Vital small business KPIs

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Results of a new survey have shown that small businesses are damaging their chances of growth by not using Key Performance Indicators (KPIs).

Researchers discovered that in 2015, 39% of small businesses failed to reach their growth targets, and 49% didn’t have targets in the first place! On the other hand, 74% of the SMEs that frequently and regularly monitor their KPIs hit their growth targets. Demographically, it is the younger generation who are more likely to use KPIs and also monitor them in real time.

Key Performance Indicators are a vital tool for businesses of all sizes as they provide information about how well (or otherwise) your company is doing. They allow you to identify some of your most important metrics, and provide a standardised way of determining whether or not your staff are meeting their goals, targets and objectives. The majority of KPIs tend to be financial, the most common being average revenue per customer, but they can be used to measure virtually anything.

Monitoring KPIs is a time-consuming process, so if you’re just starting the process, it’s better to begin by tracking just a few meaningful ones. KPIs must have a way of being accurately defined and measured – it’s not good enough to have ‘more sales’ as your target because you’re not quantifying how many sales you’re aiming for.

Common KPIs used by small business owners

  • Sales: Most companies generate income via sales. By establishing a sales growth metric, you’ll be able to see the rate at which your revenue is rising or falling. As part of this metric, you must also take into account other factors which will affect the result, e.g. seasonal fluctuations.
  • Product performance: By monitoring the performance of individual products and services, you’ll find out how well each performs. By knowing exactly what’s happening, you’ll be able to discontinue those that perform badly and concentrate your efforts on those that do well.
  • Return on investment (ROI): All businesses will at some point need to invest money in projects or equipment, the most common being assets and marketing. By monitoring the ROI, you’ll know exactly how much income has been received as a direct result of that investment. In marketing, for instance, ROIs are determined by, for instance, new enquiries or likes on social media, as well as increased sales.
  • Debtor lifetime: The interruption of cash flow caused by late payments can be fatal for small businesses. By monitoring how long it takes your customers to pay their invoices can help you with your cash flow forecast, as well as highlight problem clients.
  • Creditor lifetime: You also need to monitor how long it takes you to pay your creditors. These KPIs will be comparable with debtor lifetime figures to allow you to avoid taking out too much credit, and with keeping on top of cash flow issues – you don’t want to pay your creditors too quickly if money from your debtors is coming in too slowly.

Small business KPIs are a vital part of your day-to-day business practice. As accountants, part of our job is to help you identify tools which will help your business succeed, whether you’re a start-up or want to expand.

For more than 90 years, HB Accountants have been providing SME owners with financial services and advice throughout the business lifecycle, from start-up, growth and exit strategy. Contact us to find out how we can help you.

 

Top 7 sound budgeting tips for UK small business owners

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According to the accounting membership organisation AAT, SMEs are probably losing out on £1,277 a year because finances are being dealt with by unqualified staff. This equates to a massive loss of around £2.9billion a year across the UK. AAT estimates that 35% of people who are responsible for finances in their SME don’t have a relevant qualification, with finance and accountancy tasks being shared between staff for whom it is not a primary responsibility. In fact, only 26% of small businesses have one or more dedicated staff members dealing with the accounts.

Here are our Top 7 effective budgeting tips for small business owners.

1 Hire an accountant

Well we would say that wouldn’t we! But even if you’re thinking of using our services, there are steps you should take to make sure it’ll be a good investment. A good accountant won’t just do your tax returns, they’ll also help your business grow, so you need to find someone you can really trust as they’ll need to know everything about your company. Ask around – talk to other small business owners to find out who they use and whether they’d recommend them.

2 Be timely with your tax return

If, like many small businesses and sole traders, you leave it until the tax deadline to give your records to your accountant, it could leave you in the position of having a last minute tax bill you can’t afford. If you sort out your tax return nice and early, you’ll know exactly how much you’ve got to pay when there’s still lots of time to get the money together… without incurring added fees or penalties.

3 Don’t waste your energy

Energy bills will be one of your company’s largest expenses, so are there ways you could save money by using less energy? Shop around the utilities companies to see if any could offer you a better deal. And get your staff involved in identifying ways of saving energy and encouraging them to switch off lights and equipment when it’s not in use.

4 Get appy

There are a lot of accounting programmes and apps to help make budgeting easier and less boring. Check out our blog on some of the most popular to see out which one might work best for you.

