The budget continues to offer accountants and advisers an opportunity to add real value to their clients by keeping them armed with up to date advice to make informed decisions.  It also brings an opportunity to offer additional services to clients resulting in increased profits for you.

Whilst the information contained within every budget is too onerous to bombard clients with, the main points that affect small business owners are summarised below.


Corporation Tax

The main rate of Corporation Tax has been cut by 2% (rather than the expected 1%) to 26%, and will reduce by a further 1% year on year other the course of the next three years, down to 23%.

The SCR (Small Companies Rate) of Corporation Tax, for profits to £300,000.00, will reduce by 1% to 20%.

This is good news for incorporated business (limited companies).

The rate decrease makes incorporation more attractive for non incorporated businesses, who have not received any main tax advantage within this years budget.  With this in mind, non incorporated businesses (sole traders and partnerships) should revise their calculations of the tax advantages of forming a limited company to establish whether it is more tax efficient to operate as a limited company.

Action: Advise your clients of these changes and review non incorporated business – look at the possibility of selling the goodwill to a limited company and creating a pot to draw down from the Directors Loan Account.

AMAP’s (Approved Mileage Allowance Payments)

Finally!  The rate for business mileage from April 2011 has been increased from 40p to 45p for the first 10,000 (annual) business miles.  Thereafter the 25p rate remains.

Again this is good news for business owners who incur this expense having seen the benefit of the AMAP ‘s erode throughout the years through inflation and increased fuel prices.

Action:  Advise your clients accordingly.

Annual Investment Allowance

The annual investment allowance has been halved to £25,000.00.

Action: Advise your clients of this change and get them to seek your advice with regard to the timing of their capital expenditure.

Small Business Rate Relief

This relief was originally due to end in September 2011 but has now been extended for a further 12 months.

Action:  Advise your clients of this extension.

VAT

The registration limit has been increased to £73,000.00 – any businesses with a turnover in excess of this amount will be compulsory required to register for VAT.    For businesses under this threshold it may still be worth considering voluntary registration depending on your circumstances and the nature of the business.  VAT has been simplified and is no longer an onerous task to comply with –not only that but it could save you money.

Action: Advise your non VAT registered clients and review whether it is time to get them VAT registered.  Look at the Flat Rate Scheme if advantageous.

Time To Pay Scheme

It was announced that the time to pay scheme remains in place for businesses and individuals who are behind with their tax payments

Action: Advise your clients who are experiencing poor cashflow and behind with their tax liabilities.

Income Tax

The personal allowances for 2011/12 are:

Age                              £

Under 65                       7,475

65 – 74                         9,940

Over 75                         10,090

Note: The increase in personal allowances will not benefit higher rate taxpayers as the basic rate of income tax has been reduced from £37,400.00 to £35,000.00.

Action: Advise your clients of these changes and take into consideration for payroll purposes.

National Insurance

The wisdom of raising Employers National Insurance contributions in a “pro jobs” budget is questionable but for now I will stick to the facts rather than offer opinion!  Employers National Insurance is rising from 12.8% to 13.8%.  For employees, the sting in the tail for the raised income tax allowances is an increase in Employees NI from 11% to 12%.

Action: Advise your clients of these changes.  Look at efficiencies and take into consideration for payroll purposes.

Directors / Shareholders – Optimum Salary / Dividend Mix

From April, Employees National Insurance contributions start at £7,072.00 so whilst the revised personal allowance for Income Tax stands at £7,475, the optimum mix will usually be *£589.33 per month salary with the balance paid by dividends.  This will ensure that there is no Employees or Employers NI due, yet at this level you will still be credited with NI contributions (at a rate of 0%). Shareholders should continue to take care to ensure that all dividend payments are properly documented, and available from sufficient post tax profit.

*This is a general indication and will not be suitable for all.

Action:  Advise your clients – reiterate the importance of record keeping for dividends.  Ensure that dividends are only paid from available profit.

Capital Gains Tax

The annual allowance for CGT has risen to £10,600.00.

Action: Advise your clients and get them to seek your advice as the timing of disposals.

Jason Dormer
24 March 2012

You have decided that an accountancy or bookkeeping business is for you.  You will be your own boss, make your own decisions, make a heap of cash and work less hours.

