Last week the ICAS reported based on IFAC research..
SMEs were shown to traditionally rely on accountants as a main source of business advice. One study identified an 8.1% average increase in sales growth and a 29% decrease in likelihood of failure for businesses using an external accountant.
Also last week smallbusiness reported that 1.3 million britons want to start their own business.
So when would a business need to contact an external accountant?
Budgeting and Forecasting
Cash Flow Management
Buy or Rent decisions
Capital Investment Appraisal
Accounting Procedures and Systems
Busines Funding and Investment
For start ups its particularly important to ask your accountant to help with:
Choosing the right business structure for your business – most businesses start out as sole traders but once they start making profits convert to limited companies, this is because sole traders pay more tax than company structures
Choosing the best VAT Scheme you might be better off with Flat Rate or Cash Accounting
Choosing the most suitable accounting software
Creating a business plan and cash flow forecast – research shows that business that have a business plan make 20% more profit
My personal favourite is PracticeFlow, I have started using it for Bicknell Business Advisers.
Its not just dates you need to keep track of, if you are going to send out client reminders you will need UTR’s and amounts due. You Also need to track tasks and who has been allocated the work. PracticeFlow helps us do all of this and you can set sub-tasks and have 3 dates – start, planned to complete and deadline.
So why isn’t your accountant reminding you of important dates?
Last minute panics or penalties can be very stressful, makesure you know your deadlines or get reminders so that you can relax!
Many businesses require the skills of professionals to oversee and direct financial operations. These professionals are referred to CFOs, chief financial officers, or financial directors (FD).
So what should your Chief Financial Officer be doing for your business…..
1. The CFO should be able to look into to future to see what the future financial needs of the business will be
2. He/She should negotiate funding facilities to ensure the business can manage its cash flow needs
3. The CFO should be able to foresee the future tax consequences and risks of decisions
4. He/She should help the business to achieve the best possible credit scores
5. Identify ways to reduce costs and improve profitability
6. Understand the business owners objective and focus the business on achieving those objectives
7. Ensure financial and regulatory compliance
8. Ensure accurate and timely reporting of management information
9. Evaluate growth opportunities
10. Apply corporate governance
What key questions should you regularly ask your CFO…..
1. What is our cash cycle and how can we improve it – Cash Cycle Blog
2. What Key Performance Indicators should we use and what are they telling us – KPI Blog
3. How can we improve profitability – 15 ways to improve profitability Blog
4. What is our Business Plan and is it the right plan – How can you create a Business Plan
5. Can we reduce Overheads – 10 creative ways to reduce overheads Blog
Many smaller businesses and SME’s can’t afford a Full Time (or even in some cases a Part Time CFO or FD) but they need help with:
• Business Plans
• Budgeting and Forecasting
• Cash Flow Management
• Buy or Rent decisions
• Capital Investment Appraisal
• Accounting Procedures and Systems
• Business Strategy
• Busines Funding and Investment
Virtual FD’s fill this gap because:
1. You only pay for what you need
2. There is no employment contract
3. It provides access to higher level of expertise (in theory)
But be careful who you choose. There is no law preventing anyone from calling themselves an accountant, and as a result small businesses are unknowingly paying someone without the necessary skills to handle their finances and help their business grow.
So what experience does your accountant have to show that they have the skills to be your Virtual FD?
I am sure that in theory they have the technical skills but is that enough?
With the exception of CGMA (CIMA) accountants many accountants in practice have never worked in business let alone been a Finance Director!
I happen to think that time served experience as a CFO does make a difference because it greatly improves your insight and skills.
Would you get on a plane with a Pilot who in theory knew how to fly but had never actually piloted a plane before?
When you choose a Virtual FD you are trusting them with the success of your business. Choose wisely!
CIMA operates a Masters degree standard scheme of qualifying examinations for prospective members. It is active in promoting local education, training and management development operations, the promotion of new techniques through its research foundation and the dissemination of management accounting practices through publications and other media related activities. WIKIPEDIA
Implementing a major accounting system is big undertaking which needs a lot of planning.
Top Tips for System Implementations:
Start by drawing up a specification of your requirements – what do you want to achieve with the new system, what is the scope of the system, where will cost savings be made, how could more information lead to better decision making?
Get Buy In – its really important that the system gets the support of the Senior Management Team and that key staff are given the chance to put forward their ideas and are involved in the project. People are often resistant to change and getting them involved early will breakdown barriers to change.
Rationalise – changing systems is an ideal chance to look at how can you do things differently and stop doing things that don’t add value, this will also reduce potential customisation requirements
Allocate time to the project – If you don’t allocate time to the implementation project you will regret it later but that doesn’t mean you need to do everything yourself, budget to bring in temps and consultants to help
Measure the savings and benefits – make sure you achieve your goals
By using simple project management processes, tools and techniques you can achieve the best results.
Formal methods of project management offer a framework to manage this process, providing a series of elements to manage the project through its life cycle. The key elements consist of:
• Defining the project accurately, systematically clarifying objectives
• Planning the project by splitting it up into manageable tasks and stages
• Executing the project by carrying out actions
• Controlling the project through its stages using project definition as a baseline
• Closing/Handing Over the Project
A record breaking 581,173 businesses were registered with Companies House in 2014 showing an accelerated increase on previous years with 526,447 and 484,224 recorded in 2013 and 2012 respectively.
In 2014 the UK had the fastest growth in Self Employed workers in Western Europe!
So what should start ups do to pay less tax?
Choose the right business structure for your business – most businesses start out as sole traders but once they start making profits convert to limited companies, this is because sole traders pay more tax than company structures
Choose the best VAT Scheme you might be better off with Flat Rate or Cash Accounting
Employ your family – Children can legally work from the age of 13 which means they can perform activities which are relevant and justifiable in your business. Each member of your family has a tax free allowance of £10,600 (2015/16).
Avoid earning more than £100,000 – For all ages, the personal allowance reduces where taxable income is above £100,000 – by £1 for every £2 of income above this limit, so that the personal allowance is lost once taxable income exceeds £121,200 (2015/16).
Pay into your Pension – Currently you can pay £40,000 per year into to your pension
Pay Dividends – Generally directors will take a low directors fee and the rest of their income in Dividends
The Financial Reporting Council issued amendments (27th July 2015) to the UK accounting standards, ushering in a new financial reporting framework for small and micro-entities. The changes are mainly as a result of the new EU Accounting Directive.
The key changes are:
FRSSE has been withdrawn
FRS102 – A new section has been added to FRS102 with disclosure requirements for Small Companies
FRS105 will be the new reporting standard for Micro-Entities
The changes come into effect from 1st January 2016.
The UK’s most successful small business campaign, Small Business Saturday, has been launched and this year it will be on Saturday 5th December.
In 2014, approximately 16.5 million adults supported at least one small business on Small Business Saturday, with almost two-thirds (64 per cent) of the British people aware of the campaign.
The organisers say…
We want all kinds of small businesses to get involved, so know that whether you are a family business, local shop, online business, wholesaler, business service or small manufacturer, Small Business Saturday is supporting you!
Small Business Saturday UK is a grassroots, non-commercial campaign, which highlights small business success and encourages consumers to ‘shop local’ and support small businesses in their communities. The day itself takes place on the first shopping Saturday in December each year, but the campaign aims to have a lasting impact on small businesses. In 2015 Small Business Saturday will take place on Saturday, December 5th.