The missed opportunity of Self Billing in e commerce
I think e commerce and EDI has focused too much on billing clients and consumers (mainly B2C rather that B2B) and not enough on improving the efficiency of processing supplier invoices.
According to research and analysis group, Gartner, typically the cost of processing an invoice in the UK averages between £4 and £25, and in some cases even up to £50, per individual invoice.
You can check the costs for yourself using pay streams calculator.
A typical purchase invoice goes though these stages:
- Its checked against the purchase order
- Its entered as unauthorised to the accounting system
- Its copied and sent to the manager to check the goods were received and were in good order
- The manager signs the invoice off
- Its status is changed to approved or in query
- Queries are sent to the supplier
- Authorised invoices are scheduled for payment
- Payment is made with a remittance advice
- Supplier statements are reconciled to the accounts system
The more suppliers you have and the bigger the volume of either invoices or transactions on invoices, the more complicated and long winded the process becomes.
Although all invoices contain the same basic information they are all formatted and laid out differently.
In some systems invoices are scanned and given a bar code to help index them to accounting system entries.
But it seems to me that many businesses have overlooked what should be a simple solution, Self Billing.
With Self Billing you generate the tax invoice for your supplier and send it to them with the payment.
The following is an extract from HMRC Self-billing:
Putting in place a self-billing arrangement with your suppliers can bring certain advantages for your business:
- it can save time and money – you can send self-billed invoices electronically so long as you can set up suitable systems
- purchase invoices are produced to a standard format, making life easier for your accounts department
- you retain control of how much you’re invoiced for – this can be helpful if your business is responsible for determining the value of the goods or services it receives
- flexibility – you can outsource the production of the self-billing invoices to a third party if you want to
Your suppliers don’t have to be based just in the UK. You can self-bill businesses in other EU countries or in countries outside the EU.
Advantages for suppliers
If you’re a supplier, entering into a self-billing agreement with your customers can be helpful for your business because:
- your customer is responsible for making sure that the VAT details on the invoices are correct
- as part of the agreement with your customer you may be able to specify when you’ll receive payment – this can help with your cash flow
Self billing has been used by the Construction Industry for many years, in fact I created a Self billing system when I worked at Rollalong in 1994, the key issues are:
- Getting suppliers to agree to join the self billing scheme
- Getting approval from HMRC
- Keeping your VAT registration records up to date
But the cost and time savings are significant, the whole process changes and could become:
- Purchase Order Sent
- Goods received and matched my the manager
- Value of Goods received entered to accounting system – this could be automated on matching
- Payment made and remittance changed to Self billing invoice
The number of queries are reduced because you aren’t invoiced for things you haven’t had, there is no need to copy and distribute invoices for sign off as this is replaced with stronger goods inward systems.
Why aren’t more businesses adopting self billing?
steve@bicknells.net
How CIMA Finance Management Helps with Third party Business Partnering
Referring to a large UK based public sector organisation running a shared service centre offering IT resources, the intention is to give an overview of financial management’s relationship with an organisation and its 3rd party suppliers.
New Activities
For new activities within the existing Service Level Agreement (SLA) framework, early involvement the financial management function in developing business cases, including consultations the client departments and project management is essential to understand requirements. This helps with the preparation of cost benefit analyses and quantifying risks. Discussions with 3rd party suppliers and project managers allow for a thorough breakdown of costs and performance, as well as payment milestones before proposals are signed off.
Performance and Control
The review and maintenance of the accounting reporting system to provide consolidated reports for existing one-off projects and service lines is needed to monitor financial performance on a monthly basis. This included monthly, year to date and annual actual activity compared to budget, as well as contract life cycle reporting. Significant variances are investigated, both internally and with the 3rd party supplier to take action.
An issue Log and risk register are maintained and discussed regularly with interested parties with reference to ownership and escalation levels.
Purchase-orders are setup in line with payment milestones involving the procurement function and budget holders. Regular meetings to review progress reports with suppliers and project management are scheduled and cash-flow forecasting is maintained to monitor cash levels ensuring cash is available to meet payment deadlines.
Advice is provided on transfer pricing by referring to the SLA framework in ascertaining unit costs for the products and services.
Processes need to be in place to integrate the financial performance of the shared service corporately to ensure effective consolidation.
Regular reports are made to the steering committees and project boards on financial performance, updating them on any outstanding issues and progress on new activities.
Growth and Development Strategies
Through regular communication with the corporate centre particularly the central finance function, information is disseminated on issues such as corporate efficiency, returns on investment (ROI) and Value-add targets which support decision-making and ensures goal congruency. This type of analysis helps identify potential joint venture opportunities both internal and external.
Maintaining strong relationships with suppliers is an important way to keep up to date with emerging technological and social changes which can be assessed in the organisation’s business models for action. Advice can be then reported corporately through the business planning process to secure funding and rank them against competing proposals.