The reality, of course, can often be somewhat different!

There are many factors to consider when starting a business and not everyone is cut out to work for themselves.

For example, as an employee, you are used to a support network around you.  PC problems? Phone IT.  New clients?  That’s for the Marketing Department.  Unpaid bills? Credit Control will sort that out.

Not any longer.

As a business owner, YOU will be responsible for sales, marketing, pricing, compliance, administration, up to date knowledge, fee-earning, billing, credit control, IT, systems, filing, storage, suppliers, quality control – the list is endless.

You will initially (at least) work longer hours for less money.  You will have times of pressure that you will have never experienced as an employee.

You will spend less time with friends and family as you throw yourself into your business.

Still want to proceed?  Good – let’s go.

To set up any business requires courage, determination, and commitment.

Ask of yourself some questions of your character:

1. Have you got the courage to be exposed to a potential business failure?  It takes a brave person to stand up and take a chance.  This is why so many people stick to the safety net of employment and never achieve their potential.

2. Have you got the determination to see this through?  Do you see things to completion or do you like to take short cuts?

3. Are you committed to making your business work? At the expense of time, money, and other sacrifices.

If the answer is yes to all three (assuming you have the technical knowledge) then you have a good chance of running your own accountancy or bookkeeping business and making it succeed.

In preparation, ask yourself the following additional questions which you can also use as a pre-launch checklist for your business:

-           Have you got sufficient capital?

-           Have you got a plan for what you want to achieve personally from your business?

-           Have you got a business plan for how to achieve this?

-           Have you got a marketing plan?

-           Have you got a practising certificate?

-           Have you registered for money laundering?

-           Have you set up a system for compliance with the regulations?

-           Have you got PI cover?

-           Have you registered with ICO?

-           Have you got a reciprocal agreement if you are a one person business?.

-           Will you bill hourly rates, fixed fees, value/success based pricing, or a combination?

-           Will your pricing model achieve your profit requirement?

-           Have you got a good system in place to monitor dates, deadlines?

-           Have you got a checklist for your consultation research with new clients?

-           Do you know when to say no to potential clients and potential warning signs?

-           Have you chosen software for bookkeeping, accounts production and tax returns?

-           Have you got access to expertise in areas where you are deficient?

-           Have you got an incentive for clients to use your services in preference to others?

-           What guarantees can you promise your clients?

In addition to the above start up questions, on an ongoing basis it is wise to review your practice monthly to ensure that you are on track to achieve your objectives.  Try answering the following questions and use as a monthly checklist for your business:

-           Are you sticking to your business plan (as much as practical) .

-           Are you sticking to your marketing plan?

-           Do you devote enough hours per week for business development?

-           Are you working with the right clients?..

-           Are you looking at the financials at least monthly?..

-           Are you suffering bad debts, disputed invoices, late payers?.

-           Should you outsource any element of your service?

-           Is your pricing model working?

-           Are your suppliers giving you value?.

-           Are you meeting your CPD requirements?

By reacting to regular, honest assessment of your business you will be well placed to deal with challenges, seize opportunities, and ensure that you are aligning your business to it’s objectives.

Many accountants and bookkeepers do not conduct regular reviews and do not pay sufficient attention to their own well being and the strategy of their business.  The results of which are poor financial performance for the business and stress, anxiety, and demotivation for the owner(s).

The good news is that a well managed, disciplined accountancy / bookkeeping business can be extremely profitable and rewarding for it’s owner(s).

Make the decision to fall into the second category, keep your eye firmly on the ball, and above all – enjoy!

I wish you the best of luck.

Jason Dormer

16 August 2010



On a trip last week to an accountants seminar in Cornwall I met the accountant and author Hugh Williams FCA, of the award winning firm HM Williams, an accountancy firm recognised for it’s customer focused approach.

After discussing our views on fixed fees, value pricing and time based billing, it became apparent that Hugh was a man after my own heart. Hugh kindly gave me a copy of his book ‘Life without Timesheets’ in exchange for my promise to review it on a leading accountancy website.

