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Universal Credit – What do employers need to do?
UC replaces six existing benefits;
- Income-based Jobseeker’s Allowance
- Income-related Employment and Support Allowance
- Income Support
- Working Tax Credit
- Child Tax Credit
- Housing Benefit
with a simpler, single monthly payment for people out of work or on a low income. It is delivered by the Department for Work and Pensions (DWP) and ends the 16 hour rule that may previously have led employees to restrict the hours they work to avoid losing benefits.
The benefit has been tested already and the progressive national rollout begins in October 2013.
UC payments are linked to how much money an employed Universal Credit claimant has earned. This is captured through the new way of reporting PAYE information in real time.
What do employers need to do?
Your employee’s UC payments are linked to PAYE information reported in real time, so:
• it is very important to make accurate real time submissions when they are due, so that the amount of UC employees receive can be calculated correctly
• getting the right identity details for new employees at the point of hiring is vital in helping with both PAYE and UC.
david@graceaccountants.co.uk
National Minimum Wage rates from 1 October 2013
The National Minimum Wage Act 1998 provides the legal mandate for employers to pay a minimum wage.
The rates of national minimum wage applicable to pay reference periods starting on or after 1 October 2013 will be as follows:
• the main adult rate (for workers 21 and over) will increase by 12p to £6.31 an hour (currently £6.19 an hour)
• the rate for 18-20 year olds will increase by 5p to £5.03 an hour (currently £4.98)
• the rate for 16-17 year olds will increase by 4p to £3.72 an hour (currently £3.68)
• the rate for apprentices will increase by 3p to £2.68 an hour (currently £2.65).
From the same date, the accommodation offset will increase from the current £4.82 to £4.91.
A person qualifies for the national minimum wage if he is an individual who –
(a) is a worker;
(b )is working, or ordinarily works, in the United Kingdom under his contract; and
(c) has ceased to be of compulsory school age.
For a 37 hour per week worker the annual wage is £12,140.44 (£6.31*37*52)
The Living Wage Foundation use data from the Centre for Research in Social Policy at Loughborough University. They advocate the payment of a living wage of £8.55 in London and £7.45 elsewhere – that is £1.14 and £2.24 above the £6.31 NMW.
david@graceaccountants.co.uk
Competition at the frontline – lessons for small business
East End Foods in Birmingham, UK, is a success story. A business that has grown to £180m turnover on the back of providing the right product at the right quality to the market. They even sell rice processed in Birmingham back to India – a modern day coals to Newcastle. The brand has the strength to make people see it and want it.
The food division processes rice, grains, spices and many other foods. But the wholesale cash and carry division shows their competitive spirit. A £25m investment in the Aston, Birmingham cash and carry warehouse is significant. Why? because it is a key link in the supply chain to the small retailer. They go to East End, stock up on the bulk supplies for their shops and merchandise this to the public. East End even work with retailers to improve their stores.
Going head to head with the retail multiples (Tesco, Asda etc) does not sound like a good strategy – but that is what they have done. They want to get the right product into shops to enable the shops to compete.
Being members of the UK buying consortium Landmark also helps. It enables them to buy from the manufacturers at prices comparable to the ‘mults’.
This business impresses on many levels – but what are the lessons for small businesses?
Cash is king – collect cash promptly and keep it in the business for re-investment
Process and operations – wholesale is low margin, so the operation has to be excellent to protect margin
Quality – if you want a brand to be recognised it needs investment in process and sourcing to get the right ingredients
Eye for detail – an ethos of detail first to remove waste, spot opportunities and realise them
Negotiate – everything is negotiable!
david@graceaccountants.co.uk
9 steps to a perfect Xero implementation
- Discuss the requirements with the client and then document the project plan to deliver in the time-frame and budget. Understand which team members are accountable for what deliverables.
- Define the chart of accounts and tracking codes so that the right level of analysis can be obtained for tax, accounting and management control purposes.
- Ensure that the final trial balance from the legacy system is accurate and balances before you load into Xero. Get all the invoices that make up the accounts receivable and accounts payable balances and load them into Xero via invoice import.
- Get bank feeds working for all bank accounts – don’t import CSV file bank statements – this is where productivity is improved.
- Define your record keeping system – how do you find the payable invoice to match that in Xero – you can scan it and attach the image to the Xero transaction or keep a hardcopy or softcopy outside Xero. You want a system that is robust if it is inspected.
- Setup up your sales invoicing templates in word for invoices, statements and credit notes and upload into Xero. Use repeating invoices where possible to get the productivity. Set up inventory items for the things you sell and you can analyse volumes and margins by item for goods or services.
- Define when you will reconcile the bank statement – continuously, weekly etc. Setup bank rules to improve the speed and consistency of matching and coding. Understand the reconcile and cash coding screens. Understand how the reconciliation report works. Understand accounting transactions and how Xero presents a bank account.
- Decide if you need to use Accounts payable or can you code expenses after you have paid them.
- Review the report suite and get the reports you want into your favourites list.
david@graceaccountants.co.uk
12 ways to get your invoices paid faster
- Discuss credit terms with your new client – set the expectation
- Change your credit terms to be less than they are right now – research has shown that invoices are paid 2 weeks late. So better to be paid late on short credit terms than late on long credit terms
- Get invoices out on time – be clear about what makes a service or product billable and bill it. Don’t be shy about billing promptly, the client has had the service\product, they need to pay for it
- Make it standout – clients processing lots of invoices may put it on the pile with the rest, but if it stands out then chances are that it will get paid faster
- Be able to report your aged debtors and then chase the late ones rigorously. Send a statement and call them – some people get so much email that it gets ignored
- Add late payment charges – you can always reverse them but it will generate a conversation where you can re-iterate your priority to be paid on time
- Get the entity right that you are invoicing – if it is called Jupiter Construction Limited, don’t put JC limited on the invoice
- Make it get to the right person – does it need to go to the budget holder or accounts payable or both
- Do you offer multiple payment methods – cheque, bank transfer, paypal, debit card, credit card – the more methods the more likely you will get paid faster.
- Review the average days to pay for your clients and target the late ones – don’t treat all clients the same
- Delegate your credit control – if you are running the business and delivering to clients you won’t focus on this and a part time resource can
- Send electronic invoices with Pay Now feature – Xero cloud accounting does this
david@graceaccountants.co.uk
Business Accountant 