Month: December 2021

Managing a business means you probably have 101 things on your to-do list every day, and organising your business finances usually takes a back seat until there is a need to.

Running a business is hard and staying organised can be difficult, but organising your business finances can actually take the pressure off, making other areas of your business run a lot smoother.

Why? The correct management of your money is what ultimately secures your business’ success, and that’s why we’re giving you eight tips designed to get you started with organisation today.

Separate business and personal bank accounts

This is the number one priority when it comes to business finance. Keeping organised is difficult anyway, but when your business transactions are mixed with your personal ones, you’re making things more difficult than they have to be.

Having a separate bank account for your business makes it easier when it comes to working out your taxes. Not only that, but the monthly bank statements you receive from your separate business account will enable you to get a clearer picture of cash flow.

Track your income

Tracking your income means keeping a note of all incoming business related revenue – that’s received and due to be received income. Knowing how much money you will have coming in will allow you to understand the limitations and opportunities of your budget, as well as supporting forecasting.

Many smaller businesses begin tracking their income on spreadsheets, but with the advancements of cloud accounting software, there are many apps that can make your life much easier (and organised!).

Apps such as Xero and Quickbooks, or our own app KashFlow, allow you to view your income and cash flow over different periods. These apps can also be useful as your accountant (should you have one), can be granted access to your accounts.

Track your expenses

It’s never a bad idea to keep a track on where your money is going. If you are not aware of your outgoings, it’s very easy to become disorganised and overspend.

Tracking your expenses isn’t only an organisational tactic, but a money-saving one too. Some of your expenses will be tax-deductible, such as travel expenses, so it’s always a good idea to have a clear structure for expenses organisation.

You can track your expenses with all the apps previously mentioned, so it doesn’t have to be a manual process.

Be strategic with how you receive payments

Ultimately your business, beyond your overall purpose, was set up to generate revenue for either a cause or for yourself.

That’s why deciding on the most efficient way to receive payments can help to ensure revenue continues to come in as expected.

If you sell a service, for example, it is important to sort out how often you will invoice your clients, and what methods of payments they can use. Direct debit payments for regular clients are a fantastic idea and can help keep you on track with your forecast.

Set aside money

We’re sure you’re aware of the importance of budgeting when it comes to organising your finances, but are you aware of the various tools you can use to set aside money for various outgoings?

Banks like Starling have created spaces within your account where you can separate money from your general balance to account for things like VAT, Tax, and even bonuses for your team at the end of the year.

If you don’t bank with Starling, that doesn’t mean you don’t have options. Check with your bank to see what’s available – you may just be surprised.

Make time to organise

The problem with running a business is that there is always something more important to be doing, and setting aside time to do admin is a mean feat.

However, setting aside even a small amount of time each week to get on top of your finances will work out better in the long run.

Spending half an hour to an hour every week sorting out receipts and invoices means you won’t become overwhelmed.

Not great with planning time? Try time blocking  https://todoist.com/productivity-methods/time-blocking.

Go digital

Having loose papers everywhere can put even the most organised of people at risk of becoming disorganised.

Digitising your financial records and accounts makes it much easier to access and organise your documents, and reduces the risk of things slipping by the way.

We understand many business owners like to keep hard copies in case of emergency or fault, but unless it’s vital, it’s just an additional thing to manage. If it is vital to keep copies, make sure these are filed strategically and stored in a safe place.

Seek Help

Sometimes, the best way to stay organised is to seek the support of an expert who lives and breathes organisation.

Consulting with an accountant, financial advisor or a VA for example will not only save time and money in the long run, but it will also help you to develop the right level of organisation specific to your financial needs and concerns. As always, if you require our assistance here at Shenward, do not hesitate to get in touch. Email hello@shenward.com

Thinking of hiring an Accountant? Want to understand how to navigate the hiring process? You’re in the right place.

It’s no longer satisfactory to conduct a google search for your nearest accountant and make the call. It’s vital you dig deeper into whether they are the right match for your business. Not only does your accountant need to be a fit professionally, but also personally.

Here, we help you understand exactly what to look for in an Accountant when navigating the hiring process, and why Chartered is the first box to tick.

Choose Chartered

Choosing to hire a chartered accountant gives you guaranteed peace of mind over the quality of service you will receive.

Chartered accountants must be accredited by a professional body. This means they must undertake further exams and practices to ensure they meet the correct standards.

Chartered accountants usually become members of professional bodies such as the Institute of Chartered Accountants in England and Wales (ICAEW), or the Association of Chartered Certified Accountants (ACCA).

Being a member of these groups means the accountant must adhere to their ethical and professional codes of conduct. You know that they are doing the right thing by you as if their working practices aren’t up to the respective standard, they may lose their accreditation. Chartered Accountants are required to have professional indemnity insurance, which means both you and the accountant will be covered if a mistake occurs and causes you financial or reputational losses.

