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Business finance today is fast-paced and often complicated. The type of support you need from your accountant will evolve as your business grows or your goals change.

There isn’t a one-size-fits-all in terms of our approach which is why we’ve outlined some examples of how we can help your business, in this blog.

Starting a new business

Starting a new business is a very exciting time. Whether you’re putting your existing skills into working for yourself or you’re venturing down a new path entirely, the prospects of what this business could be are endless. All the opportunity, and all the liability, sits on your shoulders. There are lots of strategic decisions to make even in the early days, and for many, this can feel overwhelming.

Rather than make those decisions on your own, with little-to-no experience of running a business, utilise the expertise of an accountant to guide you through this unknown territory – after all, you don’t know what you don’t know! Accounting Clarkes work with lots of start-ups at this delicate part of their entrepreneurial journey. We help them to make the right decisions for their business and lifestyle, setting them up for success. Here’s some examples of how we can help you:

• We help you identify the right legal entity for your business (and the process of setting up a limited company if that’s what you decide)
• We advise you on selecting the right accounting system (and help you get set up and establish good bookkeeping practices)
• We take care of your self-assessment or filing of company accounts (getting your relationship with HMRC off to a positive start)

Business accounts

Every business, whether you are a sole trader or a limited company, will have annual business accounts to prepare and file. The legal requirements for limited companies are greater which is why it’s important to choose the right legal entity for your business. Remember that the right legal entity can change as the business grows.

Even if a business is not profitable or even trading, annual company accounts still need to be prepared and filed with Companies House.

Preparing company accounts can be complicated and time-consuming which is why many of our clients hand this responsibility to us. Our clients tell us that this makes life less stressful for them, and they can use that time and energy elsewhere in their business.

Tax planning

This is a key area of support we provide our clients. Understandably, every client wants their business to be tax efficient. Nobody wants to calculate their tax incorrectly and face the repercussions with HMRC. Mistakes can easily be made (and tax efficiencies lost) if you aren’t up to date with tax rules and thresholds. We saw a lot of change in this year’s Autumn Budget which will require all business owners to take a closer look at their tax planning.

How would it feel to know that your business is paying the right amount of tax, you’re making use of all the allowances and reliefs available to you, and you’ve budgeted to pay all your tax bills when they fall due? In our experience, this removes a lot of stress from our clients. It can often bring new opportunities, with reliefs freeing up cash to invest back in the business.

We look holistically at your business and personal taxes and align them with your goals. We can take care of:

• Corporation tax — computation and submission
• Personal tax — self assessment
• VAT
• Capital gains
• Payroll

Navigating business growth

As you have probably already experienced, success is rarely linear. You will need to make strategic decisions along the way to reach your financial aspirations and personal goals. Though instinct and ‘gut feel’ can prove fruitful, the best advice is to be informed by the numbers in your business.

This isn’t always an easy task. Accounting Clarkes clients can lean on the 60+ years of experience we collectively have, helping businesses from start-ups to large corporations. We can take you from understanding what the numbers mean to improving efficiencies in your systems. We help our clients to navigate business growth through:

• Management accounts – from budgets and forecasting, pricing, cashflow management and management reports to assist decision-making
• Business consulting – where we dig deeper and offer strategic advice on accounting systems and internal audits, for example.

We bring our expertise and knowledge to your business to enable it to thrive as you so wish.

Tailored advice for your business

We hope that this article gives you food for thought. As we said in the beginning, our advice is tailored to the business and the individuals within it. The easiest way to find out exactly how we can help you is to get in touch. Let’s have a discovery call to find out about your goals and aspirations, what challenges you are facing and how we can set you on the path for success.

Call 01252 612484 or email gillian@accountingclarkes.com

At Accounting Clarkes, we find it a privilege to work closely with business owners. We’re there to help them celebrate the good days and weather the difficult ones. We recognise that one of the biggest challenges that business owners face today is managing increasing costs. With the soaring impact of inflation increasing the cost of raw materials and overheads such as rent rates insurance and IT/ telecoms, there is a significant strain on business finances and the constant consideration of whether to pass these costs onto customers.