Hugh goes on to state the advantages of fixed fees:

- Clarity – providing clients with a choice to accept the fee, request a reduction in exchange for a reduced level of service, or take his or her business elsewhere
- No surprise bills for the client
- Anxiety free access to support without fear of the clock ticking
- Sense of control for the clients that timesheets cannot give
- Budgetary control for clients
- Spreads the cost when implementing the fixed fee throughout the year
- Incentivises accountants to increase efficiency
- Timesheet administration is eliminated from accountancy practices, freeing up time and money

To me, this is not an acceptable way to do business.

Nichola is a regular at ICAEW, CIOT and ATT tax events, sits on the ATT tax technical committee and supports her local Working Together initiatives. Nichola has published articles for all the leading tax magazines and websites and has lectured to tax advisers and accountants.

The Ross Martin Tax Consultancy site is an essential source of tax information for any accountant or adviser and is priced at £295.00 + VAT per annum for a single user license. Seahorse members are entitled to a 10% discount on this price, giving you an even greater value at £265.50 + VAT per annum. We are delighted to be able to give our members access to this service which ties in with our objective to give members access to affordable, quality driven support services for all aspects of their practices.

See www.rossmartin.co.uk

See what other accountants who subscribe to the service have to say on a recent accountingweb thread: http://www.accountingweb.co.uk/anyanswers/recommendations-ross-martin-tax-consultancy

Having founded his own award winning accountancy firm in 2005 – starting as a sole practitioner working from home, and growing it to a company of six trading from its own purchased premises – Jason Dormer knows a thing or two about making it in practice. His latest project, Seahorse (UK) Ltd, is an advisory service aimed at helping start ups and existing small firms of accountants and bookkeepers through the difficult first stages of establishing themselves, right through to growing and developing their client base.

“Being a good accountant or bookkeeper isn’t enough to make you a good business person”, he says. In the early stages, it’s important to recognise your limitations, as well as what you can do well, and try to work on those. While many issues are unique to the individual setting up their practice, there are a few common errors that Dormer has seen time and time again. Below, he outlines the top five slip ups.

1. Missing the bigger picture
“I made a big mistake when I set up my accountancy practice”, admits Dormer. “I personally did all the operational work, administration, client inception, liaising with HMRC, marketing, strategic work and even answering the telephone all day. I was a busy fool”.

This experience taught him that he needed to invest in staff in order to grow the business, and he subsequently hired another accountant and an administrative assistant with good marketing skills, which freed him to systemise the operational work and work on other aspects of the business.

“I wanted to get out of the trap of doing client work full time and neglecting all other areas”, he says. It’s not an uncommon problem for start ups, but while finances may be tight at the start, practitioners shouldn’t miss the bigger picture. “Client work is only one aspect of the business and you can’t be as successful as you want to be without ensuring that every aspect of the business is given sufficient attention”, he says.

2. Pricing
“Although we advocate value pricing, some firms prefer traditional time based billing, which we respect. However, on asking several start up firms what their profit requirements are annually and then what their charge out rates are, it becomes clear that the profit requirement cannot possibly be reached”, says Dormer.

“It has surprised us that some accountants and bookkeepers are not paying sufficient attention to this vital area of their business. Some firms are not putting their skills into place with regard to pricing”.

3. Lack of planning
Dormer says he was surprised at the number of firms operating without a business plan and with no clear direction of where the firm is heading. “Without clear goals and objectives, success cannot be accurately measured”, he argues.

4. Marketing
“We feel that marketing is one of the most important areas for any business and in this current economic climate, even more so. Many firms are not pro-actively marketing their business. This can be remedied for relatively low cost, usually with considerable return”.

5. Empathy with clients
“Our research indicates that the main complaint about accountants and bookkeepers is that they’re not in tune with clients’ requirements. This is easily resolvable and can be fundamental to a successful long-term relationship between firm and client. Some clients want pure compliance work, whereas others value hand-holding and availability, pro active business and tax advice, regular updates, or just a friendly chat from time to time (without the jargon)”.

“Owners of small businesses can lead a lonely existence and sometimes just want a sounding board. Each client is different and a successful practice should establish exactly what the clients’ requirements are from the initial meeting. Additionally, clients may be increasingly reliant on their accountants in the current business climate and will expect them to be more pro active with regard to credit management and control, budgeting, cash flow planning and other related services”.