5 Bank charges

Review the service you’re getting from your bank, especially when it comes to bank charges. Find out what the other banks are charging as you might find you can get a better deal. If you are thinking of changing banks, take into account what your business might need in the future (e.g. a loan or insurance).

6 Keep on top of your budget

If you keep your records up-to-date and accurate, you can use your budget as a planning tool. By working out what your expenses are, you can get a much better idea of the revenue you’ll need to aim for.

 

 

Which accounting package is right for your business?

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If you run a small business, are a sole trader or even a freelancer, you’ll undoubtedly need more help with your accounting than you can probably afford. By using a specialist accounting package, your accounts can be organised in a way that’ll help you make sense of them. And if you keep your day-to-day accounts in good order, you could save money on accountants in the long run.

Many of the packages are examples of Cloud Accounting, where the system, and your data, is available anywhere with an internet connection, which means it can be shared easily with your accountants.

Here’s the HB Accountants’ beginner’s guide to the features available with some of the best packages specifically for small businesses.

Sage One

Sage is possibly the best-known accounting package, and is the one we use. Sage One is a cloud-based accounting and payroll software. Sage’s UK products are specifically designed with small businesses in mind and have a number of features that keep you in line with the UK regulations, laws and taxes.

AccountEdge Pro

AccountEdge is a complete small business accounting and management solution for Mac users. It will help you with sales and purchases, payroll, inventory, invoices and managing contacts.

FreeAgent

FreeAgent provides UK freelancers and small business owners with online accounting software. It brings everything together, from invoice and expense management to VAT, payroll and self-assessment tax return filing.

FreshBooks

With FreshBooks, small business owners will be able to track time, log expenses and invoice clients and is accessible from any device (desktop, iPhone, iPad and Android).

Harvest

Claiming to “make time tracking easy (and almost fun)”, Harvest works on your laptop, iPhone and Android. It will analyse data, set budgets, track your project’s progress, track billable and non-billable time and run reports.

Hiveage

This package helps you track time, expenses, mileage, invoicing and accepting payments. The Hiveage dashboard gives you a clear overview of your income and expenses.

Intuit QuickBooks

For small businesses and the self-employed, Intuit QuickBooks helps you track your  income and expenses, separating business and personal transactions. It will show you how much to set aside for tax, calculate mileage deduction and will download banking transactions.

Xero

An online package for Macs, PCs, tablets and smartphones, Xero will help you reconcile, send invoices and update you when they’re opened, create expense claims, as well as importing and categorising your bank transactions.

Wave Accounting

With Wave’s software, you can track sales, expenses, bill customers, receive payments, and pay your employees. It will automatically import bank transaction information, scan receipts, generate reports and insights to give you a simple understanding of how your business is doing.

Intacct

Intacct is a package designed for business expansion, with automated processes that can become more complex as your business grows. It allows for multiple users in multiple locations, streamlining the order-to-cash process and securely processing transactions.

Paychex Accounting Online

Paychex claims to provide an accounting package for people with no accounting experience with its intuitive and user-friendly design. It provides true double-entry accounting, bank reconciliation, a full activity stream, financial statements, and import/export capabilities.

Kashoo

Kashoo is an online accounting package enabling small business owners to control the company’s bookkeeping all from one place. It allows you to import bank details, keep track of invoices, expenses, cash flow, payroll, tax reporting, and audits.

Less Accounting

Billed as “accounting software for business owners who dislike bookkeeping”, Less Accounting was built on the premise that all you need is to see who owes you money and bill them, record and categorise expenses, then hand all the information over to the person doing your tax returns.

 Working Point

This package was designed for business owners, not accounting professionals. It enables you to do online invoicing and general accounting from any of your devices, with nothing to install and no upgrades to download.

Zoho Books

Easy-to-use cloud accounting software for businesses. Zoho enables you to invoice clients, accept online payments, track expenses, connect to your bank account, share transactions and capture customer feedback and product accounting reports.

If you’re a small business looking for an experienced and trusted Hertfordshire Accountants, contact us for more information.

Payroll News – The New Tax Year

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Please be aware of the following changes effective as of 1 April 2016:

· National Living Wage increase to £7.20 per hour for those aged 25 and over.