In this article, we share practical advice to help you review your budget and tackle those increased costs.

Step one – Identify where you are wasting money.

When you’re conscious of increased costs eroding your profit, it can be tempting to focus on big figures. In reality, it’s the smaller costs that go unnoticed which do more damage. If you pay attention to the smaller values and find several to reduce or cancel altogether, those small savings will soon add up. With these simple tips, you might spot some great savings and move into 2025 knowing you aren’t wasting a penny!

Review the costs coming out of your account regularly – go through your bank statements line by line. For each cost, ask yourself:

1. Do you know exactly what that cost is for?
2. Is it necessary?
3. Is there a contract renewal date to consider? More about to follow.
4. If a subscription has continued longer than you thought, could you apply for a refund?

Once you’ve identified the subscriptions you no longer need, it’s time to see if you can reduce the ones you do:

1. Review the benefits/features of what you are getting for your money. Is there a lower-priced package that covers your needs?
2. Are you out of contract? Speak to your supplier and try to negotiate a better (cheaper) deal.
3. If the supplier won’t budge, it’s time to shop around to see what other deals are available. It’s a sad reality these days, but loyalty isn’t often rewarded financially.

Step two – plan ahead for the bigger costs.

Budgeting isn’t just about reducing costs. When running a business, you will have operating costs that you simply cannot avoid or reduce – they are what they are! We’re referring to things such as your utility bills, insurance and of course tax. It is also wise to plan for a financial buffer to cover times when you aren’t working like taking a holiday or when you are sick.

1. Calculate what these big bills add up to and what you need to put aside each month to contribute towards them.
2. It’s easy to build up a buffer by putting small amounts aside each month. Opening a second bank account means the money is kept separate from your daily business finances.
3. Diarise when bigger costs are due – remember that late payment of taxes can incur penalty fees and interest!

How close are you to the numbers in your business?

It’s not uncommon for business owners to estimate their costs – they just simply aren’t close enough to the numbers! We recommend that you review your costs each quarter (ideally monthly). It’s so easy to do! Use the pre-defined reports in your accounting software and get an accurate view at the click of a button.

If you aren’t confident enough with the numbers, or you want to get better at understanding how to accurately forecast and budget in your business, call 01252 612484 to speak to Gillian or Chris. We’d be happy to help you build a profitable business.

The team at Accounting Clarkes has worked with hundreds of businesses like yours. We’re well versed in the common misconceptions and mistakes that are made, and we know the right solutions to put them right. If you don’t already, follow us on LinkedIn and Facebook where we regularly share snippets of advice each week.

In this article, we’re going to focus on why this time of year is ideal for giving your business a financial reality check. As humans, we naturally reset when the schools go back. Do you have a bit of a spring in your step this week? Are you feeling more energised and focused on tackling those goals again? Then this is a great time to check in on the numbers in the business.

Does your business need a financial reality check?

It’s easy for business owners to get caught up in the day-to-day operations of the business and overlook the importance of regular financial checks. Even if the business is trading well, keeping close to the numbers, especially what’s coming in and when, is vital to avoid a cashflow disaster.

Checking in with your finances is a bit like using GPS to work out where you are. Your goals are the direction you want to head. If you set them at the start of the year and start walking, how do you know how far you’ve reached without regularly plotting your current location? At the very least, using the halfway point in the tax year (or the halfway point in your accounting year) to mark where you have got to. In an ideal world, we recommend businesses do this on a monthly basis to have a solid grasp on their numbers.

Why financial awareness is essential for SMEs.

We’ve explained the importance of knowing where you are in terms of reaching your financial goals, but financial awareness will also:

• Help you to spot warning signs early. As soon as actual numbers don’t line up with budgeted numbers, there could be a problem. For example, you may notice that you’ve spent more than you’ve budgeted for and that’s easting into your profits. A noticed problem is one you can begin to address and remedy before it escalates.
• Help you to make informed decisions. We love it when our clients come to us with questions about how they can grow their business. The answers are almost always in the numbers! Whether it’s the opportunity to take on a new member of staff, invest in new equipment or launch a new product, your financial data will guide you.
• Help you to prepare for future opportunities. Some of you may be thinking further down the line – perhaps you need to attract external investment, or you want to sell the business and get the best value for it. In either circumstance, having a clear picture of the financial health of the business over time is essential.

