How to avoid cashflow

Here are two startling statistics of start-up businesses:

·         One in four businesses don’t make it through the first year

·         More than half don’t survive past the fifth year of trading

There can many reasons for this, but one of the main reasons for this is down to cashflow – without it, a business simply cannot stay afloat. Below are some of the most common cashflow problems and some advice on preventing them from occurring in the first place.

Keeping accurate company records

Lots of new business owners put off bookkeeping duties as they are so busy with the huge workload that can be involved with setting up a new company.

The longer the books are neglected, the worse the problems will get; records and forecasts are pivotal to you knowing what is happening in your business.

It’s also important to ensure that you keep a proper record of what customers have and haven’t paid you to avoid significant sums of money that may owed to you getting overlooked. An effective accounting system is vital to manage your cashflow.

If you don’t have the time to do this yourself, an accountancy practice or bookkeeper will be able to do this for you.

How to manage company debts

Slow payers or bad debt is money that is owed but not paid.

This can be crippling for any new company but is usually preventable if a proper credit control system is put into place early on. If you discover that a customer has a poor credit record but you still want to take them on as a client, ask them for an upfront deposit or issue partial invoices so they can pay as portions of the work are completed. In other words, understand your customers and manage the risk.

A customer at any cost?

Calculate very carefully if want to offer credit terms - does your business model support it? If it doesn’t work early on don’t do it; you can always introduce credit terms as and when the business can afford it.

If you are currently in this situation then re-negotiate terms with your customers and/or suppliers or consider factoring the debt.

No cashflow forecast

A cashflow forecast is vital for any new business and is something that a qualified accountant can put together for you. This will allow you to forecast the months you can expect to see a cash deficit and the months when you may experience a surplus.

It will allow you to plan ahead as well, as give you a pretty good idea of how much cash your business is going to need over the next 12 months in order to survive. It is a good idea to keep the forecast on a rolling 12 month basis.

Free of charge accounting advice from Chartered Accountants

Omni Chartered Accountants offer totally free of charge advice for any business – new or otherwise – that may be experiencing difficulties. We are also here if you or would like to find out more about our cost-effective solutions that are designed to help your company run smoothly.

Call us now on 01902 837 408 or request a free of charge call back from our website today!

Self-employment tips – part one

One of the main benefits of becoming self-employed is the ease with which you can start up and run your new business.

In part one of our special feature, we take a look at some of the important things that you may wish to consider before taking the plunge.

You can even become a sole trader (another term for self-employed) whilst working as an employee for someone else, so you can test the water and see if you’re suited to working for yourself.

Here are first top tips for when you decide to go self-employed:

How to register as self-employed with HMRC

Once you set up as a sole trader (or work as a partner in a partnership if there’s more than one of you), you will be responsible for paying your own income tax and National Insurance (NICs).

You must register as self-employed with HMRC within three months of starting trading, even if you already pay tax via the self-assessment process each year. You can register online or call HMRC on 0845 915 4515 if you’d prefer to speak to someone.

If you are unsure whether or not you need to register with HMRC, here is some help to establish whether you are employed or self-employed.

Once you start operating as self-employed, you will need to pay your own National Insurance contributions (NICs).

Do you need to register for VAT?

As of April 2015, if your business has an annual turnover of £82,000 or more, you must register for VAT.

At any stage of the business cycle, if you look like you’re going to hit this annual VAT threshold over the coming 12 months, you must also register. The threshold usually rises by a few thousand each year. Make sure you let HMRC know within 30 days, or risk paying a fine.

In many cases, you might decide to register for VAT even if you don’t need to. You may gain more credibility by having a VAT number, and you’ll be able to claim the VAT back on eligible purchases you make.

You might also consider the flat rate VAT scheme, which makes accounting for VAT much simpler. Your accountant will be able to advise you if you’d be better off on the Flat Rate or standard VAT scheme.

Need advice?

If you need advice about becoming self-employed, we are here to help – request a free of charge call back from our website or click here and we will contact you to discuss your situation.

How likely is it that your business will win a HMRC tax appeal?

How likely is it that your business will win a HMRC tax appeal?

Not very, according to accountancy firm Wolters Kluwer.

Apparently, there is actually only around a 25% chance that a business tax appeal will be successful; 75% are unsuccessful, based on Government figures.

HMRC the Revenue received 7,081 appeals in the tax year 2013-2014; 6,626 were settled. Out of the outstanding 455 appeals, only 113 were granted.

VAT expert for Wolter Kluwer UK, Glyn Edwards, said that accountants should warn clients of the difficulties appealing a HMRC decision;

“If you have a client that disagrees with an HMRC decision you need to make them aware of how difficult it is to win a case at tribunal.

“As the statistics show, only a few hundred appeals get to tribunal and those that do are more likely to be won by HMRC than the taxpayer.”

He went on to explain that accountants should always advise clients by helping with thorough research on relevant legislation, helping them with preparation for hearings and making sure that all of HMRC’s documentation is in place well in advance of any hearing.

In addition, it was recommended that clients should consider using HMRC’s alternative dispute resolution service in a bid to negotiate settlement.

Edwards went on to say;

“Clients shouldn’t be spending more time and money than the tax in dispute reserves, as they can’t claim costs even if they win in the first-tier tribunal.

“However, if an accountant feels the client has a strong case then it is certainly worth making an appeal, but only if the client has expert help, as those who represent themselves are more likely to lose.”

Of course, the above should be common sense, but can you be sure that your accountant would help you in this capacity if you found your business in this situation?

At Omni Chartered Accountants, we strongly believe that remaining in contact with our clients and guiding them along their business journey is the key to not getting into tax disputes with HMRC in the first place.

However, our bespoke, one-to-one service means that we are there whenever our clients need us and are proud of our first class service and competitive fee structure.

For more information about Omni Chartered Accountants, call 01902 837 408, or request a free of charge call back from our website www.taxandaccountancysolutions.co.uk – we are always happy to help.