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We frequently come across the fact that business owners rarely use their accountancy software to its full potential. They are comfortable using it to send out invoices, quotations, and track payments (some even go as far as submitting their self-assessments) but that’s it!

There is SO much information feeding into your software and all the insights are sat there waiting to be discovered. It’s such a waste that business owners don’t know what’s in there (remember our blog on “you don’t know what you don’t know”) so we’ve decided to do what we can to put that right. Here’s an insight into what you’re missing and how to go find it!

Pre-defined reports which are already part of your subscription

We work with all the major accountancy software providers (Xero, QuickBooks, Sage, FreeAgent et al) and they all have a reporting section to navigate to when you login. There’s no need to build a report from scratch (or revert back to an Excel document), they all have pre-defined accounting reports set up and ready to go. The typical high-level reports you’ll see:
– Profit and loss (view your income and expenses over a period of time)
– Balance sheet (a summary of what your business owns and owes at a given point in time)
– Cashflow forecast (an estimate of the expected flow of cash in and out the business over a period of time)

Our best advice here is take a look at each report and build your understanding of what the report is telling you.

A word of warning – the reports are only as good as the data feeding into them

Put in the nicest way, putting rubbish in will mean you get rubbish out. For example, the cashflow forecast will be most effective if you input all your expected billing (when it’s likely to be paid) AND your known expected outgoings.

If you had to, you could write a list of all your expected business costs for the next 12 months. If you’re unsure, use all the costs you paid in the previous 12 months as a starting point. Rather than hold that information in your head, input it into your software so that when you run that report it’s as accurate as it can be.

It will help you to spot cashflow issues if you have a run of bad luck with late paying clients – and it might even incentivise you to keep on top of them!

Customise the reports to your business – not forgetting the accounting dashboard

Once you’re a bit more familiar with the reports, customise them to meet the needs of your business. Your accountancy software provides standard templates that fit most businesses but to get the most insights you’ll need to tailor them. If you’re unsure how to edit the reports, there’s normally a help or FAQ section to assist – sometimes they have short video clips to show you exactly what to do. If all else fails, ask your accountant.

We also recommend customising your accounting dashboard or the overview page you first see when you login. Here is where you want to be able to get a clear snapshot of the financial position of your business. Ask yourself “what information do I need to make daily decisions about my business?”

Once you’ve got the basics right, then move to the add ons

From our experience, the standard accounting reports are included with any basic subscription from the main software providers. As you start to dig deeper into the insights or you add more automation into your transactional processes, you may wish to explore add ons which usually come as an added cost (typically a monthly subscription fee). Typically, the value of these add ons lies in:

– Saving you time
– Improving the customer experience i.e. adding a payment system like Stripe or Zettle
– Helping you to track business costs more accurately i.e. electronically capturing receipts with Dext
– Helping you to track billing time for clients i.e. MinuteDock.

What your basic accountancy software subscription should be doing for you:

– Showing you your financial position in real time
– Giving you an understanding of what is going to impact cashflow in the near future
– Enabling you to make smart business decisions

We always have time for our clients if they are wanting to get more from their accountancy software. It often prompts great conversations about their business! If you like to explore working with Accounting Clarkes as your accountant, let’s have a chat. There’s no obligation with an initial meeting but we could find we’re a great fit and we can help your business to grow. Call us on 01252 612484.

For the last five tax years, the dividend allowance (the amount of dividend income you can earn each year without paying tax) has been set at £2,000. But from 6 April 2023 that allowance is changing.

In the 2023/2024 tax year, the dividend allowance reduces to £1,000. The following tax year it reduces further to £500.

Although this looks like a small change, it could significantly impact the amount of tax you pay on your dividends.

How much tax will you pay on your dividends?

That depends on the income tax bracket you fall into.

If you’re in the basic rate of income tax (£12,571 to £50,270) you’ll pay basic rate dividends taxed at 8.75%. If you’re a higher rate taxpayer your dividends will be taxed at 33.75%, and if you’re an additional rate taxpayer your dividends will be taxed at 39.35%

If dividends are your sole source of income, then the point at which you pay tax on your earnings is £13,570 (the £12,570 personal allowance plus the £1,000 dividend allowance).