How can you ensure your SME business is financially fit?

Here’s our recommendations and some helpful resources:

1. Create a budget. Not sure how? Check out “How to effectively forecast your budget.”
2. Monitor your cash flow. Do you understand the difference between accounts receivable and accounts payable pays? We explain it all here.
3. Track profitability. Understanding your profitability is essential for measuring your business’s success. Do you understand the difference between a profit and loss and cashflow forecast? It’s a common question we’re asked and we answer it here.

Finally, you can ask your accountant! A qualified accountant can provide invaluable guidance on financial management as well as tax planning and compliance.

Don’t bury your head in the sand!

If reviewing your business financials gives you the jitters and you’d do anything to avoid it, you need a supportive, friendly accountant. One who understands the ups and downs of running a business.

We help our clients to better understand their numbers every day, and as a result they become more confident with them. It’s never too late. Book in for a initial meeting with Gillian and Chris by calling 01252 612484 or email gillian@accountingclarkes.com.

 

 

 

Whether it’s a long weekend or a month-long getaway, every business owner needs to take time off from work. A break from the day-to-day running of the business gives you the opportunity to recharge, come back to work refreshed, and can also boost motivation and creativity.

From our own experience, we understand that taking time off from the business isn’t always so simple. If you’ve moved from employment, you’ll know that running your own business is not a 9-5 job! When you become a business owner, you are responsible for the decisions and for making sure the business continues to function when you are away from it.

It can feel like a challenge to step away from work and switch off, so we’ve pulled together some tips to help you.

How to take time off from work – top tips!

Tip 1 – Plan it into your diary (with plenty of time)

Time off is important is just as important as a client meeting. Get the time booked off in your diary to prevent it from being double booked. If you’re taking more than a few days off, it will need more organisation so start planning ahead with plenty of time.

Tip 2 – Line up the right resource

Do you need resources to cover work whilst you are away? That decision will depend on the size of your business, whether you have employees and how long you are going for. Here’s some resource options you might consider:

• Delegate important tasks to team members or employees (remember to prioritise what must get done or you’ll leave them overloaded)
• Outsource as a short-term contract to a freelancer or agency (depending on the type of work)
• If your business is small enough or the work can wait until you return, close for the time you are away (clearly communicating to customers when you are going to be absent and how this may impact services on your return)

Tip 3 – Communication is the key to success

Communication is essential – to manage the expectations of clients and colleagues but also to have clear boundaries in place so your time off isn’t interrupted. Give plenty of notice (especially if taking several weeks off) about when you will be away and who they can speak to in your absence. It’s important to set your boundaries. If you must, include details of when it is appropriate to contact you i.e. an emergency, but where possible filter these ‘emergencies’ via someone you trust so your peace isn’t disturbed unnecessarily.

Tip 4 – Take a technology detox

If you can, leave technology at home or out of sight. We are so digitally connected that it is hard to disconnect from work even if we are physically not there. Remove work-based apps from your phone or switch off pop-up notifications. If you must ‘check in’ from time-to-time, set clear boundaries for yourself as to when you will do this and for how long. If you are replying to emails, remember that the person you’re contacting may continue the conversation – or be confused thinking you are meant to be not working!

Time away from work is good for you!

We cannot emphasise enough how important it is to take a break from work if you are running your own business. There is no annual leave legislation for you to comply with – you need to take responsibility for looking after yourself.

We hope our tips help you to successfully plan some well-deserved time off!  Join in our conversation on LinkedIn or Facebook, we’d love to hear if you’ve visited anywhere exciting.

 

Budgeting and forecasting are important parts of your business planning. It creates a roadmap for the business, helping you to understand the costs involved in achieving your goals. If you don’t budget forecast, your expenses could easily escalate, leaving you with little, or no profit.