Please be aware of the following changes effective as of 6 April 2016:

· Emergency tax code increase to 1100L (£11,000 Tax Free Allowance per Annum)

· Employment Allowance increase to £3,000 for eligible businesses. Businesses with a sole employee who is also a director are now not eligible for employment allowance.

· Apprentices under the age of 25 have a change in NI to category H, so employer’s no longer have to pay employer’s NI contributions on earnings up to the new Apprentice Upper Secondary Threshold (£43,000 per Annum)

A business owner’s guide to relocating in Broxbourne

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The Borough of Broxbourne is extraordinarily well placed to become a lively and prosperous place for businesses to be.

Just outside the M25, it has all the advantages of being close to London without actually being in London. It’s already home to major companies such as Tesco, News UK, Merck Sharp & Dohme and VolkerWessels UK. Stansted and Luton Airports are easily accessible, it has good road and rail links and will offer easy access to the proposed Crossrail 2 route.

But most importantly, it is being supported by the government in the form of Ambition Broxbourne which was launched in 2014.

The Council’s vision for the area is that by 2030 the Borough of Broxbourne will “have a thriving, vibrant and prosperous economy that is underpinned by innovation, enterprise and entrepreneurship”. It is aiming for a knowledge-driven economy, where the educational institutions meet the current and future needs of business, and with a well-educated and skilled population willing and able to compete in the local and global economy.

Work is already underway on a £3.9m purpose-built Enterprise Centre to provide quality workspace for SMEs and start-ups. The Centre is due to open in Autumn 2016.

As part of the new initiative, a business and community support centre has been set up in Hoddesdon town centre under the name Give Your Town The Run Around. The centre is a café hub which offers works booths and meeting space with wifi, as well as a space to educate and engage the local community. It aims to raise event sponsorship locally, to bring awareness of what is great about the area and to give back to a selection of good causes centred around charity and fitness incentives. Give Your Town The Run Around also supports local ideas and is a building towards being a platform that encourages local creativity.

In addition, there are already numerous business networking groups established by and for small businesses in the area which are complemented by exhibitions and showcases.

Broxbourne is also a great place to live. Bordered by the Lea Valley Park and surrounded by ancient woodlands, it combines the best in small city living with the countryside on the doorstep.

HB Accountants has been established in Hoddesdon for more than 30 years. As an active part of the community we enjoy helping other businesses and organising local events. We’re passionate about the Broxbourne Borough and would love to talk to you about its advantages and attractions. So if you’re thinking about moving your business to the area, get in touch!

Main points from The Budget 16 March 2016

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Following on from today’s budget, see below the main points from HB’s tax specialist.

Capital Gains Tax:
The rates of tax will be reduced from 28% to 20% and from 18% to 10% with effect from 6 April 2016, but the “old” rates will still apply to disposals of residential property (apart from your main residence, which is exempt).

Company tax:
From 1 April 2016 loans to directors etc. will be taxed on the company at 32.5% instead of 25%. This tax is only payable if the loan is still outstanding 9 months after the end of the accounting period, and it is repayable to the company if and when the loan is repaid.

From 1 April 2020, corporation tax will be reduced to 17%.

Personal tax:
From 6 April 2017 the personal allowance will be increased from £11,000 to £11,500 and the higher-rate tax threshold is also to be increased from £43,000 to £45,000.

National insurance:
Class 2 national insurance, which is currently paid at £2.80 per week by the self-employed, will be abolished completely from 6 April 2018.

Investments/pensions:
The annual ISA (Individual Savings Account) limit is to be increased from £15,240 to £20,000 from 6 April 2017.

A new Lifetime ISA is also being introduced from 6 April 2017 to help people save to buy their first property or to save for retirement. £4,000 per year can be saved and the government will add a further £1,000 to this.  The money can be used to put towards the purchase of a first home or retained and drawn down tax-free after age 60.  Each individual can open one so a couple saving for a home can effectively double the benefit.

Practical steps to deal with small business debt

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Small businesses can never be safe from the possibility of getting in to debt. Often, it’s not even the fault of the business owner – the late payment culture prevalent in the UK can tip a company over the edge. According to UK Debt Collection News, virtually 60% of small business invoices are paid late (and it won’t surprise any small business owners to know that the worst offenders are blue chip companies, high street retailers and supermarkets).