Conclusion
This can be applied to a variety of business models that rely on partnering to deliver its core services. It is therefore useful understand these relationships and how they impact an organisation. To evaluation the effectiveness of existing systems can be done by:
- Fact finding – Information gathering about the existing system through process documentation review, structured interviews with relevant stakeholders and other performance information currently available.
- Identifying shortcomings – An analysis of these finding is used to develop a clear picture of relationships and outputs will include process documentation, flowcharts and most importantly, a gap analysis between the existing system and aspirations of the stakeholders.
- Development and implementation of solutions – Proposals to close the gap are considered and agreed with stakeholders before implementation to meet predefined quality levels and milestones.
- Review – Periodic reviews are done at least annually to assess the effectiveness of the changes.
By John Sanni ACMA
For comments or further information please complete the contact form below.
How to Monetize a Blog
Basically research shows that you have the following options:
- Advertising
- Paid Content and Affiliate Marketing
- Donations
- Paid Subscriptions
- Consulting
- Journalistic work for other media
Advertising is the most popular and is based on:
Popularity of the Blog (number of visitors)
Stickiness (time spent by visitors)
Loyalty (number of repeat visitors)
The visitors are measured in CPM (cost per thousand visitors)
Adverts are 125 x 125 Pixels
A blog with 100,000 monthly hits might charge 50p CPM which works out to £50 per month (£600 per year)
eMarketer estimates that retail sales via smartphones and tablets have more than doubled to £8.2 bn in 2013, accounting for 18% of total UK ecommerce sales. Tablet commerce has seen particularly high growth, reaching £4.8 bn. In 2014 mcommerce is expected to increase by 53.3% in 2014, more than triple the 15% growth rate for retail ecommerce.
UK mobile ad spend is expected to pass the £1bn mark in 2013, according to eMarketer, reaching £1.2bn (19% of total digital) – a 126.1% YoY growth. Mobile ad spend is expected to nearly double again in 2014 to almost £2.26 billion (32% of total digital).
Would you sell advertising on your blog?
steve@bicknells.net
A Trillion Euro’s lost to tax evasion in the EU
A Trillion is a huge amount, its almost too large to imagine.
Here is the latest campaign video
http://ec.europa.eu/avservices/video/player.cfm?ref=I080915
As part of the intensified battle against tax fraud, the Commission launched on 6th February 2014 the process to start negotiations with Russia and Norway on administrative cooperation agreements in the area of Value Added Tax (VAT). The broad goal of these agreements would be to establish a framework of mutual assistance in combatting cross-border VAT fraud and in helping each country recover the VAT it is due. VAT fraud involving third-country operators is particularly a risk in the telecoms and e-services sectors. Given the growth of these sectors, more effective tools to fight such fraud are essential to protect public budgets. Cooperation agreements with the EU’s neighbours and trading partners would improve Member States’ chances of identifying and clamping down on VAT fraud, and would stem the financial losses this causes. The Commission is therefore asking Member States for a mandate to start such negotiations with Russia and Norway, while continuing exploratory talks with a number of other important international partners.
http://ec.europa.eu/taxation_customs/taxation/tax_fraud_evasion/missing-part_en.htm
steve@bicknells.net
Employment Allowance
Up to 1.25 million businesses and charities will benefit from it – and around 450,000 will not have to pay any Class 1 NICs at all in 2014-15.
On 6 March, HMRC sent employers an email, headed ‘Get up to £2K off your NICs bill’, highlighting the introduction of the Employment Allowance (up to £2,000 available for the tax year 2014-15 onwards) with a link to the guidance. Almost every employer who is a business or charity (including a Community Amateur Sports Club) paying employer Class 1 NICs on their employees’ or directors’ earnings will be eligible.
Employers need to claim the Employment Allowance using their 2014-15 payroll software, or HMRC’s Basic PAYE Tools.
Ruth Bulteel HMRC
5 top reasons why you need to use an MVL
Members Voluntary Liquidations have been increasing in popularity
According to the official statistics from The Insolvency Service, over the last few (financial) years the number of MVLs has been:
| 2008/2009 | 3,727 |
| 2009/2010 | 3,266 |
| 2010/2011 | 3,270 |
| 2011/2012 | 3,644 |
Since the ESC C16 change came into effect on 1st March 2012, the number increased to:
| 2012/2013 | 4,695 |
Here are my top 5 reasons why an MVL might be a good choice:
- The change in 2012 capped capital distributions on striking off at £25,000 but this cap does not apply to liquidations
- You want to retire and close your business and extract the net worth
- You created a Special Purpose Vehicle (SPV) for a specific project and the company is no longer needed
- Companies that are stuck off can be re-instated but that’s not the case with liquidated companies
- Entrepreneurs Tax Relief may be applicable meaning the capital distribution is taxed at 10%
steve@bicknells.net
Have You Heard Of The Parent-Subsidiary Directive? It Is About Tax, Who Pays It And Where.