As in life, things don’t always go according to plan. Businesses are increasingly finding it difficult to budget in this economic climate. Rising utility costs, inflation and a General Election have also had an impact on budgets, with many business owners realising they have under-budgeted.

What many don’t realise is that budgets aren’t set in stone. In fact, they shouldn’t be seen as an admin task – something you complete and then file away until the end of the year. You should be regularly reviewing your budget against actual costs to sense check if your budget is on track or needs to be re-forecast.

With that in mind, we’ve pulled together some top tips to help you effectively forecast your budget.

1. The best place to start – look at last year’s performance.

The best way to know where you are going is to look at where you have been. Analyse what you spent in the previous year, and if possible, go back further to look at how those costs had risen compared to the year before that. We recommend you use the reports in your accounting software. There is usually a pre-defined report for you to access at the click of a button.

2. Be as detailed as you can – break down costs into relevant sections.

It might feel like more work initially, but it will give you greater insights into your expenditure. The template reports in your accountancy software will already have detailed categories for you to use as a guide.

3. Record costs accurately for the best insights.

Your accountancy software will make automatic suggestions but it’s important to check they are correct. Good quality data will help you to accurately forecast in the future.

4. Review your budget regularly to help keep on track.

If you can, review your forecast and actual spend each month. If that’s too much, review on a quarterly basis. Some companies have their accountant produce management reports on a monthly basis, which will include a budget review. If you’re aware that costs are escalating rapidly, it’s best to keep a closer eye and monitor spend frequently, re-forecasting as necessary.

5. It’s acceptable to re-forecast – don’t be afraid to do it.

We’ve seen some significant changes in the economy over recent years, all of which have had an impact on business costs. Ignoring the changes won’t help you further down the line. Address them as soon as you can to maintain an accurate forecast for the business.

How effective is your budget?

If you’ve experienced under-budgeting, you’ll understand the impact it can have on your business finances. It can also knock your confidence in being able to accurately forecast in the future.

At Accounting Clarkes, we help businesses to understand their numbers better and to create robust and accurate forecasts. If you’d like a helping hand when it comes to budgets, get in touch with our helpful and supportive team. Call 01252 612484.

 

Three key areas to consider.

Some of the most successful businesses we know today were started by family members:

• Aldi supermarket chain started as a corner shop run by brothers Theo and Karl Albrecht
• Walmart was founded in 1962 by Sam Walton. His brother Bud was an early business partner, and his sons Rob and John held leadership positions later down the line.
• The son of Sir James Dyson has been named as successor to the family business having led the companies diversification into lighting products.

Whether you are just starting out or expanding your business, it’s a natural decision to consider how family members could help you. After all, you know them well enough to understand their skills and abilities, and also their quirks! When recruiting a stranger into the business, it can be a steep learning curve.

Employing a family member, whether a partner, spouse, child or other relation, will require you to do some homework first. You will need to check legal requirements from an employment law perspective and where you stand with HMRC in regards to tax.

To help you get started, here’s the key areas you need to consider:

Who can you employ into your business?

In short, anyone you are related to! If you have a good relationship and they have the skills that your business needs, why not consider bringing them into the business to support you? Whether your business is a sole trader or limited company, you can employ family members.

Family members of all ages can be considered. When it comes to those who are 16 or under, you will need to consult with an HR professional first. There are specific rules in place as to whether they can be employed.

Do you need to register as an employer with HMRC?

As soon as you employ someone to work for you, and you pay them a salary, then you are required to register as an employer with HMRC. Whether they are a family member or not, the rules are the same.

There are some, small, exceptions. If the family member is going to be a director of the limited company and paid via a dividend only, then registration as an employer is not required. If they are to be paid a salary, then yes you will need to register as an employer.

If you do register as an employer, you are also responsible for submitting PAYE records and annual returns.

How much can I pay my family?

Anyone you employ is entitled to a fair and reasonable rate of pay. Ordinarily, the National Minimum Wage (NMW) and National Living Wage (NLW) rates apply to anyone you employ but there are some exceptions.

If the family member lives inside the family home (for example your spouse or children) then the NMW rates do not have to be applied. The rate of pay you negotiate with them is up to you – remember the phrase ‘a fair day’s wage for a fair day’s work!’