Whilst small business owners are perfectly justified in complaining about how unfair this is, without government intervention, there’s very little they can do to overturn this damaging practice. However, there are steps they can take to help tackle any debt before it gets out of control.

  • Alternative funding: the bank isn’t your only source of funding. Since the recession, alternative ways of funding and dealing with small business debt have risen, such as crowdfunding, peer-to-peer loans and invoice financing. Invoice financing is where you hand over your company’s invoices to a third party who will process your invoices. Your business can then receive loans based on the expected invoice payments.
  • Free up cash: increase your efforts to chase your debtors to try and get the money you’re owed in the first place. After that you could: sell off unused equipment – even if it’s broken or out-of-date, you may get scrap value for it; get rid of unnecessary expenses; rent out office space to other small businesses or sole traders.
  • Look at your budget: create a new, realistic one based on your current financial situation. Once you know what your fixed costs are, you’ll know how much you can apportion to debt payment. There are many inexpensive accounting software packages designed to help you keep track of your budget, so if you don’t already use one, look at what the market has to offer.
  • Prioritise debt payment: don’t just pay off the bare minimum each month or it’ll take too long to get back into the black. Check your interest rates and pay off the debts with the highest rates first.
  • Communicate: talk to your creditors, explain your situation and ask if they can help with a realistic payment plan.
  • Ask for help: contact a confidential helpline like Business Debtline which specialises in free debt advice for SMEs. They can advise you on many financial aspects, including whether you might be eligible for benefits to help you through the lean times.

If you’re looking for confidential financial advice from approachable specialists please get in touch with the HB Accountants team.

 

7 Fundamental Tax Tips for UK Entrepreneurs in 2016

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Did you know that there are a whole host of tax benefits currently available for UK entrepreneurs? If you’re just starting out on a new business venture it’s highly advisable to research tax tips for UK entrepreneurs to not only ensure you are following best practice when it comes to your financial accounts, but you are also making the most of any tax benefits available.

7 tax tips for UK Entrepreneurs in 2016

 

  1. Working from home?

If you are a UK entrepreneur the chances are that you will be running your business from home.  Did you know that you can claim tax relief on a proportion of your home expenses such as heating, lighting, council tax, home insurance and mortgage interest?  You need to be realistic about the claim and you should also make sure you don’t use any room exclusively for business, as this could cause capital gains tax problems if you sell the property.  You start by apportioning the expenses over the number of rooms in the property to get the amount relating to the room you use mainly as an office.  Then you need to look at the amount of time you spend using the room for business purposes as against private use and scale down the amount accordingly.  You can also claim for business use of telephone and broadband.

 

  1. Company transport? It pays to pick up

Many people find twin cab pick-up trucks almost as desirable as SUVs.  If you are one of those people it would be worth getting your company to buy one of these for your company vehicle.  Provided the vehicle payload is more than 1,000 kg. it is treated as a van for tax purposes and you get the use of it at a much lower tax cost than a “normal” SUV.  You can also write off the full cost of the vehicle against company tax, whereas you would only be able to write off 8% of the cost of a car each year.  On a £20,000 vehicle this means the company benefits from a tax saving of about £3,500 and the director saves about £1,500 (assuming personal tax at 40%).  If the company pays for all fuel for both private and business use, the further tax saving can be up to an astonishing £8,500.

 

  1. Kids on wheels

If you have a teenager who has just learned to drive, you will know that car insurance can be very expensive.  Why not get the company to buy a very low emission car (75 g/km or less) and let them use it.  The company will be able to write off the full cost of the car against tax as well as all the running costs except fuel.  You will have to pick up the tax cost of the car benefit but, even if you pay tax at 40%, on a car costing (say) £12,000 this would only cost you about £500 a year.

 

  1. 5th April … put it in your diary

From the 5th April, the government is making big changes to the dividend route for businesses. As a UK entrepreneur, if you’re already in business it’s recommended to bring forward your dividend payment to save on tax and take less in the next financial year. If you decide to bring forward your dividend payment before the new financial year just double check that this doesn’t take you into the income tax bracket of over £100,000 as this could impact the level of tax taken against your income.  This is not a ‘one size fits all’ so you need to take advice on this.