Check if they have the relevant experience

Is it enough for your accountant to only have the capabilities to submit your taxes on time? Accountants are capable of helping you with so much more, especially if they have prior knowledge that is relevant to your business.

It’s always worth asking what kind of clients the accountant works with so that you can establish what their capabilities are to recommend the right course of action for you. Sometimes, it can be beneficial to also know what size businesses the accountant usually works with – it clarifies that they are more likely to be aware of your needs.

Check the Service Offering

This is an important one, for obvious reasons. Before hiring an accountant, you need to be aware of not only the services, they offer, but the services you require.

Many Accountancy firms offer a great deal more than the typical accounting services you would expect. The question is, what kind of services do you need? Are you only looking for assistance with your paperwork and Tax or VAT submissions, or would you benefit more from working with a multi-disciplinary firm?

Multi-disciplinary firms generally also offer services that complement your accounting needs. This could be anything from HR and payroll to health and safety or even marketing.

Ask if they are up to date with the latest technology or software

You don’t need us to tell you the business world has become predominantly digital, so when we say it’s important to make sure your accountant is up to date with the latest technology and software within financial services, you get it.

With VAT now being digital, and Tax following suit by 2024, you need to ensure your accountant has the technical capabilities to facilitate digital accounting. If an accountant has trepidation around new practices, they probably won’t be the most helpful going forward.

Asses their communication styles

This is less about the accountant’s expertise and more about how their working styles will suit your own. After all, alignment of values and workstyles plays a part in helping you decide whether an accountant is right for you.

When researching and talking to different accountants, asking how much contact they prefer to make with their clients and their preferred modes of communication – this will help you gain an understanding as to whether they value communication and the commitment they have to keeping you up to date with changes.

Final thoughts…

There’s a lot of consideration when it comes to hiring an accountant. Remember, you’re essentially hiring an integral part of your team – the fact they work externally makes no difference – so treat the process as you would if you’re taking on a new employee.

Staying on top of your tax is not the reason you got into business. We get it, it’s not fun. But unfortunately, it is a vital aspect of running and ensuring you’re on the right side of the law.

Whilst getting to grip with business tax won’t bring you immediate joy – it may leave you laughing. By following our handy tips, you can make sure you’re making the most out of your time and correctly managing tax.

Get your calendar in order

When it comes to tax, time really is of the essence. There are deadlines for payments, submissions and information updates, all of which if missed can have an impact on your business.

Keeping a calendar with all of your dates for payment (tax-related or not), ensures you won’t fall behind. Whilst you may have an accountant who takes care of your payments – you should still be aware of deadlines, as it is you as the business owner who will receive the late penalty charges.

Save time with the cloud

Cloud accounting is becoming common practice in today’s business world. Adopting online platforms within your business will save hours of time for both you and your accountant.

The beauty is, most cloud accounting software allows you to enter key dates, set reminders, and even estimate the amount of tax you’ll need to pay and when.

Take it from us, it’s a worth investment.

Keep records – and keep them accurately!

Many have been there; a lost receipt, a misplaced invoice – it all happens too easily. Stay on top of your records, keep them in a safe file and get into the habit of storing them straight away.

Even if you use online accounting, everything can still be safely stored online and in a categorised way. NB: HMRC recommends you keep all business records for six years.

Know what to claim for

Remember that expenses incurred in business can often be tax-deductible. From office stationery and equipment to travel expenses, many can be claimed. Make sure you keep your receipts as your accountant will likely want to check.

Most expenses incurred in business are ‘allowable’, but make sure you can clearly state how they are a business expense and not used for personal reasons. Also, remember you can still claim on work from home expenses. Your entitlement is a flat rate of £6 per week – without providing any evidence of your costs. Or you can claim tax relief on the exact amount of extra costs you have incurred if it is above the £6 weekly amount – but evidence must support this claim, for example, receipts or utility bills.

Check whether your business structure is working for you

There are several different business structures, and all have different tax implications. Unfortunately, there is no one size fits all approach, and deciding upon a structure is a decision personal to you and your business.

Many businesses begin as sole traders or partnerships as they require less compliance than limited companies, for example.

However, once your business is earning a certain amount, it may be time to consider changing to a limited company. This means your business is a separate entity to you personally, so rather than paying income tax on all of your earnings as a sole trader, you pay corporation tax. This is, generally speaking, more tax-efficient – providing your business is earning over a certain threshold of roughly about £30,000.

Decide on the most efficient way to pay yourself

As a business owner, there are many different ways you can pay yourself. It all depends on your business structure and is a decision that is different for each individual.

A common way for business owners of a limited company to pay themselves is via both a salary and dividends. Usually, that salary does not exceed the Personal Allowance threshold and as such is not subject to income tax. NB: In the 2021/22 tax year, the threshold is up to £12,570.

