Archive for the ‘Advice’ Category
Would you get on a plane if the pilot didn’t go through the pre-flight checklist? Would you be happy for a surgeon to operate on you without using the checklist recommended by the World Health Organisation?
I didn’t think so – most people on the receiving end of an important service would prefer the person delivering the service to use checklists.
Checklists are very powerful. A simple five step hygiene checklist was tested in an Intensive Care Unit in 2001. The results were amazing – after 12 months the 10 day infection rate was down from 11% to 0% and after 15 months it had prevented 43 infections, 8 deaths and saved £1.3m in post infection costs.
Checklist is something every small business can use to grow and get a competitive advantage but it’s not to implement easy.
Many people (especially experienced) don’t like checklists because they don’t think they need them and/or they don’t like feeling controlled.
Here are some strategies to help implement checklists in your business.
– Share your company’s non-financial purpose so your team buy into your vision. Link the use of the checklist to the outcome you want to create in the world
– Explain that it’s not about the checklist; it’s about the culture of discipline and teamwork
– Remind yourself and your team that the most intelligent well trained people in the world, like surgeons and pilots, use checklists
– Start with key systems and grow the number of checklists
– Get your team to build the checklist
– Celebrate the impact of checklists
– Explain the cost of not using systems and how this impacts everyone financially and non-financially
– Make sure systems are available at the right time in the right place
If you’d like to find out more we recommend reading The Checklist Manifesto by Atul Gawande.
Full details of the March 2016 budget are available on the governments Website .
Here’s our summary of the main points.
The new dividend tax is confirmed; you can read more about it here.
From 6th April 2016 the will increase by £500 further to £11,500 in April 2017.
Tax Higher Rate
From 6th April 2016 40% tax will kick in £2,000 later at £45,000.
The rate will reduce 17% by 2020.
Director’s Loan Accounts
From 6th April 2016 loans to directors not repaid within 9 months will be taxed at 32.5%.
A new allowance is being introduced for the 2016/17 tax year which means basic rate taxpayers won’t have any tax charged on the first £1,000 of savings interest. Higher rate taxpayers have £500.
This is increases to £3,000.
National Insurance Contributions
Class 2 National Insurance Contributions will be abolished from April 2018.
The rules on closing a company using a Members Voluntary Liquidation are changing. It will not be possible to pay tax at 10% on company assets.
But, the rate of Capital Gains Tax for basic rate taxpayers has been reduced from 18% to 10%. For higher rate taxpayers the Capital Gains Tax rate will reduce from 28% to 20%.
The Government is looking to introduce “pay-as-you-go” tax accounts with flexible payment rules,. This means you can pay tax as soon as the income is received. More details will be released during the year.
Every business needs to think and act strategically, including Sackmans.
One of my target markets is start-ups and small businesses that want to grow. I feel this segment of the market deserved a separate brand, so I have created Ten Accountants. The names suggest “perfect” as in the Dudley Moore film.
I know there is no such thing as perfect but I think it’s a worthwhile direction.
I’m working with other accountants on this and our aim is to create the perfect business development system; a guaranteed way to launch a successful small business.
One of the things we are doing is building business management software. This will help you manage the business, projects and people – including yourself. This software (if sold separately) would start at £50 plus a month for three users. But, the value is far more that £600 – what would 20% or 30% growth every years be worth other the next 5-10 years?
That software will be available in a few months. In the meantime you can use Profit Improver. This is a system that will help you figure out how to improve your profits. You can look at the impact of relatively small improvement to your key drivers over the next five years.
If you are interested in a service which is more focussed on business development and growth then maybe Ten Accountants would suit you better than Sackmans.
We use Xero Accounting software with all clients because of the budgeting feature. This allows you to set and report against targets.
Get in touch if you’d like to know more.
The new Small Business Enterprise and Employment Act will impact all companies and Limited Liability Partnerships (LLPs).