If the family member does not live inside the family home, you will need to pay at least the NMW, or the National Living Wage if they are 21 years old or over. The NMW rates were last updated in April 2024 and you can find them here.

Don’t forget to factor in salary deductions for anything connected to the job or through salary sacrifice. If you fail to calculate the minimum wage correctly, you could be underpaying your workers. Also, that family members unless directors are NOT exempt from auto-enrolment.

The risk of getting it wrong

Employing family members into your business might seem like an easy win, and in many cases it will be a positive decision that gives you great support. However, if you aren’t mindful of the legal and financial aspects that go with it, you could put yourself in the spotlight with the authorities:

• You could be prosecuted for employment law breaches
• Receive fines and penalties from HMRC
• Potentially damage the reputation of your business with customers
• Harm valuable family relationships

We’ve noticed that HMRC is paying close attention to employers falling foul of National Minimum Wage rates. It won’t matter to them whether this is a member of your family or not – failure to pay the correct minimum wage is an offence they won’t take too kindly to. If you have spotted that you are underpaying, you must correct it as soon as possible through future payments, including any back pay.

 

Accounting Clarkes is a family-run business so we understand the trials and tribulations of working with family members. We can speak from experience and help you to decide whether employing a family member is right for you. Call us on 01252 612484 to tell us about your business and what you are looking to achieve in the future.

 

 

The importance of understanding the difference between accounts receivable and accounts payable days

Every business owner has heard about the importance of cashflow – that cash is the lifeblood of the business. Your company might be great at making sales BUT until that sale has materialised as cash in your bank account, it is merely a figure in a sales report. The money has not been received into the business to be used to pay suppliers, or wages, or realised as profit for example. We understand that businesses will spend the amounts owed before the cash is received, but that can be a risk. In this article, we explain why and the importance of understanding the difference between accounts receivable and accounts payable days.

What are accounts receivable and accounts payable days?

Accounts receivable is the amount owed to the company from the sale of products and services on credit. Accounts receivable days are how long it takes, on average, for customers to pay their invoices.

Accounts payable is what the company owes to suppliers, and accounts payable days are an average of the credit terms offered for those purchases.

They are separate calculations but they are interlinked. Understanding the difference between accounts receivable and accounts payable days will help your business to have positive cashflow, and to adequately manage any cashflow issues should they arise.

What should my accounts receivable and accounts payable days be?

As a general rule of thumb, your accounts receivable days should be less than your accounts payable days. This means you will have the cash in your bank account ready to make payments to your suppliers on time and in full (within the specifications of your credit terms). The bigger the difference between the two, the larger the buffer your business has in case customers don’t pay their invoices on time.

If the difference is small (a day or two) then there’s an increased risk that if a customer takes longer to pay you, you won’t have the cash in your account to pay your suppliers on time. You could incur a late payment penalty as a result.

The situation your business must avoid is having accounts receivable days MORE than accounts payable days. In that scenario, your business will need to have plenty of cash reserves to pay suppliers on time, before getting paid by customers. If a customer then had an issue paying you on time, you could be left in financial difficulty.

How to calculate accounts receivable and accounts payable days.

The formula to calculate your accounts receivable days (how long it takes on average for your clients to pay you) is:

(Accounts Receivable / Total Revenue) x Number of Days

In plain English, the calculation is (Total amount on credit with customers / Total amount of sales) x 365 (as you typically look at this calculation across a year).

If your total sales in a year are £200,000 and £25,000 of those sales are on credit, the calculation would be: (25,000 / 200,000) x 365 = 46. It takes on average for your company to receive payment for a sale on credit in 46 days.

Accounts payable days are the credit terms you agreed to with your supplier which typically are 30, 60 or 90 days terms. If the average accounts payable terms are 60 days, then accounts receivable being 46 days is positive. If the average accounts payable terms are 30 days then there will be a cashflow issue, and you will want to consider ways to reduce your accounts receivable days.

Ways to reduce your accounts receivable days.

