Financial Gym for Business

BUILD A BUFFER OF PERSONAL MONEY & STAY OUT OF DEBT

You are here: Home / Blog

The Number One Reason Entrepreneurs are in the Dark About Their Finances

by

Podcast: Play in new window | Download | Embed

Subscribe: RSS | More





To download the audio file to your computer, please right click on this link and choose save link as, or save target as, depending on your browser.

If you would rather read while you listen or you prefer to just read without the audio or video, we have provided the full transcript further down the page for you.

Be a part of the Financial Gym Inner Circle for Free. Pop your email in the box below and be amongst the first to get:

  • Updates on ways to improve your day to day business money and productivity issues
  • Free video tips and tutorials
  • Downloads and templates to keep and use in your business

Click here to subscribe to my mailing list

Transcript

Are you one of those entrepreneurs or independent business owners who does everything you need to do to keep your business going?

You market well, you take care of your customers, and you handle your money or so you feel. Because every time someone asks you a question about your finances, it’s guaranteed it will be the one question that you can’t answer! Why is that?

You’re here probably because you do get asked questions, or you ask yourself questions about your finances where you just don’t have a clue not only how to answer them, but sometimes even where to look for the answer.

Well in my day to day business, I’m always asked various questions whether they be general financial questions, or questions specific to that particular client’s needs.

So just this week, I’ve been asked these questions already and it’s only Tuesday!

“I need to take X amount of money from the business to live on. Can I afford it?”

“This is how much sales I’m making at the moment. How much tax will I pay at the end of the year?”

“I keep putting money into the business; when will I be able to take it back out again?”

“We want to move into new premises, so I want to know if there’s going to be enough money to pay the rent?”

“Should I register for VAT?”

“When moving abroad, should we incorporate in the country we are moving to, or should we still keep the business as UK based?”

And the last one, which is my favourite and I get asked this every week:

“How come if I’m making all these sales, money is still tight?”.

In fact a few months ago, I got this little message through Facebook and the question was:

“Am I a six figure business yet?” and I replied “Yes, you really are.”

Now a few things are apparent. First of all, questions are asked in a financial form but they are really quite personal, or about the business as a whole. And even though these questions all seem quite different; I realised that the answer that I gave to pretty much all of them was the same.

In fact, it’s not even an answer; it’s actually a question that I was going to give to all of them:

“How up to date is your bookkeeping?” or “How recent are your accounts?”

And the answers that I was getting were things like:

“We’ve done nothing since the accountant did them however many months ago.”
“We’re fairly up to date but there’s some stuff missing.”
“Nothing at all. I haven’t even got bookkeeping or accounts.”

This is the number one reason why you usually find that you can’t answer the fundamental financial questions about your business that you need to know in order to make the bigger decisions.

The reality is that I could guess a lot of these questions. Because people think that I know about these things, they think that I’m able to just figure out the answer. I don’t figure out anything, I use facts. And the facts come from the data that we take from your business.

So if you don’t have the data, you don’t have the answer.

You know where I’m going with this, don’t you? Get your data, bookkeeping, accounts – whatever you want to call it – up to date! You don’t want to be working any more than a month in arrears because that is how quickly you need to know where you are to turn things around.

I’ve got a client who went through a rough time recently simply because they thought things were worse than they were, and when we brought them up to date, we saw that actually it wasn’t all that bad.

So bear with me on this one. Do what you need to do. It will pay off in the end.

Why Accounting Software is such a Disappointment

by

Podcast: Play in new window | Download | Embed

Subscribe: RSS | More





To download the audio file to your computer, please right click on this link and choose save link as, or save target as, depending on your browser.

If you would rather read while you listen or you prefer to just read without the audio or video, we have provided the full transcript further down the page for you.

Be a part of the Financial Gym Inner Circle for Free. Click the link below and be amongst the first to get:

  • Updates on ways to improve your day to day business money and productivity issues
  • Free video tips and tutorials
  • Downloads and templates to keep and use in your business

Click here to subscribe to my mailing list

Transcript

If you know me, you will know that I groan when people tell me they are doing their accounts using a spreadsheet. But the truth is; I have to admit there is a case for staying well away from accounts packages.

