Twenty-first birthday
Thanks to http://www.freedigitalphotos.net
Our practice is twenty-one years old this year and to celebrate …. well, we’re just working as normal. That’s not to say we’re not pleased, because we are, and though we’ve had our ups and downs, overall it’s been a good experience.
Why we, or more to the point, I, went into practice is a story for another day, but I am frequently asked how we got started, and how we secured new clients, so what marketing tips can we pass on to those just starting out or struggling to develop a customer base?
I would not pretend to have any particular marketing expertise, so all I can do is pass on some things that have, and have not, worked for us, and hope that it might help others as they take their first steps into what might be a very alien environment.
1. Advertising in local press and Yellow Pages: yes, we did pick up some early work from both these sources (remember this was early 1990s) but generally this was low value and poor quality work and certainly did not warrant the expenditure, so after a few years we stopped advertising. I guess this route to market is largely redundant in today’s digital era so it would be interesting to hear from other MiPs whether this type of advertising does indeed still generate any new business.
2. Direct mailing: we took advice from a marketing consultant and spent a small fortune, or so it seemed at the time, on brochures, mailing lists, and postage, and dutifully followed up every mailing with a telephone call to ensure that the brochure had been received and enquire whether they would be interested in meeting …. they were not.
3. Recruitment agencies: thinking that I really would need to step back into the world of paid employment after just a few months of ‘independence’, I reluctantly started contacting agencies, and found to my surprise that there was quite a demand for temporary, part-time, and interim, accountants.
At the time I had no idea what the latter term meant, but it paid well and I soon had a number of short-term projects under my belt and suddenly agencies were approaching me rather than the other way around. This gave me the confidence to continue, and one of these short-term assignments turned into a one-or-two-day-per-week marathon over eighteen months which provided a platform from which to build the practice.
4. Networking: I think I need to distinguish here between networking which occurs in the normal course of business where say, I have been discussing a client’s affairs with a bank manager and he or she asks for a card and then contacts me later to see whether I can also help with another of their customers, because this has lead to some good, long lasting client engagements, and the type of staged events which now proliferate and are promoted by various business and trade groups: as a colleague once remarked, “too many predators, too little prey”; I have to agree with the latter sentiment.
5. Referrals: similarly I have picked up new work from existing clients who have a brother, sister, uncle, good friend, customer, supplier, etcetera who has “… a problem you might be able to help them with”. Some have turned out to be headaches we could really have done without, but some have turned into good, long term clients, and indeed almost all new clients now come via this route – I have just learned to be a little more adept at asking the right questions to work out which I should pursue, and which I should avoid.
Yes I still find myself taking on things I probably shouldn’t when I see someone in need of help but I guess that it at least earns some goodwill with the client who has made the referral, or is that just wishful thinking?
6. Training: I have been delivering ‘Finance for non-financial managers’ courses via Chambers of Commerce and the former Business Links since 1997 (and still do via one such Chamber). Over the years it has proven to be a useful marketing tool in that inevitably a proportion of participants will approach me afterwards for more specific advice and some will then invite me to meet and to review their business requirements – it is one reason why a small practice based in South East Wales has clients from Birmingham, to Bristol, to Cardiff, and various points between.
In short I have been paid to market my business! How often does that happen?
A few year ago my colleagues and I put this online for our own clients at http://centralaccounting.co.uk/home/documentation/accounting-basics/ and I have already made an offer to other members of the local area MiP group that if they wished to do likewise with local Chambers, FSB, and similar organisations, then I have no problem with them using this ‘online workshop’ to deliver training provided the appropriate acknowledgements are made – it will be for them to bring it to life in a classroom situation with their own anecdotes and personal experiences.
I’m very happy to make the same offer to MiPs generally: we have had a very good return on the work I undertook to develop the course so it owes us nothing, and we’re not looking for anything in return beyond brand awareness for the award winning cloud/ SaaS ERP software in which we have had some involvement over the past several years, and on which website the workshop sits.
7. Website: we have one at www.centralaccounting.ltd.uk and yes, we do get occasional enquires from prospective clients who have found it via search engine, but it’s much the same as the early advertising and Yellow Pages experience – nothing to get too excited about. We also get quite a number of sole traders in particular who are just looking for some free advice.
That said, it’s proven useful as an electronic brochure that can be ‘left with’ a prospective client, so it is worthwhile in my view, and it can act to both encourage the type of clients we are looking for, and discourage those we are not.