Challenges breed opportunities
“There’s no doubt that this is a testing time for both start ups and existing firms – insolvencies are up and the construction industry is on its knees. Clients who are managing to trade through the recession and more cost conscious than ever before, whilst at the same time demanding more from their accountants. Clients will no longer stay out of loyalty if the service and price and is not what they demand”.

The good news, argues Dormer, is that every challenge brings with it new opportunities. “Firms that keep their costs down by maximising efficiency through software, systems and resources, whilst providing value added services on top of their compliance, work will continue to prosper”.

He also suggests that learning to market your firm efficiently, as well as networking and developing strategic alliances is essential, “accountants who do this will continue to obtain new and profitable work”.

“The current economic climate gives us all the perfect opportunity to show what we are made of and reiterate the importance of the accounting profession to the wider business community. Firms who continue to support struggling businesses will reap what they sow when the good times return”.

Originally published on AccountingWEB.co.uk, the UK’s leading online community for accountants and finance professionals.

There has been much written about the credit crunch. There can be no doubting that this has been a very challenging time for small businesses and many have not managed to survive the current economic downturn. Many firms that have continued to trade are only breaking even, or trading at a loss.

Whilst this climate has many negative implications, there have been some positives too. Many owner managed businesses who have not had the resources to allocate to every area of their business (which they have previously overlooked) are being forced to ensure that every area of their business is now being given sufficient attention:

Staff

In the past, many owner managed businesses who have not had previous management experience have not fully utilised their workforce, or have not fully managed their staff. Idle time has been tolerated, staff have not been fully motivated, and insufficient attention has been given to lowest cost allocation of resources. Sub standard performance has previously been accepted by some.

This is no longer the case. Business owners now have no alternative than to ensure that they are getting the most out of their most vital asset – their people.

Suppliers

As with staff, in many cases suppliers have previously been chosen out of habit when such suppliers are no longer competitive on price or service.

Business owners are now increasingly regulary reviewing the value they receive from their suppliers, and switching if it makes good business sense.

Clients

Firms are now increasingly doing what should be second nature – going the extra mile for their clients in order to retain their business and to generate exceptional referral rates.

Marketing

More and more small businesses are investing in lower cost but more effective marketing, rather than the previous popular method of advertising and waiting for the ‘phone to ring.

Costs

Many firms previously used to look at increasing turnover without looking at their costs. The credit crunch has taught business owners that cost review and analysis is every bit as important as increasing sales, if not more so.

Credit Management

Non or late payment of invoices has been the reason that many firms have gone under of late, despite their business being profitable.

Firms are now wising up in this area, and are implementing credit management policies, researching new clients, setting credit limits, and chasing payment much more pro-actively.

Profit retention

The smarter firms have always kept reserve levels, though other firms are learning the hard way that in business, there are bad times as well as good and some funds should always be retained for a rainy day.

Summary

The above shows only a few areas in which business owners have had to review and act on very quickly, sometimes making unpopular decisions that they may have shied away from previously.

For all of the downsides of the recession, it can also be viewed as an invaluable lesson in business, albeit a very expensive one!

Firms that ensure that they continue to put into practice what they have learned in this period could be well placed to prosper when the economy recovers.

Lack of credit management systems and credit control procedures, combined with previous good payers holding onto their money longer, has created a real problem for many businesses. This problem is compounded by the obvious difficulties businesses are facing in obtaining credit to bridge the gap between doing the work and getting paid.

Poor cashflow, combined with poor credit management, has resulted in:

• Profitable firms being liquidated by cash poor creditors;
• Increased costs through borrowing;
• Increased bad debts;
• Increased disputes between firms;
• Increased litigation;
• A knock on effect with many firms not paying their suppliers until paid themselves; and
• Redundancies

This situation is a gift from the gods for the pro-active accountant. Yet this is one area that accountants often miss when they could be adding real value to their clients.

An accountant does not need to review the aged debts at year end to establish whether the client needs assistance – for some firms that will be too late. Regardless, prevention is always better than cure.

The smarter firms are already ringing their clients and asking them how their cashflow is and whether any expert assistance is required.