Want to know why? Stick around I’ll tell you in a second.

If you’re here, I’m guessing you are considering or have invested in accounting software and maybe it hasn’t been as plain sailing as you had hoped.

Well there is a perfectly logical reason for that.

Hopefully this will save you time, or money or stress or all 3.

Let’s say you fancy yourself as a bit of a musician. Let’s go with drummer.

Even if drums don’t interest you stay with me, I promise you will get this.

So the drummers amongst you, just you love to create rhythms on anything you can get your hands on. Sticks in hand you tap on table tops, pans, whatever. But you are fed up with playing at it and decide you are going to do it properly and so you go and buy yourself a drum kit.

Now imagine this state of the art drum kit arrives. You walk around it so you can see it from every angle. You pick up the sticks and tap the cymbals. You touch of the skin and then you sit down and pick up the sticks. This is it. You are on the way to being the next Ringo Starr. There is a Grammy award with your name on it.

You bring the down the sticks and start creating percussion poetry. Now you are playing ok but that’s it, just ok. You go again and to your horror it suddenly hits you. You don’t really know how to play the drums.

What an anti-climax. Even worse; you parted with money. Now the thing is here; you not only don’t have the skills to play it properly, it is going to take a while to learn it and even then you cannot guarantee ever getting beyond so-so level.

That is what happens to most people when they decide to go for it and buy accounting or bookkeeping software. Once it is installed & they go through the bits they know or thought they knew. Much like the wannabe drummer they get stuck. They have just enough knowledge to make noise, but not enough to make music.

But because the software marketing blurb has told them that buying the software will solve their bookkeeping issues they push on, get demotivated, dump it and slowly but surely go back to the financial equivalent of tapping a table top…… the spreadsheet or pen & paper.

If this has happened to you, don’t blame yourself.

If I gave you Jaime Oliver’s simplest recipe and all of his kitchen tools, you still wouldn’t create the dish the way he does. And you wouldn’t expect to. He took him years to build up wealth of experience and techniques that he has. No recipe or set of pans is a substitute for that.

The same thing applies with accounting software. Even the “easy to use ones” are only easy if you know what you are doing.

So if this has been your experience. Give yourself a break.

Accept that it will take time to get good at using it or better still get someone who is good at it to do it for you.

Not only will it be one less thing on your regular to do list. You might find time to do something you really want to do with the freed up time.

Do You Talk About Money or Do You Hide Away?

by

Podcast: Play in new window | Download | Embed

Subscribe: RSS | More


To download the audio file to your computer, please right click on this link and choose save link as, or save target as, depending on your browser.

If you would rather read while you listen or you prefer to just read without the audio or video, we have provided the full transcript further down the page for you.

Be a part of the Financial Gym Inner Circle for Free. Click the link below and be amongst the first to get:

  • Updates on ways to improve your day to day business money and productivity issues
  • Free video tips and tutorials
  • Downloads and templates to keep and use in your business

Click here to subscribe to my mailing list

Transcript

Money is a popular subject for most people, but even though you may talk about money in general terms, i.e. the credit crunch, what you think of the banks, unemployment, late payment by customers, how tough it is to get customers, I bet it is rare for you to speak specifically about our own situation to others; or even to yourself.

Now I am not saying you should be telling people all your business. There is something to be said for keeping our own counsel.  But is that due to caution or fear?  Is your lack of action or motivation more for personal reasons; despite feeling that you could really do with some help.

This may not necessarily be because you are in financial trouble. Your business could be going through a transition or just experiencing the stresses of growing and you have reached the stage where you realise doing everything by yourself or the way you have handling your accounts and finances will not work well for much longer.

So what stops you and so many others from doing something about it?