It might also be worth mentioning that the other question that often crops up in conversation with new MiPs is “how do I price for the work?” and over the years we have developed a formula that gives us a good starting point and which we use in discussion with the client in a question and answer session so that (a). we get clarity on what we are being asked to do, and (b). they understand the cost implications for their business.
If you think it might be useful and want to use it it’s at http://www.centralaccounting.ltd.uk/cost.html but remember not to send it to us when you’ve completed the form with the client as that will generate a good deal of confusion.
8. Social media: yes, we are active on LinkedIn, Facebook, and Twitter, and have been for a few years, and the received wisdom is that this is the future for marketing. To date I cannot think of a single client that has been generated via this route, so for me the jury is still out. Clearly others may have had a more fruitful experience and there is no guarantee that we are using this tool to best effect so it would be interesting to learn of other MiPs experiences in using this.
I should also note that we have used pay-per-click advertising in another business in which I am involved, and this has delivered new customers, but I think the critical difference here is that that business has a well defined product, rather than a service that needs to tailored around the client’s wants and needs.
For our practice, there is nothing quite like face-to-face engagement with a prospective client to initially listen to what it is they want and need, and then deliver a response to address those needs, and if those prospects are there because of a referral and/ or recommendation from an existing satisfied client, it makes life all the easier.
As I write this I have no idea whether this very personal experience is similar in any way to that of other established MiPs, so it would be very interesting to learn of your experiences, and I’m sure that if you are able to share those experiences it might provide guidance and encouragement to those just starting out, or about to start out, in practice.
Look forward to hearing from you.
Paul Driscoll is a Chartered Management Accountant, a director of Central Accounting Limited, Cura Business Consulting Limited, Hudman Limited, and AJ Tensile Fabrications Limited, and is a board level adviser to a variety of other businesses.
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 Business Entity Tests for IR35
The Intermediaries legislation known as IR35 was introduced on 6th April 2000.
The aim of the legislation is to eliminate the avoidance of tax and National Insurance Contributions (NICs) through the use of intermediaries, such as Personal Service Companies or partnerships, in circumstances where an individual worker would otherwise –
- For tax purposes, be regarded as an employee of the client; and
- For NICs purposes, be regarded as employed in employed earner’s employment by the client.
In May 2012 HMRC set out their 12 business tests:
- Business premises (10)
- PII (2)
- Efficiency (10)
- Assistance (35)
- Advertising (2)
- Previous PAYE (minus 15)
- Business plan (1)
- Repair at own expense (4)
- Client risk (10)
- Billing (2)
- Right of substitution (2)
- Actual substitution (20)
A score less than 10 is high risk and a score more than 20 is low risk. Whilst it is only guidance, these are the tests that HMRC use and if you fail the test you may be taxed on deemed payments.
http://www.hmrc.gov.uk/ir35/guidance.pdf
Many Freelance Contractors have some assignments within IR35 and some outside, you can ask HMRC for their opinion.
If you would like HMRC’s opinion on a particular engagement you should send your contract(s) to:
IR35 Customer Service Unit
HMRC
Ground Floor North
Princess House
Cliftonville Road
Northampton
NN1 5AE
e-mail: IR35 Unit
Tel No: 0845 303 3535 (Opening hours 8.30am to 4.30pm, Monday to Friday. Closed weekends and bank holidays) Fax No: 0845 302 3535
If your contract is within IR35 its not the end of the world, the chances are that you will still pay less tax than a direct employee, to calculate the tax you have to work through 8 stages of calculation, here is a summary:
- How much were you paid? deduct 5% for business costs
- Add any other payments/non cash benefits
- Deduct business expenses – travel, meals, accommodation
- Deduct capital allowances relevant to the work done
- Deduct pension contributions made by your company
- Deduct any NIC paid by your company on your salary and benefits
- Deduct any salary or benefits already paid and taxed
- If the answer is zero or negative then there is no deemed payment, if the answer is positive you do have a deemed payment which will be taxable
HMRC have a spreadsheet you can download which has further details.
steve@bicknells.net
What expenses can I not claim when I am self-employed?
When you are operating a business as a sole trader, you will need to complete a self-assessment return for your income. Self-employed income is taxable after deducting allowable expenses. Previously I talked about the expenses that a sole trader can claim but now I am going to tell you about the expenses that you cannot claim.
