth using accounting software or enlisting the help of a professional. These projections are incredibly valuable when it comes to scaling up your business and so they’re worth investing in.

3. Prepare a safety net

Any entrepreneur will tell you that it pays to have a safety net, particularly when you’re scaling your business. Investing in growth can lead to short-term negative cash flow which is perfectly okay, so long as you’re prepared for it. A cash reserve will help to smooth things over when you’re having cash flow problems and ensure that you have enough funds available in order to pay suppliers and staff. It’s also worth investigating whether a credit card or line of credit could be beneficial to your startup to help you keep operations going when cash runs dry.

4. Plan for the long term

As important as it is to have a handle on where you are right now, your business won’t be this way forever. After all, the ultimate goal is to grow out of the startup stage - and this means big financial changes. Furthermore, there are many factors outside of your control that could affect your cash flow in the future, such as inflation, recession or late payments from clients. It’s always best to be prepared for the worst so that your business is protected against any eventuality. Take some time to research and forecast potential changes in market conditions that could impact you in the future. Again, it’s worth consulting your accountant for advice that could help to protect your business.

5. Stay on top of invoices

It’s important to manage cash inflow effectively and sadly, you can’t just bank on customers always paying you on time. You need to ensure that you send invoices in a timely manner, set clear payment deadlines, send reminders and chase up late payments. If you have a large customer base, this can be a time-consuming process and it may be worth looking into accounting or invoicing software to take care of this for you. Not only does this help you to manage cash inflow accurately, it also frees up your time for more valuable pursuits.

Cash flow is key to your success

There’s a lot to think about as an entrepreneur but managing your cash flow well is one of the most important ways of ensuring the financial health of your business. Not only does this help you to protect your startup against market changes and late payments, it enables you to invest your money wisely and at the right moment. Good cash flow management isn’t just about protecting your business from collapse, it’s also vital to help your startup to grow and flourish.

Talk to the team at ADM Accountancy about how to make sure your startup has good cash flow management on 01242 679767.

Budget 2021

Fri, 05 Mar 2021 10:52:22 GMT

Chancellor Rishi Sunak has outlined his economic plans during his budget statement of 3rd March 2021. Below, we have outlined the areas we feel will be of interest to our clients.

Furlough Scheme

The main highlights include the extension of the furlough scheme to the end of September. It is worth noting that during the extension period, employers’ contributions are set to increase gradually. (In the same manner as when the chancellor initially attempted to phase it out in October last year.)

During April to June, the furlough scheme will still cover 80% of employees' salaries for the hours they are not working, up to a maximum of £2,500 a month, with employers only asked to pay pension and National insurance contributions. Employers are still expected to pay workers normally for the hours worked.

If you currently have staff furloughed, you should be aware that, as an employer, you will be asked to contribute 10% in July and 20% in August and September.

Self-Employed Income Support Scheme (SEIS)

The SEIS will continue with the fourth grant available for the period February to April, and a new fifth grant from May.

The major change is that new self-employed individuals who completed a FY2019-20 Self-assessment Tax Return before midnight on 2nd March will now be eligible for the grants.

The rules for the fourth grant remain unchanged and applications can be submitted through the government website from April. However, it is worth noting that for the fifth grant, only those self-employed individuals where their turnover has fallen by 30% or more will be entitled to the full grant. Those where the fall is less than 30% will be entitled to a reduced amount.

Corporation Tax

The current 19% rate of corporation tax will continue until April 2023 when it will be increased to 25%, the chancellor has announced. Companies with profits of £50,000 or less will continue to pay at 19% even after 1st April 2023. Those with profits between £50,000 and £250,000 will pay tax at the main 25% rate reduced by a marginal relief, providing a gradual increase in the effective Corporation Tax rate.

The change back to more than one Corporation Tax rate also means the re-introduction of the 'associated companies' rules to prevent business owners trying to keep profits below the £250k threshold by having separate companies.

Capital Allowances - 'Super Deduction'

Companies will be able to claim a 130% deduction on the purchase of most new plant and machinery investments that normally qualify for the 18% writing down allowance, if the expenditure is incurred after 1st April 2021 and before 31 March 2023. The allowance will enable a tax deduction exceeding the cost of the asset.