  1. Do you find yourself often saying “I just don’t get it”? You recognise financial terms and names and you have a vague idea of what they mean but your feel inadequate when faced with trying to understand and interpret financial information, let alone try and produce it yourself.
  2. Do you meet with your accountant or sign off your accounts each year but you don’t really understand what they are all about except that you owe tax or you don’t.
  3. Frankly you couldn’t be less interested if you tried. You really just want to get on with being creative and making a difference in your business, with your family or in the world, but these darn numbers keep getting in the way. You know they are needed but every time you thing about getting down to it, you at best start to yawn or at the other end actually feel the beginnings of a migraine.
  4. Your experience of money, whether growing up; with your partner or spouse or even with business colleagues; regularly turn into arguments and is just another source of stress to add to the others you already deal with trying to run your business
  5. You are ashamed and embarrassed about your finances. People perceive you a certain way, you have your pride and you are afraid of being be judged or condemned by others. No doubt you can beat yourself up enough; you certainly don’t need others to make you feel even worse. The irony is that most people are quite understanding but it is not what they say that you afraid of. It is what you believe they are not saying; and what you perceive as the negative impact it would have on their opinion of you as an entrepreneur, or worse, as a person.

So why bite the bullet, what is in it for you.

  1. The cost of not being in total control of your finances is greater than just losing money
  2. Isn’t it just so tiring hiding things and feelings from those around you? The energy used to do that could be directed at actually making your foundations firmer
  3. As you understand how your money moves around, you build confidence and that will show up in how you price your goods and services, so you get better at pricing for profit not just for turnover
  4. You attract other savvy finance people because you become more discerning about who you work with, which ironically could mean you need to do less on the financial front because you know it is being dealt with effectively. Or if you are a hands-on person you are being advised better, so your decisions and actions are more effective.
  5. While mindset is crucial to get you started on the road to controlling your business finances, sometimes just taking basic steps that gets you a positive result, even if you don’t feel it yet, will give enough confidence to create a shift in mindset.

That sinking feeling in the pit of your stomach does not have to be a way of life.

Please know, you don’t have to tackle this alone. I went through a painful period of yo-yo money and yo-yo diets so I know what it feels like to feel out of control. And it only got better when I stopped beating myself up and took action.

The time to suffer in silence is over for you. If you know where you can go for the information or the guidance you need; even if it is just to feel free to voice your concerns, then do it.

The wonderful thing about most of us finance people is that we are good at keeping secrets.

 

Successful Entrepreneurs talk about their money – Dan Andrews of Tropical MBA

by

Podcast: Play in new window | Download | Embed

Subscribe: RSS | More

Tropical MBA (formerly Lifestyle Business) is hands down one of the best business and lifestyle podcasts out today!

Dan Andrews & Ian Schoen actually got me to stop dead while jogging, on more than one occasion; because of the awesome business tips they share that hit me like bolts of lightning. If you want to build a successful business, particularly if you yearn to be location independent then check out what they have to say. See Items Mentioned below for a link to the show.

Firstly though, listen to this segment from the Tropical MBA podcast where Dan answers questions about getting past $1000 per month quickly. In this excerpt he answers a question from a listener regarding how he deals with tracking money and what he advises others to do to keep it simple and stress free.
Dan & Ian TMBA

Be a part of the Financial Gym Inner Circle for free and be one of the first to get:

  • Updates on ways to improve your day to day business money and productivity issues
  • Insights into how other entrepreneurs handle money
  • Free video tips and tutorials
  • Downloads and templates to keep and use in your business

Click here to subscribe to my mailing list

Items Mentioned

Tropical MBA Podcast – Episode

QuickBooks (UK version)

QuickBooks (US & Worldwide)

Xero (UK)

Xero (US & Worldwide)

 

 

Avoiding Problem Customers

by

Podcast: Play in new window | Download | Embed

Subscribe: RSS | More

[audio:https://financialgymforbusiness.com/wp-content/uploads/2013/10/Video-17_Cashflow-tips-Avoiding-Problem-Customers_audio.mp3]

To download the audio file to your computer, please right click on this link and choose save link as, or save target as, depending on your browser. If you would rather read while you listen or you prefer to just read without the audio or video, we have provided the full transcript further down the page for you.