It is usually not a difficult process to then install good techniques to clients to ensure that invoices are paid quicker, bad debts are reduced or even eradicated, disputes over payment are quickly resolved, all resulting in increased profits and greater cashflow.

This will usually involve helping clients to:

• Credit checking all of their new (and existing) clients;
• Taking deposits from their new clients until payment pattern is established;
• Setting (and sticking to) credit limits for their clients;
• Setting up direct debit / standing order arrangements where workable;
• Having effective dispute resolution procedures;
• Avoiding ‘own goals’;
• Having a controlled reminder process for overdue amounts;
• Enforcing bad debts;
• Litigation

It should be remembered that effective credit management starts not when an invoice is overdue, but starts the moment a new customer walks through the door. It is understandable that businesses are keen to make as many sales as possible in this current climate, but that old maxim should always be remembered:

“A sale is not a sale until the money is in the bank”.

Don’t overlook this important area of opportunity for your business. The more you help your clients in this area, the more clients of yours will survive this current economic downturn. Additionally it is an opportunity for you to generate some additional profit whilst generating positive word of mouth referrals.

Here, Baiju talks to Jason Dormer about challenges in business.

Tell me why you started Performance Coaching and Training Ltd?

My passion has always been in educating, motivating and inspiring. In my formative years I used to teach Psychology and the satisfaction I got when I knew I could make a difference to people was immense. Having trained as a Performance Coach the last number of years, while working full-time, it was a natural progression for me to start my own company where I could assist individuals and business is be the best they can.

What were the obstacles that you faced and how did you overcome them?

Before starting up my main obstacle was leaving a secured well paid full time job as a Sales Director and start of on my own with no security of income. I have had this ambition since 2001, but only really decided that I was going to start up on my own in 2006. Once I decided to leave it was easy, both from the point of view of how I started to think and the opportunities that come up for me, that enabled me to leave my job and pursuer my ambition of being a full-time Performance Coach and Trainer.

What would you do differently if you could start again?

Talk to more people about starting out on your own; you can never get too much advice. In hindsight maybe start to actually pitch for the kind of business I was looking for. Because of the nature of what I do, I completely understood the right mindset needed. I actually decided to leave my job and start on my own 18months before I actually quit. This meant I could get my mindset and circumstances in a state such that It was the most natural thing for me to do. When you actually make a decision with conviction its amazing how your mind and thinking leads you towards opportunities and events that will assist you when starting on your own.

What do you see as the biggest challenges for your business and how do you plan to overcome them?

The obvious is to generate enough cash flow and profit to keep going. However the biggest challenge is to ensure you never give up. One thing I know that is certain is that I WILL have bad days and I WILL have good days. When there are good days it’s great, you go with the flow, you can only think positive things and see the light. When you have bad days, this is the time when your conviction passion desire etc needs to kick in. Its very easy, when you are having the bad days to think, well I’ll just get a job, regular income, its not worth the hassle, I’ll probably won’t succeed anyway, and guess what you’ll be right. Whatever you believe you’re right.

The biggest challenge is how you react to those bad days, will you allow yourself to stay with the bad thoughts and feeling or do you do something about it. What you can do, and the one saving grace you have when you start your own business, is to associate yourself with like minded people. NETWORK. There are more people than you may think, in exactly the same position, and networking is the way business is done in today’s world. Networking is also a great way to talk and exchange ideas about what is working and what isn’t. I probably go to about 2-3 networking events per week. Over 80% of the business I have generated is a result of the networking events I have attended. However it does take time.

Where will your business be in five years time?

The No. 1 Performance Coaching Consultancy in Essex.

What do you love about your business?

My aim is to give business and individuals a way to understand how they can perform at the best more often. The reason we don’t perform at our best is because ‘stuff’ happens in our life. I love the fact I have the opportunity coach people to be the best they can. As a former lecturer in Psychology, I loved it when a student understood and developed as a result of my teachings. Being able to coach and train for a living gives me that same satisfaction.

And what do you not enjoy in your business?

The stuff for me, is all the admin bits, accounts, and the waiting for decisions. You find that although my business is about Coaching and Training, the majority of my time is spent generating business. i.e. marketing, networking, sales etc that can challenge you if you don’t have the right mindset.