Non allowable expenses for sole traders include:
Your own wages and drawings, national insurance contributions and pension contributions.
Childcare costs. These can only currently be claimed through a limited company scheme.
Subsistence. You can only claim for hotel and meal costs if you have an overnight business trip. You cannot claim for other meals including lunches, snacks and coffee.
Any business entertaining including entertaining clients and suppliers and hospitality at events.
The purchase cost of business premises and any costs relating to a non-business part of your premises. Also the cost of improving and altering premises and large equipment.
Motoring costs like fines, purchase cost and travel between home and work.
Repayment of loans, overdrafts and other finance solutions.
Some professional fees like the legal costs of purchasing property and large assets. Also the cost of settling tax disputes and fines.
Payments to clubs, charities, political parties.
Cost of ordinary clothing even if you only wear it for work.
Personal use including goods bought for personal use, the personal proportion of your home costs if you work from home, personal phone calls on your mobile phone etc.
Rebecca Taylor
What expenses can I claim as a sole trader
When you are operating a business as a sole trader, you will need to complete a self-assessment return for your income. Self-employed income is taxable after deducting allowable expenses. None of us want to pay more money than necessary to HMRC so use this guide as a starting point to ensure that you are claiming all you can.
There are two main types of expenditure:
Capital expenditure
Capital expenditure is money spent on items (assets) that will have a useful life to the business of more than one year, for example premises, furniture, machinery, vehicles, tools, IT equipment.
These costs cannot be included when working out taxable profits. However you can claim Capital Allowances which give tax relief for the reduction in value of the assets.
Revenue expenditure
Revenue expenditure is the allowable expenditure which is incurred in the general day to day running of a business. This can include:
Cost of goods bought for resale and cost of producing goods that you are going to sell or use in providing your goods or services to sell.
Employee costs including wages, employers’ National Insurance, benefits for employees, agency fees, subcontractors and training.
Business premise costs including rent, rates, utilities, maintenance and cleaning.
A proportion of your home costs if you work from home, including a proportion of the costs for rent, rates, utilities, mortgage interest, maintenance and cleaning. The costs should be apportioned based on how much of the home is used for business and for how much time if not exclusively. Or you can claim a fixed rate of £4 per week (from 2013-14).
Office running costs like phones, mobiles, broadband, email hosting, postage, stationery, printing, software and small office equipment.
Vehicles including the running costs (petrol, car tax, insurance, repairs, MOT and servicing). If the vehicle is also used privately, you can only claim for a proportion of the cost in relation to how much the vehicle is used for business mileage. Business mileage includes trips to the bank, post office, business meetings and networking events.
Mileage can be claimed instead of a proportion of the running costs of a vehicle if your turnover is below the VAT threshold when you acquired your vehicle. Mileage rates are 45p a mile for the first 10,000 business miles a year, then 25p a mile.
Travel, meals and accommodation including hotels when an overnight stay is required for business.
Business insurance including public liability, professional indemnity and employer liability.
Marketing and advertising including PR, free samples, networking, website maintenance costs, printed ads and brochures.
Magazine subscriptions if they are relevant to your business or are for client reading in a reception area.
Professional fees are usually allowable. Legal fees for drawing up contracts and terms and conditions are allowable as are your accountant’s fees for completing the year end accounts. Architect and surveyors fees are also allowable.
Bank, credit card and other finance charges including overdraft charges, hire purchase interest and lease payments.
If the expense relates to business and personal cost, only the business cost is deductible but also if the expense is dual purpose then no deduction is allowed. Always remember to keep detailed records of your transactions and keep copies of receipts and invoices as back up (these can be the originals or scanned copies on your computer).
Rebecca Taylor
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
5 things you need know about asset revaluations
It’s a fundamental concept of accounting that the accounts must give a ‘True and Fair’ view of the state of affairs of the company at its year end.
In order to achieve this a company may need to revalue its fixed assets, it could be Plant or Property, larger companies will refer to International Accounting Standards and Financial Reporting Standards but most SME’s use FRSSE.