Be a part of the Financial Gym Inner Circle for Free. Pop your email in the box to the right and be amongst the first to get:

  • Updates on ways to improve your day to day business money and productivity issues
  • Free video tips and tutorials
  • Downloads and templates to keep and use in your business

 

Transcript

DEALING WITH DEBTORS – CUSTOMERS WHO OWE YOU MONEY:

When a business ceases trading, it is not just the business that closes that is a casualty but anybody they may have owed money to.

Because of the recession, people going out of business has became much more commonplace than before, so you owe it to yourself to be vigilant and not ignore red flags that could be a sign of payment issues to come.

Some of these are:

1. Constantly paying invoices late.

While this could just be a symptom of the administration routine at your customers end, e.g. local authorities are known for long payment periods so if you do business with them it is something you knowingly take into consideration.
If the late payment is not for an obvious reason, and you are confident there is no dispute with what you supplied, then it could be, though by no means definite, that your customer is juggling bills to fit with tight cashflow.

2. They rarely pay your bills in full, making regular part payments on account.

3. Though not so common, but relevant, they send post dated cheques.

4. They send a remittance advice advising of payment online but the money does not appear until sometime later. Definitely not on or around the date of the remittance

5. Paying your old invoices only when they need to place another order with you.

6. Regularly disputing invoices and wanting refunds. This could be a sign your goods or services need improving, but if you are confident that is not the case, be wary.

7. When chasing them for payment, never being able to speak to the person who is responsible for paying you, colleagues reassure they have passed on your messages and you will be called back, but you never are.

8. One that is not so obvious but one that I have witnessed occurs when a new customer places a larger than usual order for a first time, often needing a quick turnaround.

I experienced this the first time in a company I worked with many moons ago and on further investigation (it was a very incestuous industry), I learned the potential client had fallen out with 2 previous suppliers due to late and non-payment and was struggling to fulfil their orders.

I had no intention of being the next in line so insisted on payment in advance. It is instances like that where credit checking and references can be very useful. But that is something to consider when setting up your credit control policy and procedures in the first place.

Credit control policy & procedures!

I will save that for another time.

Thank you for spending time at the financial gym. Dedicated to helping you be the financial leader in your business without having to be a financial expert.

Leave a comment, share with your contacts and …

Enjoy your day

Getting Your Customers to Pay You Quicker

by

Podcast: Play in new window | Download | Embed

Subscribe: RSS | More

[audio:https://financialgymforbusiness.com/wp-content/uploads/2013/09/Video-16_Cashflow-tips-Getting-Your-Customers-to-Pay-Quicker_Audio.mp3]

To download the audio file to your computer, please right click on this link and choose save link as, or save target as, depending on your browser. If you would rather read while you listen or you prefer to just read without the audio or video, we have provided the full transcript further down the page for you.

Be a part of the Financial Gym Inner Circle for Free. Pop your email in the box below and be amongst the first to get:

  • Updates on ways to improve your day to day business money and productivity issues
  • Free video tips and tutorials
  • Downloads and templates to keep and use in your business

 

Transcript

I became a director of a company many years ago that had a month end invoice routine. It was that way because there were so many invoices to produce that batching on one day became the norm and it was done by one of the directors who was time poor.

It may have solved a workload problem but it created another one in terms of cashflow.

It also highlighted poor delegation but that is a whole other discussion.

Because the invoices were sent on the 30th of each month and customers had 30 day credit terms, you couldn’t start chasing for 30 days to get the money in. So if a customer had been serviced or received goods at the beginning of the month, they were effectively getting 60 days credit. [Read more…]

How banks set a good example – Huh?

by

Podcast: Play in new window | Download | Embed

Subscribe: RSS | More

After all that has been said and written how is it possible that the banks may actually have set a good example?


[audio:https://financialgymforbusiness.com/wp-content/uploads/2013/07/23_How-Banks-set-a-good-example-Huh-audio.mp3]

To download the audio file to your computer, please right click on this link and choose save link as, or save target as, depending on your browser.

Criticised for reckless lending; but who did they lend to? Well us.

When times are good, just like in business, shortfalls in one area can be compensated for in another.