Taking positive action

The changes in the dividend allowance can’t be changed but following these steps could help you to manage the impact:

1. Talk to your accountant. We’d hope that your accountant will have flagged this change in allowances to you already. Get a meeting with them in the diary sooner rather than later to discuss the impact of this change on your personal finances.
2. Forecast your predicted sales and income. Utilise cashflow forecasting reports from your accounting software or together with your accountant to build a picture of how your company is likely to grow over the next 12-18 months and what this could mean for future dividend payments. What could your tax liabilities look like?
3. Review your options. We much as we’d love to give you the key to unlocking further allowances, we’re unable to without knowing the specifics of your personal circumstances. BUT good practice says to look at your income streams with a fresh pair of eyes. Just because you’ve structured your income in such a way previously doesn’t mean that it’s cost effective to continue.

Fail to prepare and you prepare to fail

Any change in tax allowances and thresholds, no matter how small, can have a big impact on the amount of income you take home. With inflation rates, increased utility costs and generally everything costing more right now, these changes can cause a lot of disruption to your personal finances and your well being.

One of the values we pride ourselves on at Accounting Clarkes is that we look after you as well as your business. We keep our clients informed of upcoming changes and help them make informed decisions to achieve the outcome that’s best for them.

If you have concerns about these changes or feel you aren’t well informed about your business finances, then we can help. Call us on 01252 612484 and we’ll find the right time to sit down and talk about your business.

 

If everyone is totally honest, we’d admit we don’t know everything. And actually, that’s OK!

American politician, Donald Rumsfield, famously said:

“There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don’t know. But there are also unknown unknowns. There are things we don’t know we don’t know.”

What we often come across is business owners claiming they fully understand an accountancy issue, when actually they don’t. Again, that’s OK because it’s our job as your accountant to know these things and advise you appropriately.

In the early days of starting a business, a business owner will try to do all they can from a bookkeeping and accountancy perspective until they reach a certain size. They most likely want to ‘keep costs down’ or believe their business finances are relatively straightforward. During that time, should something a bit tricky crop up they will ask a friend for a bit of advice, Google search or even just wing it without fully understanding the implications of what they are doing.

They’ve tried to turn a known unknown into a known known. The problem is the unknown unknowns are still there, and their actions could do more harm than good, particularly in the longer term.

The potential impact could see you financially worse off or penalised for getting things wrong. If you’ve made an error which impacts the level of tax you pay, HMRC are fairly swift at the action they take to recover the amount owed – best not to give them an excuse to come knocking in the first place!

What can you do to mitigate your accountancy unknown unknowns?

Unfortunately, you won’t know what you don’t know, until you know it.

Instead, take a moment to think about what your accountancy known unknowns are. What questions keep you awake at night? What gaps in knowledge do you have about your business which would help you make a strategic decision? What would you like to understand better?

If you already have an accountant, speak to them about those questions you have. Speak to them as soon as new questions arise – closing gaps in knowledge or potentially tackling problems early on will be better than letting them fester.

If you don’t have an accountant yet, consider who you might like to work with and start building that relationship. A common unknown is the right time to engage with an accountant. You probably don’t realise how soon you could benefit from working with one.

The services of an accountant will have a cost, but that shouldn’t be the reason for not working with one. The right accountant will ensure your tax affairs are set up efficiently and will help you avoid unnecessary penalties with HMRC.

If you’d like to talk to a friendly accountant in Fleet, call our team on 01252 612484 or use our contact form.

If you have plans to invest in machinery and equipment in 2023, you need to do two things: read this blog and then act quickly!

There is a generous capital allowance regime for incorporated companies coming to an end on 31 March 2023. Here’s what it is and how you could benefit from it.

 

Super deduction – what’s the big fuss about?

The impact of the coronavirus pandemic hit UK businesses hard. Amongst the financial support like bounce back loans and the furlough scheme, the government introduced a ‘super-deduction’ to allow companies to cut their tax bill when investing in qualifying new plant and machinery. It looks like this:

From 1 April 2021 until 31 March 2023, companies investing in qualifying new plant and machinery assets will be able to claim:

• a 130% super-deduction capital allowance on qualifying plant and machinery investments
• a 50% first-year allowance for qualifying special rate assets

The government wants to encourage companies to invest in assets and equipment that will help them grow and keep UK companies competitive. Super-deduction is an incentive to keep companies investing during a time where spending could easily be pulled back. Using the super-deduction they can cut their tax bill by up to 25p for every £1 they invest. Super!

 

Which plant and machinery actually qualifies for the super-deduction?

We understand that people feel hesitant when they see the word ‘qualifying’ – you immediately think the benefits are too good to be true! As a general rule of thumb, most tangible capital assets used in your business are considered as plant and machinery. Things like:

• office chairs and desks
• refrigeration units
• computer equipment and services
• solar panels
• electric vehicle charging points
• tractors, lorries, vans
• compressors
• Foundry equipment

The quickest and easiest way to know if something qualifies is to ask your accountant. The super-deduction factsheet from the government website is also handy to scan through.