Accounting Explained gives a good summary of the entries related to revaluations http://accountingexplained.com/financial/non-current-assets/revaluation-of-fixed-assets
Here are some things you need to know:
- Revaluing Assets does not create a tax liability
- Revaluing Assets does not create a profit (it creates a revaluation reserve)
- Depreciation Rates may need to be reviewed (as they could be too high if you need to revalue regularly)
- Revaluation will increased the Net Worth of your business
- The Directors can revalue the assets but the value needs to be carefully worked out as an arms length market value
steve@bicknells.net
10 important things to know about auto enrolment pensions
Here are 10 things that you need to know:
- A Worker may include Agency workers and Self Employed workers depending on the their contracts
- One Person companies are not subject to Auto Enrolment however, if the company takes on a second worker and the director and new employee have contracts of employment then both could become workers under auto enrolment.
- Eligible Job holders are aged between 22 and state pension age and earn over £9,440 and are automatically enrolled however Non Eligible Job holders could opt to join
- Employer contributions will be 1% from October 2012 till 2017 (2% total contributions), then 2% till 2018 (5% total contributions), then go to 3% (8% total contributions)
- The employer must register their scheme www.tpr.gov.uk/registration
- The scheme is being introduced over a 5 year period starting in 2012, to find out when it applies to your business click on this link http://www.thepensionsregulator.gov.uk/employers/staging-date-timeline.aspx
- Employees can opt out but new Employment Rights will prevent employers from offering inducements to opt out and prohibit employers from anti pension recruitment policies and unfair dismissal relating to pension enrolment
- If the employee opts out the employer must automatically re-enrol them every 3 years
- The Pensions Regulator will have powers to issue compliance notices and fixed and escalating penalties increasing on a daily basis. Employees who blow the whistle on their employer will be protected under the Public Interest Disclosure Act 1998
- The following types of scheme will qualify
- Defined Benefit Schemes
- Defined Contribution Schemes
- Hybrid Schemes
- Contract Based DC Schemes
- Stakeholder Pension Schemes
steve@bicknells.net
What happens when you buy an ERP system?
I am often asked about ERP systems, so I have written this blog from my own experience, I am not saying Dynamics is better than any other system its just that it’s the only one I have worked with.
Enterprise Resource Planning systems such as Microsoft Dynamics NAV can be configured in many ways.
Prior to Order, you will probably have issued an RFP (Request for Proposal) and had a bid process. Typically a Dynamics system might start from £200k with probably half the cost or more being for consultancy.
Once you have selected your supplier, the first stage is Systems Design, I have worked on many of these, basically, you gather information on how the business works now, right down to fine detail such as how control accounts are used and what reports are currently used, then you consider what is possible with the new ERP system, what is the best way to perform tasks, how are results reported, some of the information will be flowcharted and a route map drawn up to get from where the business is now to the new ERP system. It is a highly detailed process, my reports were typically 200 pages long and the supplier and client sign off the report before configuration work starts.
Next the system experts get to work and make a mock up of the system and then workshops are done with senior management and directors to makesure the clients instructions have been correctly intrepreted, this process is then signed off.
The next stage is Training, normally immediately before the system goes live.
I hope this is helpful.
steve@bicknells.net
10 ways to improve your business credit rating
Having a good credit score is essential in the current economic climate, your credit score will be checked by Customers, Suppliers and Banks/Lenders, so how can you improve your score?
1. Pay your bills on time – many credit rating agencies (Dun & Bradstreet, Creditsafe, Risk Disk to name a few) now collect payment data from your suppliers every month and update your score, often showing days beyond terms (DBT), if you have a dispute with a supplier try to resolve it quickly as it could affect your credit score.
2. Don’t make multiple applications for credit – credit searches by lenders leave footprints on your credit file and could make it look like you have cash flow problems.
3. File your accounts on time – late filing can really hurt your credit score, sometimes it can reduce your score by 50%.
4. Avoid CCJ’s – Getting a judgement against your business even for a small value is extremely damaging to your score.
5. Retain Profit – this increases net worth and shows you are investing in your business.
6. Record Borrowing Terms – in your published accounts and notes makesure you explain the terms and split the loan between short and long term, if all your loans are shown as short term this will damage your score because it will impact on working capital.
7. Review Share Capital – if you have directors loans that you have made to the business and you aren’t expecting repayment in the near future convert them to Share Capital, this will increase net worth.
8. Keep Credit Card Balances below 30% – Its bad for your credit score to max out your business credit card and its also bad to have too many business credit cards, it makes your business appear desparate for cash.
9. Avoid Negative Net Worth – it can wipe out your score.
10. Fix any mistakes – if a credit score is wrong and contains errors speak to the credit agency and get it fixed.
Do you have any tips to share?
steve@bicknells.net
Business Accountant 