However when we are faced with danger of crisis the tendency is to do exactly what the banks did and retreat and withdraw from the norm

Let me use paint a picture or scenario for you. Imagine you are a tour guide who used to take city people through the jungle to see the sights on a regular basis.  In hindsight you may consider this to be maybe a little reckless, bearing in mind the danger that lurks in the jungle and the lack of experience of the people who you are guiding. Yet you keep doing this because these crazy naive people keep trusting you to take them on the tour.

Then one day while you are out with a group, a large wild cat, pounces from nowhere and you are running for cover. You escape and find a cave to hide in but your tourists are left out in the danger zone. You know you are the only thing standing between them and getting eaten alive as you know the way out of there but you decide to stay put, what good would it do if you all got caught. And if you did manage to survive you could then help the tourists.

Only by the time you do emerge from the cave, some have been eaten alive, others injured and those that got out of the jungle were traumatised and mistrusting of you because they believe you left them when they needed you most.

Yes it is a silly example, but is not dissimilar to how the public perceives what happened between the banks and small businesses when the financial crisis of 2007 onwards struck. After years of happily taking people into the jungle; when danger hit, the banks retreated and the businesses that had no contingency faced extinction. In their case the wild cat was lack of money no longer being able to rely on the banks to get or extend loans or overdrafts.

So if the banks were such turncoats as is popular belief, why should you follow any example that they set?

Why because they taught us one valuable lesson, when your ability to make money is under threat, whether from:

  • Lack of sales,
  • Inability to work, for example if you are self-employed and get ill.
  • Economic forces like the credit crunch hitting your business
  • A downturn in interest in your product or service, think Sony Walkman.

What do you do (apart from sort out how you can improve the situation) you beef up and/or protect your assets.

What do you mean by that George?

Well for most of us, it is the items that make up your balance sheet. Don’t get too hung up on what a balance sheet is for now, I know it is just another thing that is a pain to get your head around.

I will demystify that subject in another video so don’t worry.

For now; I just want you to understand that one of the things it shows is what your business actually owns that may or may not be worth money if you tried to sell them. The balance sheets also shows you what cash you have left over at any point in time. If sales & cash flow are under pressure; having reserves to fall back on could well help you ride out storms.

As with most small businesses you may not own lots of property, valuable plant and machinery, run a vintage wine cellar, etc so your balance sheet reserves may well be mainly made up of cash in the bank and maybe your two year old all-in-one printer.

If you rely on borrowing, whether via an overdraft, loans or credit cards, then having cash sitting in the bank is maybe a distant dream at the moment, but it is what is needed.

And this finally is what the banks, though unintentionally showed us By tightening their lending they sat on the money. Security became the focus. Savvy business owners of course generating income but keep some back for contingency and investment.

Our much clued up older generation would call it “putting something aside for a rainy day”

The trick is to be able to do it even when we need the money for other things. The majority of us spend what we earn first and see if there is anything left. But the odds are very strong that there will always be something that you need to pay for even when you are doing really well, so getting into the habit of moving money out of the way before you spend will be one of the things that will build your financial foundations.

In future months I will give you some pointers, tools & techniques that you can use to do this for yourself.

And if you sign up for my freebies, you will be one of the first to be notified when they become available.

 

 

Claiming for business food and business travel

by

One of the constant conversations I have with my clients is whether or not they are allowed to claim for certain expenses.

It is assumed that just because they give my team a receipt that everything is hunky dory.

The team at FreeAgent have put together a simple little infographic showing the most common scenarios and the difference between claiming if you are a limited employee as opposed to a sole trader.

And if you want to know more about FreeAgent, click this link which entitles you to a discount off standard prices.

View the full image at FreeAgent

Business Record Checks – Would YOU Pass an Inspection

by

What exactly is Business Record checking and how could it affect your business.

Please bear in mind that regulations and procedures change at the Revenue all the time, so the information here may change.

This video is for the people who should read their Tax and Government bulletins, but get a migraine just looking at them.

And for those of you that want to take action before action is taken against you. See below for a great tool to have in your business.

[youtube]http://youtu.be/OWMYvdLJqtA[/youtube]

 

Please bear in mind that regulations and procedures change at the Revenue all the time, so the information here may change.