 

Electric vehicle charging points count – does that mean electric cars do too?!

If you’re investing in cars for your business, then electric cars or those with zero CO2 emissions do qualify for a different capital allowance but sadly not the super-deduction. They qualify for 100% first year allowances so you’ll be able to deduct the full cost of the car from your profits before tax.

 

Super-deduction ends on 31 March – is there enough time to use it?!

Yes there is but you must act now (do not procrastinate – we told you about that in our last blog!)

We would suggest you:

• make a list of the items you believe qualify and you’d like to purchase
• speak to your accountant to make sure they are eligible
• go shopping!

The key is to make sure you’ve purchased the items by 31 March 2023, even if they will be delivered to you at a later date.

There are no plans to extend the scheme and we’re unlikely to see such a generous offer in the foreseeable future. If you had plans to invest then take advantage of deducting up to 130% of the cost from your profits before tax before it’s too late!

Join us on LinkedIn or Facebook and feel free to share any tips you’ve found helpful.

We’ve all done it – put off until tomorrow what we can do today. Which is relatively harmless until you run out of time to get the job done or you cross a deadline. When it comes to financial matters crossing a deadline more often than not leaves you with a penalty fine and interest to pay.

 

Why do we procrastinate?

Procrastination is defined as the act of putting off or delaying tasks until last minute or past their due date. It can be misinterpreted as lazy but they aren’t the same. If you’re lazy, you’re voluntarily unwilling to make the effort. Procrastination involves a bit more thinking – you’re doing one thing when you know you should be doing something else.

The science behind why we procrastinate is really interesting (well, to the team at Accounting Clarkes it is!) – it’s all about ‘time inconsistency’. As humans we subconsciously place a higher value on the present rather than the future. This means we’ll seek instant gratification from a reward we can receive today even if the reward we receive in the future is even better.

Let’s give our example an accountancy twist.

It’s the first day of January and top of your to do list is your self-assessment tax return. You know it’s due to be filed and any tax paid for by 31^st January. Even though you understand the deadline and the amount of work you need to put in to completing your tax return, you still spend the next few weeks finding other ‘more important’ things to do. These tasks aren’t actually as important as completing your tax return on time, but you experience that reward trigger sooner.

 

The different types of procrastinator

Did you know there are six different types of procrastinators? Here they are:

• The perfectionist

This person finds it hard to accept their work is complete because they want everything to be perfect. Their standards are so high they avoid completing tasks for fear of being judged as substandard.

• The dreamer

This person is easily bored and needs lots of variety to keep focused. They will underestimate how long a task will take.

• The worrier

This person’s procrastination is driven by their fear – which can be of failure as well as success. Heard of ‘imposter syndrome’? That’s another trait of the worrier.

• The defier

This person likes to be in control of situations and doesn’t like being told what to do (even by themselves). They feel hard done by that their time has to be spent on such tasks.

• The crisis-maker

This person believes they work better under pressure so will push tasks up to their deadline as much as possible. They get a buzz from working in this way even through they end up rushing tasks.

• The over-doer

This person finds it hard to say no to things and then ends up overwhelmed by the amount of work they have to do.

Can you relate to any of these procrastinator personality types?

 

How to avoid procrastinating

Each type of procrastinator would need to tackle their procrastination in a different way however there are some general rules to help you avoid procrastinating.

1. Set smaller tasks which bring shorter-term reward

Big tasks can feel overwhelming and the end reward too far away. If you can break a task down into smaller steps, you’ll receive that hit of dopamine quicker and more frequently.

2. Organise your tasks

As well as breaking down tasks, have a clear timetable and view on what those smaller deadlines should be. It will help you keep motivated when you see the progress on a weekly and monthly progress and how it all comes together.

3. Remove distractions

This is probably the biggest influence on how we procrastinate! Think about what distracts you. Is it email notification pop ups? Having your phone on your desk? Social media too easy to access? Once you know, it’s time to take those distractions away from where you’re working.

4. Don’t be too hard on yourself

We all have periods of procrastination – we’re only human! So if you find your mind has wondered to something less important or off-task, accept that’s what’s happened. Punishing yourself or being mad you weren’t focused enough is unlikely to get you back into the right mindset. Finish what you’re doing (if it’s quick to complete) or take a break and then review your priorities with a fresh perspective.