What do you think are the main reasons that many ‘would be’ entrepreneurs stay in jobs they don’t like instead of creating their business dream?

For exactly the reasons I have mentioned before. They haven’t got the right mindset or at least are not prepared to understand what that mindset needs to be. Fear of Failure, Fear of Success and Fear of the Unknown are common drivers for people to stay in their jobs. The job gives you a secure income, but guess what job stands for Just Over Broke! In order to start your own business you have to come out of your comfort zones, and this can be painful. Many would be entrepreneurs stay in their jobs because the pain of leaving their jobs, to follow their dream, is just that, too painful. The pain to stay in their job is less painful than the pain of leaving and creating their business. Until the pain of staying in their job becomes greater that the pain of starting their business they will never leave.

How could you help people overcome these fears?

It goes back to the pain. When there is enough pain they will do something about it. The way to overcome fears is to truly understand your WHY? This means having reasons for the change. Fear stands for False Evidence Appearing Real. When looking at the fears people have about change, most of the concerns are based on assumptions they have made about starting out. By tackling some of these assumptions and challenging their limiting beliefs you realise some fears are unfounded. Having said this there will still be some concerns about starting a business, this goes back to what mindset is needed to give you the best chance to succeed. What I can give you are tools and techniques that enable you to overcome these fears when they occur. A series of coaching sessions will give you a different perspective on how you look at things and an understanding on how to better deal with your fears.

What advice would you give to anyone thinking of starting a business?

Talk to people. There is a presumption that people want you to fail. This couldn’t be further from the truth. What you will find is that the people who having already running their own business will be more than happy to talk about what works and what doesn’t and the people who are still in a job will be, on the most par, very supportive and quite impressed that you made the jump. Some will even be quite envious that you had the courage to take the plunge and they are still at the beck and call of their employers.

Can anyone do it?

Yes. With the right mindset they can do it. It is very important that you have clear goals and objectives for your business, you are doing it for the right reasons and that you research your market.

What advice would you give to those already in business who are not reaching their potential?

Why not? What are you doing that means you are not reaching your potential. When we are in business it is very easy to ensure that procedures are in place and you know your market etc. However how much time have you invested in ensuring that you are at your best more often? You probably still have the motivation and desire, however are you working in your business or on your business? What would be the payoff if you were able to perform to your potential more often? Investing in yourself stays with you forever it is priceless. Even by answering these questions you may still be wondering what you can do to reach at your potential. A coach will challenge you about how you are performing and see if you are operating within your comfort zones. As your coach I will be the person who holds you accountable to ensure you are at your best and you are getting the results you are looking for.

How do you keep motivated when you are not answerable to anyone?

Exactly, how do you? We all have a honeymoon period when we start our own business, the excitement of going alone, being your own boss, work when you want, its great. Then reality kicks in and you doing everything, from banking, sales, marketing, admin, meetings, delivery. To ensure you are kept motivated and more importantly kept on the right path to meet your goals and objectives you would benefit from using a coach. The coach’s role is to ensure you keep on the right path and help you deal with the ‘stuff’ that prevents you from being at your best and produce the results you want

How do you relax?

I have a beautiful family, my wife Sangita and three lovely children Sapna(12), Milan (10), Suraj (5), take up a lot of my time. I play cricket for Southend-on-Sea Cricket club and am the Secretary of the club. In addition to this I am involved with Essex CCC organising the Southend Cricket Festival. Relaxation for me is doing something that makes me feel good, family, cricket and socialising with like mined people.

Name three famous people who you are most influenced by and give your reasons.

Richard Branson – his single minded determination to have an idea and follow it through with appropriate action and to never settle for second best.

Gandhi – For his passion to do the right thing without compromise

Sachin Tendulkar – For his courage and ability to handle the pressure to perform with 1 billion people wanting him to succeed.

Tell us something interesting about you

I ran the London Marathon in 2005, ran all the way didn’t stop, not even for a pee and finished in 4 hours 49 mins 31 secs. My aim was to run sub 5 hours which I achieved.

Baiju offers free initial consultation and can be contacted on:

Tel: 07968 533918
Email address: baiju@pctconsultancy.com
Website: www.performancecoachingandtraining.co.uk