If you need customers to pay their invoices quicker and reduce your accounts receivable days, there are several options to consider:

1. Incentivise paying early –reward customers who pay early with a small percentage discount.
2. Make it easy to pay– consider if there are alternative payment methods you could offer which simplify paying the invoice for the customer.
3. Be proactive and regularly communicate – you can easily set up automatic payment reminders in your accounting software but nothing beats picking up the phone and speaking to a customer. Contact them as the due date approaches, don’t just wait for the invoice to be late.
4. Implement late fees and stricter payment terms – you may find that implementing late payment fees encourages customers to pay on time in the future. It may also be worth reviewing the amount of credit you offer future customers to help reduce accounts receivable days.

What does ‘good’ look like?

There is no one-size-fits-all description of exactly how many accounts receivable and accounts payable days are good – it depends on many factors. Each will have its own influencing factors on the standard credit terms. How much cash is already in the business and what it plans to achieve over the next few years will also have an impact. What may be good today might not work for the business in the future.

If you are finding that your accounts receivable days are increasing or you would like expert advice on how to monitor and improve your cashflow, speak to the team at Accounting Clarkes on 01252 612484.

 

 

 

Did you know that April is Stress Awareness Month? Being a business owner can be stressful at times. Growing your business to the point of needing employees can add even more stress! You’ll need to:

• Recruit the right person for the role
• Negotiate the right terms and conditions
• Organise employment contracts and register as an employer with HMRC
• Invest in tools and equipment so they can do their job
• Pay them on time and correctly!

As well as paying the employee, you’ll also need to pay tax and National Insurance contributions to HMRC, and set up auto-enrolment with a pension provider to provide a company pension scheme. Finally, as well as the regular payroll reports you need to submit, there are annual reports and admin to complete as well.

As you can see, becoming an employer and running a payroll can add a lot of responsibility to your shoulders, taking up more of your precious time. Time that could be (and needs to be) focused elsewhere on your business. This is why outsourcing payroll is a common solution for growing businesses, but it isn’t the only option.

 

Can I run payroll myself through my accounting software?

If you’re happy to allocate the time to running payroll yourself, you could do that. If you have accounting software already in place, this is a logical route to investigate. Most of the major accountancy software providers have a payroll module or add on to integrate, which will record payroll runs in the company accounts.

If you choose this option for your payroll, you need to understand that you are entirely responsible for providing all the information and data that the system will use to calculate the payroll. This isn’t just the rate of pay and hours/days they have been worked. Every member of staff needs to have correct contact details, date of birth and National Insurance numbers for accurately reporting to HMRC. Any error can put you at risk of not being compliant, cause additional work to resolve and potentially delay paying the employee or HMRC on time.

You’ll need to invest time in learning the payroll system and allocate time each week or month to run the payroll. Ask yourself – could this time be better utilised elsewhere in the business? A payroll professional is likely to complete the work in less time with higher levels of accuracy.

 

Payroll is a specialist skill

Running a payroll isn’t just about paying each employee the right amount of pay each time. You also need to consider holiday pay, sick pay, ad hoc or regular overtime, and performance related pay. All of these elements can vary from each payroll run, and getting any of them incorrect could see you breach employment legislation. For example, if you have an employee who regularly works overtime, they are entitled to additional holiday.

Having knowledge of the relevant UK legislation is essential and must also be kept up to date. In April 2024, we’ve seen changes to eligibility for National Living Wage rates as well as the annual minimum wage rate increases. New legislation for Carer’s Leave has also been introduced, permitting employees to access one week of unpaid leave each year for carer responsibilities. This would all need to be recorded through the payroll process in the right way.

 

About the payroll team at Accounting Clarkes

Our payroll services are looked after by Chris and Gillian. They both have extensive experience in payroll. They fully understand key payroll matters and legislation and have many years experience running payroll in both small and large organisations. They understand the pressure a business owner feels to ensure each and every payroll is run accurately and on time. Many of their growing clients outsource payroll to Accounting Clarkes once they take on their first employees, assured that this area of their business is correctly managed.

If you’d like to discuss your payroll needs with Gillian or Chris, call 01252 612484 for a friendly chat about your business.