Well the Revenue introduced the record checking in 2011 as a way of ensuring that small to medium sized business owners are keeping adequate records to support any returns they make, such as their tax returns. They already do these for VAT.

So what is different about these checks?

Well in the past when you were contacted by the revenue to arrange a visit to inspect your records it was usually triggered by something. For example if your VAT Return said you were entitled to a refund, the Revenue could request an inspection to verify your figures.

Business record checking however is based on businesses the Revenue think may be more risky than others, and so target – for want of a better word – those. Prime examples are heavily cash-based businesses, particularly the trades, consultants, restaurants and take-aways, to name a few.

A pilot was run in 2011 which brought up some concerns from industry experts, so the Revenue suspended the checks until late 2012 when they resumed them again. For those hoping it may fade away. During the pilot scheme the Revenue found issues with 36% of business owners visited and reported that of those 10% were serious enough to warrant a further visit. So they will not be going away any time soon.

How does it work and what happens?

FIRSTLY

  • HMRC contact you, usually in writing, to arrange a time to ask you questions over the telephone about your bookkeeping records. This interview is usually around 15 minutes
  • Based on the call the officer will come to one of three conclusions:

1) No further action is required

2) You could do with further guidance, so your details will be passed to their Education & Support Team to provide you with help on tidying up your records.

Or

3) They are sufficiently concerned that your records are at risk of being inadequate and you require a visit from an inspector.

Your details are then passed to their booking team to arrange a convenient time for this.

You will be told during the call which one of these actions applies to you.

What if you are told you need a visit?

THE VISIT

 The face to face inspections are usually around two hours, but I have had this estimated with visits in the past and it is not unheard of for an officer to be at a premises for many hours if they find enough cause to keep looking.

The officer will:

  • Ask you about your business and how it is run
  • Take a look how you do your bookkeeping in general
  • Inspect a period of bookkeeping, around  months to get a snapshot of actual records

From this they will make conclusions and decide whether further action is needed, and if so what that needs to be.

As with the introductory phone call you will be told during the visit what the next stage is, if any, and this is confirmed in writing.

What are the next stages?

OUTCOMES

  1. If all is well, that is the end of it and this is confirmed by letter
  2. If there is room for improvement you will be told what needs to be dealt with to bring your records up to scratch and given a deadline in which to do it, generally no more than 3 months. You may also be liable to pay a record keeping penalty.
  3. At the end of the deadline you get a follow up visit. If you have done as asked as your records pass scrutiny; your penalty will be removed and you no longer have to pay it.
  4. However if the officer still is not satisfied you can be fined anything between £250 and £3000, the higher penalty applies if you have destroyed records that you should still have.
  5. You are then put on the schedule for another visit in two years time.
  6. As if that is not enough, you may also be referred to the tax return investigation team to carry out their own checks because the lack of good records is a red flag that the Returns need looking at also.
  7. And they will also check whether you should be registered for VAT, PAYE and CIS if you have not already done so.

If this is daunting to you, speak to your advisers to make sure you are where you should be. Your accountant, if they are involved in your day to day. But this is really the forte of your trusty bookkeeper.

Thank you for spending time at the financial gym. Dedicated to helping you be the financial leader in your business without having to be a financial expert.

And why don’t you leave a comment, share with your contacts, customers and friends

Oh and of course here is the link for the tool I mentioned above. If you don’t use anything like this, or your current systems are not supporting you, give this a a try.  Click Here

Popular Misconceptions about Bookkeepers & Accountants

by

5 ways that being misinformed can lead to poor choices

[youtube]http://youtu.be/q3RqjgLcses[/youtube]

Come with me a little trip where I want to clear up a few common misconceptions about business finances and bookkeeping and how it may affect you and your business.

As much as I would like to think otherwise, I am under no illusion that for most business people, doing bookkeeping is on a par with clearing up after a party.

Taking the actual doing of it out of the equation; I have found that much of the resistance comes from why you need to do it rather than just what you need to do.