There are many changes being implemented in 2016 including:
- Restrictions on use of corporate directors
- Extension of duties of shadow directors
- Replacement of the annual return with a process for confirmations
- Option for a private company to elect to use the central register
- Procedures for rectification of the register relating to the company’s registered office
- Shortened periods for striking off companies
- Changes to the disqualification of director’s regime and introduction of a new compensation mechanism in relation to insolvent companies
- Easier and simpler to remove the details of falsely appointed directors from the register.
One change is the need to keep a record of People with Significant Control (PSC) so they can file a “confirmation statement” at Companies House.
A PSC includes people within a company or LLP who meet the following conditions:
- Owns more than 25% of the company’s shares
- Holds more than 25% of voting rights
- Holds the right to appoint or remove company directors
- Exercise influence or control of the company.
The information required for an individual is the name, month and year of birth, nationality and service address will be publicly available, together with details of the interest concerned.
If you would like with any of the new rules let me know.
Over the years I’ve been researching what makes some businesses really successful and what makes others average or worse fail.
On the face of it it’s fairly simple – sell something for more than it costs. The truth is that it is easy when you’re your own. The problems seem to start when you start working with other people, employees and sub-contractors.
What I think a business needs is an effective people management system. And, from looking into this I believe this starts with the way you recruit. You need to attract the right type of people to work with you.
But, before you can do this you need to think REALLY carefully about who you are. Questions like these can help:
• What do you want to achieve?
• What do you care about?
• How do you expect people to behave?
• What do you stand for?
• What won’t you stand for?
In business speak these are your vision, values and purpose.
Once you have these in place I suggest you focus on something called “engagement”. This is about people having a positive attitude to work and willingly giving their best.
To do this effectively I think you need a few things:
• A compelling business plan so everyone know where there business is going and why
• Clear position agreements so people know their role in the plan
• Support for people to help them perform to the best of their ability
• A culture where people can provide feedback to the business
• Accountability and transparency in all aspects of the business
• Frequent communication so everyone knows what is going on
If you would like to explore engagement to improve business performance let me know and I will set up a On Track session.
The UK national debt is growing at over £5,000 a second and tax revenues are the only way for the government to stop this growing and pay it off.
Starting April 2016 the government is committed to denying people basic tax reliefs. This will divert personal and business cashflow into the Treasury.
We have highlighted three issues which will have a significant impact:
- Private landlords
- Higher rate tax payers
- Owners of small limited companies
Owners of furnished, residential property will pay more tax because the 10% wear and tear allowance is replaced by a more restrictive replacement cost relief.
Stamp duty is also going up for landlords and next year sees tax relief on loan interest being restricted to the basic rate. This last change could seriously impact the ability of landlords with high debt to property values to maintain their property holdings.
Landlords considering buying a new property should think about bringing the completion date forward to before 1 April 2016.
If you need to replace furniture in a rented property then wait until after 5 April 2016. In this way you can claim for the full wear and tear allowance 2015-16 and next tax year you can claim the new replacement furniture relief.
Higher rate taxpayers
The governments focus here is the reduction of tax relief that can be claimed for pension contributions.
The law is already in place to reduce the amount of pension relief for additional rate (45%) tax payers to just £10,000 a year. Now, there is speculation that 40% or 45% tax relief will be scrapped altogether and a lower threshold set.
Consider maximising your pension contributions before the end of the tax year.
Limited company owners
From 6 April 2016, the first £5,000 of dividend income is tax free, but any additional dividends, will be taxed at:
- 7.5% if the dividends form part of your basic rate band
- 32.5% if the dividend forms part of your higher rate band, and
- 38.1% if the dividend forms part of your additional rate band.
If you use dividends to take out profits from your company, consider stripping out any available company reserves to 5 April 2016 as dividends.
If this can be done without pushing your overall income into the higher rates you will have no additional income tax to pay. Even if the distribution pushes you into the higher rates there may still be overall savings to be made.
As Xero approaches 600,000 users worldwide, here are some notes on recent developments at Xero to help you improve your business results in 2016:
- Partner of month for December 2015 was Crunch Boards which enables forecasting and reporting
- The new + icon and search facility saves clicks and time
- Improved Fixed Assets
- Cashflow report helps businesses understand money flowing in and out of their business
- Two step authentication increases security
- Automatic invoice reminders prompt customers to pay so you don’t have to
- Billable expenses make it easy to pass on costs to customers
- Xero on Apple Watch updates you when your bank accounts change
The Xero eco-system continues to grow wand more industry specific add-ons. At the end of last year a property management system called Arthur was added.