If you’d like more tips on how to kick the procrastination habit, we like this article by James Clear.

 

Join in our conversation on LinkedIn or Facebook on procrastination, feel free to share tips you’ve found helpful when you’ve been easily distracted.

Now if there’s one thing that can so easily be missed (and it’s not this beautiful, little blue flower!), it’s the confirmation statement for Companies House.

Such a small and seemingly harmless thing to overlook, just once a year and it can get moved down the ‘to do’ list pretty fast however the consequences of missing the deadline is more severe than you might think. A mere 14 days after the review period ends and there’s fines up to £5000, a possibility of officers facing prosecution and your company can also be struck off the register, even if it’s dormant.

For most people its just a case of confirming that nothing has changed; your directors and secretary are the same as may be your registered address and people with significant control but it’s important to check and make sure and for £13 (if filed online) it’s a small price to pay.

If the timing of it is a problem (perhaps it falls in a busy season), you are welcome to change it by filing whenever is more convenient, as long as its inside the current review period, and the 12 months cycle will restart from then.

If you’d like to find out more about filing your Confirmation Statement, GOV.UK have made up this very short, handy video with links on how to use their web service or check with your accountant as this may be a service they can provide for you (we do!)

If you found this helpful or if there’s another topic you’d like to see here, let us know on our social media platforms; Linkedin, Twitter and Facebook .

We’ve got a birthday coming up here at Accounting Clarkes and so in the spirit of giving we thought it would be handy for you to know about Trivial Benefits; in a nutshell a trivial benefit is defined as “a gift from the company which does not have a direct cash value.”

The beauty of the trivial benefit is that it’s not counted towards taxable income or subject to National Insurance and you don’t even need to put it on your P11D. Even better is that as a company director you can gift it to yourself (rules apply – see further down) …Happy Birthday!

Its important to remember a few things before enthusiastically slamming that card down on the shop counter and they are:

• The gift has to be under £50 – anymore and the whole amount is taxable, not just the excess
•  It has to be for personal reasons like Christmas or Easter or even a birthday or wedding anniversary but absolutely not work or performance related
•  The payment must come from a company bank account, either a debit or credit card is fine and not reimbursed from another method of payment e.g. a personal card
•  It can be vouchers as long as they can only be exchanged for goods only such as a store gift card or Amazon voucher and not one that can be exchanged for cash
• If you are a director of a “close” company i.e. a limited company with five or fewer participators (shareholders) who are all directors, you can only claim a maximum of 6 trivial benefits (£300) a year.

And that’s it…so off you go and buy those lovely gifts and if you get a bit stuck (with the accounts, not the gift choosing although we’re pretty good at that too!) give us a call on 07796 954685.

 

“You should never assume. You know what happens when you assume? You make an ass out of you and me because that’s how it’s spelled.” – Ellen Degeneres

Making assumptions is easy, we all do it every day and sometimes these snap judgements help us to make decisions on how to move ahead with the facts we have available; but whilst it can be a helpful tool (and therefore not to be discounted entirely) in those moments it’s good to remember that it’s not based on concrete information, just what you know at that time.

As a business owner however, there are some things that you should never assume and here’s our top 5:

1.  Never assume your business relationships are fine, everyone could always use a little extra attention and important contacts can be lost through misunderstanding or unintentional neglect
2.  Never assume that your customer can’t afford your product/service – have you not seen ‘Pretty Woman’? how many times have you wished to say that famous line to a snooty shop person? “You work on commission, right? Big mistake, huge..I have to go shopping now”
   Don’t be the snooty shop person!
3.  That the customer knows/doesn’t know all about the services you offer, too much information and they may feel patronised, too little and they may be uncertain and confused, either way that customer may be lost to you
4. Don’t assume you are better than your competition. You may be passionate about your product or service, you may be wildly confident that it beats all others, but other businesses will feel the same way too so don’t be complacent, always strive to do better. That your pricing is optimised for both selling and purchasing.
5. Research, benchmark and do this regularly – are your rates in line with your industry and your audience – too much and you price them out, too little and assumptions may be made that it’s not good quality. Same with purchases, check your supplies, can you make saving without compromising quality?

At the end of the day, we don’t have time to research every tiny detail of every tiny thing but we should always be wary about making assumptions – its about balance, calculation and the willingness to be open to new information and limit those surprises.

Was this article helpful? Is there anything you’d like us to write about or do you just want to have a chat with us about Pretty Woman? Or maybe even your accounts?! Find us on Linkedin, Twitter and Facebook.or use our Contact Us page.