Don’t be confused by VAT

When your business is turning over more than £85,000 you must become VAT registered. Despite being known as the ‘simple tax’, it can actually cause a lot of confusion. It is worth discussing VAT with an accountant or financial advisor to determine whether your business would benefit from the VAT Flat Rate Scheme or cash accounting, and to understand how VAT generally impacts your business costs and transactions.

Remember… We’re here to help

Running a business requires a lot of planning and strategy. We understand that it can be overwhelming to remember all the considerations needed to run at an optimum level. As always, we are here at Shenward to offer you unrivalled support and advice about any of your business concerns. Contact us at hello@shenward.com

When the word tax is mentioned, everyone who’s not an accountant cringes a little inside, but the matter of fact is, your tax liability is something you can’t escape from and sooner or later, you need to face it head on and figure our a way to manage it.

Yes, tax liability can be difficult to wrap one’s head around, especially when trying to determine the legalties but there are steps you can take to correctly manage the amount of tax you pay whilst also remaining compliant.

Here we offer seven tips to help you manage your tax liability, focussing particularly on corporate tax liability, with some reference to self-employment where necessary.

1 – Correctly Account for All Business Expenses

We all know running a business costs money, but it’s not just the business side of things that incurs costs. Simple things such as travelling to meetings, providing lunch for the team and investing in new stationery or equipment are all overheads which build up on a monthly basis but can slip through the net on your personal statement if you use your own card whilst out and about.

All of these business expenses can be tax-deductible – providing they are used solely for business use and the correct records are kept to claim on them – so make sure you correctly account for them.

2 – Optimise Your Salary Structure

For business owners, the key to saving on tax is paying yourself a salary in two parts. Part of your salary should be paid through PAYE with tax being paid only when you break the threshold of £12,570, and the rest should be paid as dividends.

The reason this is effective in reducing your tax liability is that dividends are only taxed at 19%, where as income tax increases the larger your salary is.

3 – Giving is Receiving (i.e. Charitable donations)

Companies are eligible for tax relief for qualifying donations made to charities. The donations are deductible from the company’s profits in the same tax year as the donation was made. This offsets the amount a company pays through Corporation Tax.

There’s a huge focus on businesses giving back, so making the decision to donate to charity is recommended regardless of the implication it has on your tax liability.

4 – Pension Contributions

An employer can give decide on the size of the contribution they make to their registered pension scheme, regardless of the related salary. For tax relief to be granted on an employer’s contribution, it must be deducted as an expense when calculating the profits, which will therefore result in the company’s profit being reduced, as such lessening the corporation tax.

NB: An employer pension contribution will not be tax deductible if the contributions were made for non-business purposes.

5 – Review your VAT payments

Providing your company turnover does not exceed £150,000 per year, and you work for clients who are also VAT registered, applying for the VAT flat rate scheme could be beneficial for cutting costs.

Using the Flat Rate Scheme for VAT means you add up all of your sales, including any VAT you’ve charged to your customers, applying a fixed percentage to those sales. The flat rate can be between 6.5% and 14.5% depending on your business and industry. For the first year on the scheme, you also receive a 1% discount on your rates.

However, you cannot claim back the majority of the VAT on purchased goods and expenses for your business. This is except for capital asset purchases which are over £2,000 including VAT.

6 – Make Use of the Annual Investment Allowance

The Annual Investment Allowance (AIA) allows you to claim 100% tax relief for capital expenditure on plant and machinery. Qualifying expenditure applies from £200,000 to £1,000,000.

Assets that qualify for AIA fall into the categories as listed:

• Office equipment, including PC hardware, software and furniture
• Integral features of buildings (e.g. lifts and escalators)
• Fixtures including air conditioning or fitted kitchens and bathrooms
• Agricultural machinery
• Machines for business purposes
• Lorries or Vans for distinct business and moving purposes.

The AIA spending limit was temporarily increased to £1,00,000 between 1^st January 2019 and 31^st December 2021, it is assumed that it will go back to £200,000 after this period. Businesses therefore have just under a month to use the AIA scheme to maximum capacity before the temporary limit ends.

7 – Use Your Accountant Wisely

Making the most out of your accountant is key – especially when it comes to tax liability. Not only do you want to ensure you are reducing your costs, but you need to make sure you’re doing it compliantly.

The difficulty with looking at tax liability is there are a lot of tips, tricks and schemes to help you save on tax but questions and queries around eligibility make it hard to know if you can take advantage of the suggestions.

Always take your accountants advice. It’s not a matter of just saving the most – but a matter of being on the right side of the law. Your accountant is well prepared to make sure you’re running your business cost-efficiently and luckily for you, they are experts at ensuring you remain compliant.

We’re not limited to 7…

These are just seven of the ways to help manage your tax liability, but you are not limited to only these seven tips. There are always new schemes that you and your business can take advantage of, that is why it’s important to stay up to date with all the changes.

Whether it’s signing up to our monthly newsletter, or following us on social media – we are always sharing insights and the latest news and advice to help you along the way.