Other Business Support

For hospitality, holiday accommodation and similar businesses, for which the reduced rate of VAT of 5% was introduced last year, it was confirmed that the 5% rate will now remain in place until 30th September, with a stepped increased from 1st October 2021 to 12.5%, before returning to the standard 20% rate from 1st April 2022.

Non-essential retail businesses which are due to re-open on 12th April will be entitled to claim a £6,000 grant per premises. Up to £18,000 grants will be available for hospitality, leisure, gyms and personal care businesses.

The Bounce Back Loan Scheme (BBS) scheme will come to an end on 31st March 2021, and will be replaced by a Recovery Loan Scheme. Loans are available from £25k to £10m to help businesses restart and cope with the next stage of the recovery. The Government will guarantee 80% of the loan.

Business Rates holidays will continue until the end of June.

The Help to Grow Management Scheme, offering MBA-style management training for SME business leaders with five or more employees, will be available. Also, a Help to Grow Digital Scheme, which includes offering up to 50% discount for new software for use in CRM, Selling Platforms and accounts and finance management will be available.

Personal Tax

There are no changes to rates of Income Tax or National Insurance.

The Personal Allowance increases from 5th April to £12,570, and will be frozen until April 2026.

The threshold at which you pay higher-rate Income Tax is increased to £50,270 from 5th April and frozen until April 2026.

Capital Gains

Unexpectedly, there were no changes announced to Capital Gains Tax.

If you have any questions or would like to discuss how the budget may effect you, or you wish to consider any business or tax planning required, as a result of the budget changes, please do not hesitate to contact us on 01242 679767.

Motor expenses – the unexpected VAT bonus

Tue, 18 Feb 2020 13:35:07 GMT

It is well known that VAT rules for cars used for business purposes can be harsh, but for certain business, car-related expenditure can actually be quite generous.

We will look at these rules and how you can take advantage of them.

Inflexible rules

If you cannot prove that a car is used 100% for business purposes then, except in extreme circumstances, HMRC will not allow you to claim back any VAT paid when you purchased it. You cannot claim VAT if you use your car for any private purposes. However, this rule does not apply to motor running costs you incur and in fact, in this situation, VAT rules are the complete opposite to the rules relating to car purchasing.

Costs related to journeys

The rules for journey-related expenses differ to those for motor running costs. The usual VAT rules apply and VAT paid on business journey expenses, such as off-road parking, can be reclaimed in full.

For certain journey-related expenses however, you might need to share out VAT between private and business use. This is similar to claiming VAT on petrol.

Motor running costs

VAT rules become interesting when you consider costs such as maintaining or repairing your car.

It must be noted that HMRC allows you to reclaim 100% of the VAT paid on this type of expenditure, even if a significant portion of the company car’s use is for private purposes. This rule also applies to personally owned cars if they are used for business journeys.

Let’s look at the following example:

Fran’s cleaning business employs two members of staff. Fran and her staff all use their own cars to travel to and from clients as well as for private journeys. Fran pays the costs of servicing all of the cars and in the case of her two employees, she deducts the servicing costs from their mileage allowance (but net of the fuel part of the cost). Fran is entitled to claim the VAT back on all three cars’ service bills. Her business also pays the bills for any cleaning or repair costs for her car and for new tyres, meaning that the business can reclaim 100% of the VAT on this expenditure.

There are two things to note here:

The VAT break can be utilised by businesses where they pay service (etc.) bills for directors and employees and, in certain cases, for freelancers as well.
It is not essential for claiming back VAT, but you should if at all possible arrange for bills to be addressed to your company. It must be noted that for employees, including directors, NI charges and income tax will apply if the value of the bills or services is more than their millage allowance entitlements (this is again net of the fuel part of the cost).

No minimum business use requirement

To take advantage of this VAT break, you will be pleased to know that there is no minimum business use requirement, which means that even if you only use your car for business purposes for about 5% of the time, you will still be able to claim 100% of the VAT paid on service costs etc. by your business.

To conclude…

Your business can claim back 100% of the VAT with regards to car maintenance costs for your car and those of your employees. The usual allocation of costs between private and business use is not needed. If you are careful, you can use this VAT break side by side with car mileage allowances.

Visit http://tipsandadvice-tax.co.uk/download (TX D 18.22.04) for more information.

We are happy to discuss VAT with you in more detail, contact ADM on 01242 679767 or email andrew@admaccountancy.co.uk

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