Our support of Xero includes a 50 point Xero training programme to ensure you use the system like a pro. We can also you develop a Financial Policy for your business to ensure you have complete control and by using LivePlan we can help you improve your numbers.
The sharing economy began to appear in the early 2000s as people looked for extra cash driven by the impact of the recession.
This new economy (worth an estimated £15n) has been on the radar of the tax office (HMRC) for a while. A consultation document issued by HMRC with the title “Tackling the hidden economy: Extension of data gathering powers” is a clear warning for 2016 onwards for everyone to ensure they declare income from places like AirBNB.
HMRC plan to collect data from third parties and estimates it will raise £285m by the end of 2021. Companies like Apple, PayPal, Amazon, AirBNB and Etsy are high on the target list.
The law supports HMRC. The Finance Act 2013 section 228 gave new powers to HMRC collect data from businesses that process credit and debit card transactions. These powers will now be broadened to data held by electronic payment providers (not necessarily in relation to credit and debit cards), and business intermediaries. Intermediaries are businesses/Websites that allow customers to place orders, buy or reserve goods, services and/or digital products.
According to the ACA, a leading professional body in the accounting world, HMRC are under extreme pressure to increase the tax take. They will turn up armed with data and look to penalise you if they think you are withholding information.
As we move to online reporting the tax net is drawing closer. If you’d like any help dealing with these matters get in touch and remember, our fees are usually tax allowable.
As part of our commitment to help our clients be successful, Sackmans keep up to date with the latest research on what makes businesses successful.
Unfortunately, we have not found a magic wand but we have established a few key principles that we believe guarantees success. The first principle is that business growth comes after personal growth of the business owner. One core skill is business management.
To highlight the importance of management training, an article published by the Chartered Management Institute (CMI) revealed that bad management accounts for 56% of business failures.
The problem is an attitude of under-investment by small businesses as they are half as likely to invest in management training compared to big businesses. However, investing in management training can pay off – the example given in the CMI article was a house building business in Northern Ireland.
David Law of WL Law saw an opportunity for growth by land acquisition. But the company didn’t have the resources to buy land and the banks were not interested in lending.
They repositioned the business brought in an equity partner which has brought the business back to profitability.
Here are the five steps to making your business a success
Sackmans can support and help you with your development, especially with calibrating because that’s about measuring and analysing. The key is to test your business ideas by using data to find the best way forward.
Using financial and non-financial key performance indicators is a key element of Improving the Numbers. If you’d like to invest in the management of your business get in touch
Xero have released the “Make or Break” report on what makes the difference between entrepreneurs who succeed a fail.
It’s based on 2,000 business owners in the US and UK and the results provide insights and ideas on how you can create a more successful business.
Six out of ten entrepreneurs believe family time is crucial to being effective. This includes keeping evenings and weekends free. However, just 28% turn off their phone and laptop off out of normal business hours.
Five out of ten invest in technology and strategic initiatives. And, 50% of successful business spend money on marketing campaigns (social media, advertising, PR), compared to 20% of those whose business failed.
Interestingly, when it comes to financial software – 58% of businesses that survive use software whereas only 14% of failures do.
Business survival rates are boosted with Xero. 88% of Xero customers operating after five years, compared to an industry average of just 41%.
Another interesting insight was the use of professional advisers – 33% of successful entrepreneurs sought outside help compared to just 14% of owners who had to close.
This is why we recommend all businesses consider using their accountant to help them increase the chance of success. To support this Sackmans offers “Improving the Numbers” as a service option. This is a business planning and budgeting service for business owners who want to maximise their results.
A start-ups relationship with their accountant is important for survival. The Xero research supports our approach – 42% of survivors describe that relationship with their accountant as “excellent,” compared to 27% of those whose company failed.