Remember. Numbers tell a story. That is why a bookkeeper or accountant can look at your figures for the first time and see things about your business that you may have missed or thought only you knew about. And if we can do it, the tax man definitely can.

Misconception 1 – My business is too small

When your business is small or you are a sole trader, the balance of the bank account and what is in your head can become the bench marks by which you measure how well things are going.

This is perfectly understandable when you are a start-up as there may be very little activity. Nevertheless the sooner you find a way to accurately keep track of what is going on with your money the more likely you are to stay out of trouble.

And your business simply cannot grow and survive if you don’t.

Misconception 2 – Bookkeeping is not as important as Year End Accounts

If you think of your financial framework in terms of the human body:

  • You are the heart
  • Sales is the lifeblood pumping around keeping everything going
  • Accounting is your annual check to see how healthy you are overall
  • Bookkeeping is the brain taking note of all the activity on an ongoing basis looking for signs of trouble and the reasons for good health.

How many lives have been saved because of early diagnosis, your business is no different.

Misconception 3 – I can do it myself

And you know what, that may well be true.

Ignoring costs for the moment, why are you?

Is your business doing so well you have spare time to devote to recording historical transactions?

If not how is this going to bring in sales?

And if your business is doing really well, I bet it didn’t happen because you did bookkeeping.

Successful entrepreneurs are totally on top of their financial figures, but that does not mean they have any idea how those figures came about. They just want the data to run their business the best way they can.

 

And not forgetting the time it takes if you are not qualified or experienced. I recently heard a photographer say “there may be camera on your smartphone, but it doesn’t mean you really know how best to use it” or something along those lines. But you get my drift.

Misconception 4 – Accountants are qualified Bookkeepers are not

While qualifications are a standard to measure the expertise of a financial professional, it is not the only benchmark. It is presumed that to be called an accountant you must have a qualification.

Did you know that at present anyone can call themselves an accountant in this country whether they have qualifications or not. There is no obligation to be part of any professional body or take any exams if you choose not to.

However; of course most choose to do so. Bookkeepers who qualify with the Institute of Certified Bookkeepers for example face a number of courses and examinations before they qualify at various levels and are prohibited from offering a service to clients that they have not successfully passed the exam for.

Many bookkeeping professionals are certified to offer Tax Returns and Final accounts as well as the standard bookkeeping and payroll services:

And there is no substitution for someone with a wealth of real life and varied experience; they are worth their weight in gold to your business.

Misconception 5 – I need ongoing advice and support but bookkeepers only enter data

Using myself as an example:

When it comes to entering data, I am certainly not shabby when it comes to speed and accuracy. I have people in my team who are qualified accountants who still go “how did you do that?”

But ironically, the entering of data has become a means to an end because my relationships with my clients have become more about hand holding and being a means of support than I ever imagined.

The entering of data is just the tool we use to do it.

What the person really wants is:

  1. to understand the story that the data is telling about their business
  2. know what to do or who to talk to based on that story
  3. know they are not alone in dealing with that side of things

I accept there are people in the business who are focused on transactions as opposed to what you need at the other end, but that is where how good you are at finding the right supplier takes on a whole new significance.

I will save that for another time.

If you have any questions or comments feel free to share them with us.

 

How can I pay my VAT and make a little money from it – Legally

by

As part of my GYM (Grasping Your Money) series let me share a little tip on how you can actually get HMRC to let you keep VAT you have collected.

[youtube]http://youtu.be/MA19w71Air4[/youtube]

If you dread VAT Return time, don’t despair. VAT can even be fun.

Alright maybe that is pushing it, but it can at least be less daunting.

Firstly decide that VAT funds were never yours to begin with. If you make a sale and charge £2000 and you add VAT, using the current 20% standard rate that would add £400 to your invoice.

Many business people collect that £2400 bank the whole lot and it forms part of their cash for expenses. If you accept that your money is the £2000 for the sale only, then you need to move the £400 out of the equation.

Set up a separate bank account and move the VAT portion of every sale you make into it.

So far so good; but how does that make me money? I hear you say. Bear with me.

Firstly the most obvious advantage is that when it does come time to pay your VAT, you have the money available and you are not panicking about how you are going to pay it.