The EU puts out its Directives and not much notice is taken until an issue drives it out for debate and scrutiny. This Directive was intended to prevent same-group enitities based in different states from being taxed twice or even thrice, yet it has been turned on its head and ignited furious debates and streams of hysterical wailing and gnashing of teeth by politicians who signed us up to the Directive, nodded all its gold-plated UK provisons through and now find it is not doing what they thought it would do.
Trade Union chieftains routinely accuse global companies of dodging taxes by trading across legal jurisdictions in exact accordance with the provisions and various national statutes based on the Parent-Subsidiary Directive. These same blockheads didn’t utter a single word of caution or advice when their political comrades devised, gold-plated, kept secret and craftily nodded through the mother of all Parliaments in the good old days when Antony Blair of that ilk ruled in conjunction with the Marxist Scotsman economist-of-note Gordon Brown, also of that ilk.
Just why the Unions should hold the present Government responsible for cross jurisdictional tax avoidance, when it is in accordance with statutes which they helped put in place, is not clear. Perhaps big Bob Crow or wee Len MaCluskie could explain their turncoat tactics in time for the Euro elections in May. If there are people in politics, the Church and high places who resent the big corporations and how they pay tax, they should have the guts and honesty to own up to their own stupidity and complicity in accepting the Directives that underpin it to this day!
Directives are issued in various formats. It is usually instructive to consult the versions issued in French and which are adopted for French domestic use. These are more likely to indicate the original true and fair intention and actual content of the Directives. It is well established that the British versions of Directives often end up almost totally different to those that are adopted by the French in their simplified format as proper working statutes and discussion documents designed to help and facilitate compliance and effect rather than to baffle, confuse and destablilise the issues they are intended to clarify and improve.
Lawyers do well out of the British Directives, Regulations and Interpretations that dog so many of our industries, commercial undertakings and ordinary people who get caught up in their toils and misrepresentations. It is time to take stock.
Service Company – Yes or No
It’s time to run your first RTI PAYE year end and you have your own limited company, how do you answer this question?
| Service Company | ‘Yes’ if you are a service company – ‘service company’ includes a limited company, a limited liability partnership or a partnership (but not a sole trader) – and have operated the Intermediaries legislation (Chapter 8, Part 2, Income Tax (Earnings and Pensions) Act 2003 (ITEPA), sometimes known as IR35). Otherwise indicate ‘No’. |
The question is now a bit more specific, which is great, because you will only answer ‘Yes’ if you have operated IR35.
steve@bicknells.net
Paint your picture!
When I ask business owners what their business will look like in a year, 5 years or even 10 years time I am often told they do not know – after all they are not a seer and don’t have a crystal ball.
This is a cop out in my opinion – and a dangerous one at that.
If you don’t have a plan of where your business is going, who will have? If you do not have a clear vision of what you want your business to look like, who does?
Clearly there are lots of things we, as business owners, have little control over: the general economy; the banks’ perception of business risk; how our competitors and our customers behave, to name but a few. But this does not mean that we have no control over our own business success.
In helping business owners to plan for the future I have found they become much more focused on what they want to achieve. They suddenly have a picture of what they need to do to get where they want to go and are motivated to get there. In some cases they are even reminded of the passion that drove them to start the business in the first place – something which is often lost in the day-to-day stresses of life.
They do not need to know for certain every detail of how their business will grow in the years ahead, but they do need a clear set of targets which, if achieved, will deliver a business which is successful in their terms. These targets will often revolve around sales achieved, new customers found , profits made, business owner earnings…
The picture they draw may become enhanced over time but will not change in essentials.
So, if you want to feel confident about the years ahead paint your own picture of your dreams for your business. Populate it with the subtle colours that will make your business shine. Then stand back and make sure you are happy to hang that picture on your wall for the long term.
Fiona 🙂
HMRC are going to let you tell them your tax code…
It’s true, from April 2014, you can tell HMRC what you think your code should be by explaining why you think its wrong, here is a link to the HMRC structured E Mail
This form can only be used for queries relating to your PAYE Coding Notice. Any other queries will not be answered.
HMRC aim to respond within 15 days of receiving your E Mail.
Checking your tax code
You’ll find your tax code on:
- your pay slip
- your PAYE Coding Notice – you usually get this a couple of months before the start of the tax year and you may also get one if something has changed but not everyone needs to get one
- form P60 – you get this at the end of each tax year
- form P45 – you get this when you leave a job
Your tax code can be wrong for lots of reasons so being able to sent a structured E Mail to HMRC should help to get things corrected faster.
steve@bicknells.net
Business Accountant 