Secondly the chances are that your VAT liability in any period will be less than the amount you collected, because it will be reduced by the VAT on any purchases you made. So if you have set aside the original £400 VAT, and the VAT you owe for the period is £300, you have saved £100.

Leave it where it is, or better still shift it to a deposit or savings account and use it build up your cash reserves. Watching money grow is a past time I could never tire of.

That assumes you are on a standard VAT scheme and you make enough purchases to offset against your sales. But even if you don’t, your VAT liability will always be no more than the 20% (or whatever the rate of the day is) anyway, so no more late payment warnings or surcharges.

Even better! If your turnover is less than £150,000 there is potentially even more money you can claw back. For those businesses, there is a VAT scheme called the Flat Rate Scheme (FRS) which enables businesses to apply a lower percentage rate to the amount they have to pay over to HMRC.

HMRC must enrol you and the rate varies depending of what type of business you are in. It is particularly suited to the self-employed, consultants, and professionals. The key is that while you still add the full standard VAT rate to your sales you are only liable for the lower percentage when it comes time to pay your VAT.

It is primarily designed to simplify VAT calculations for small businesses because you only have to account for the VAT on your sales. VAT on expenses cannot be claimed under the scheme (except for assets over £2000) so the lower rate is designed to compensate for this.

Let’s assume HMRC have agreed your rate under FRS is 13%; using our £2000 + VAT, you will still invoice £2400 gross, but if on your scheme you are only liable for 13%, you will again collect £400 VAT, but you will only pay £260 to HMRC and retain the £140 difference.

The disadvantage comes if you have a high percentage of supplier bills and expenses from which you regularly claim or you receive regular refunds from HMRC anyway; then you may be better off on the standard VAT scheme. And remember, over £150,000 turnover makes you automatically ineligible.

Also because the retained amount adds to your profit, there is self-assessment tax and corporation tax to consider. But this is still only a proportion and the rest is growing in your account.

This one may not make you rich, but you can use it unearth “hidden” cash, as well as keep the tax man at bay.

Please feel free to leave any comments and share this blog with anyone who you believe may benefit.

Better still if you are able to give it a try, why not let me know how you got on.

 

 

Testimonials

  • Andy PetersonAndy PetersonIntuit UK QuickBooks

    "Thanks for being one of my favorite partners this year. As one of my US colleagues would say – ‘You’re awesome!’

  • Steve SweetloveSteve SweetloveDirector - Right Hand HR

    “Dear Georgette, further to the work you carried out for one of my clients; I am writing to express my gratitude. The client was the first to admit that since incorporation the bookkeeping had been close to non-existent.

    Compliance was causing him anxiety as the industry his company trades in is tightly regulated.

    I received a call in which he expressed how relaxed he felt now that he was in good hands. I will not hesitate to refer you to family, friends and colleagues, as well as passing future clients to Precision/Financial Gym.”

  • Lillian KyeiAccountant

    I have tapped into Georgette Rowland’s expert knowledge; especially in relation to Estate& Letting agency accounting procedures. She is very efficient and reliable, readily to offer advice and help.
    I would highly recommend Georgette & Precision Bookkeeping for all your bookkeeping requirements and you will not be disappointed

  • Michelle HolmesMichelle HolmesThe Energetic Activist

    Georgette Rowland Osborne!!! You ROCK ROCK ROCK!!! Thank you sooooooo much! I freaking LOOOOOOOOOOOVE you Mrs! You are freaking ridiculously awesome! I need to broadcast you to the world!

  • Suzannah Nichol MBESuzannah Nichol MBEChief Executive Build UK Group of Companies

    "Our growth as a business has been fantastic and I truly meant it when I said you played a major part in that growth. Many many thanks"

  • Shelly CollinsShelly CollinsDiveristy Expert & Director of Just Resources International

    "Thank you Georgette, you changed my business and turned my life around!” 

  • Judith HollowayJudith HollowayParenting Expert & Property Coach

    “Georgette doesn't mince her words and gets straight to the point, with lightness and love - so refreshing!"