 

  1. Saving for your family

As a UK entrepreneur success can also come down to how financially savvy you are with your money outside of your business investment too. Bedding down for the long term with a plan for financial security will give you that reassurance that your family life is taken care of whilst you are building your business. Have teenagers? Set them up with a First Time Buyer ISA to help them prepare to get onto the property ladder. With a Help to Buy ISA the government will top up any savings you add to this account by 25% (tax-free) up to a maximum of £3,000.

 

  1. Saving for the future

As a UK Entrepreneur it’s also worth noting that as soon as you start to employ people within your company you will be legally obliged to provide employee contribution pensions otherwise referred to as ‘auto-enrolment’ by 2018. Failure to do so could lead to fines of up to £2,500 daily depending on how many members of staff you employ.

A business owner can put up to £40,000 per year into a pension tax free via an employer based pension. If you decide to take the alternative route and save personally the government would charge National Insurance and Employer National Insurance. A business receives tax relief on pension payments and also avoids National Insurance – so consider contributing via the business rather than personally if you can.

 

  1. Digital Tax Returns

On a final note, it’s worth having on your radar government plans to introduce digital tax accounts.  The move will allow UK Entrepreneurs who have started to generate revenue from their business to manage their tax returns in real-time and submit accounts throughout the year rather than in one go. In addition, by 2020 your business should be able to link in your accounting software and bank accounts directly to your digital tax account. The benefit? If your account information is submitted regularly your tax bills will be more closely related to your overall performance.

 

If you’re a UK entrepreneur and are looking for financial advice from approachable specialists please get in touch, the HB Accountants team would love to see how we can help build your future business.

As responsible professionals, we always advise seeking professional advice on your unique circumstances before proceeding with any of the points raised in this article.

 

 

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Expert tax advice for UK small business owners in 2016

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From experience, expert tax advice for UK small business owners is always welcomed when delivered but more often than not, it is infrequently asked for. As a small business owner it’s more than understandable that other priorities can sometimes take precedence over company accounts. After all, there is always so much to do such as building brand awareness, gaining new customers and growing your customer base.

Small business owners are often time-poor but company accounts, including cash flow management, late payments, bad debts and business tax should all be at the top of your list of priorities. What’s a business if your finances are not in order and working hard for you?

Helpful expert tax advice for UK small business owners in 2016 …

 

  • 5th April … put it in your diary

 

From the 5th April, the government is making big changes to the dividend route for businesses. As a UK small business, and assuming you are making a profit, we would recommend you consider bringing forward your dividend payment to save on tax. Naturally, this will mean that your expected dividend will be less in the next financial year but the tax saving could well be worth it.  This is not a ‘one size fits all’ so you need to take advice on this.

 

  • Assess your personal situation

 

If you do decide to bring forward your dividend payment just double check that this doesn’t take you into the income tax bracket of over £100,000 as this could impact the level of tax taken against your income and may not be advantageous in your circumstances.

 

  • Saving for the future

 

As a UK small business owner, you will soon be legally obliged to provide employee contribution pensions otherwise referred to as ‘auto-enrolment’. Failure to do so could lead to fines of up to £2,500 daily depending on how many members of staff you employ.

A business owner can put up to £40,000 per year into a pension tax free via an employer based pension. If you were to take the alternative route and save personally, the government would charge National Insurance and Employer National Insurance.  So what’s the best route for your business?  A business receives tax relief on pension payments and also avoids National Insurance – do it via the business rather than personally if you can.

 

  • Digital Tax Returns

 

The government has announced that from 2016 they will be introducing digital tax accounts.  The move will allow small business owners to manage their tax returns in real-time and submit accounts throughout the year rather than in one go at the end of the year. By 2020, your business should be able to link in your accounting software and bank accounts directly to your digital tax account. The benefit? If your account information is submitted regularly your tax bills will be more closely related to your overall performance – no nasty surprises.

 

  • Be wary of Phoenixing

 

Companies have used the Phoenix route to avoid obligations such as onerous leases or large tax liabilities by going into liquidation and buying the business back from the liquidator, but without the liabilities.  This has been known as a “pre-pack”.  The other reason for doing this is where a company has built up substantial profits and wishes to extract them tax-efficiently.  In this case the company is liquidated and the money comes out as a capital gain taxed at 10% rather than as income taxed at a much higher rate.  The business starts up again the next day in a new company.  There is existing legislation to stop this but HMRC have apparently been reluctant to use it.  However, from 6 April the monies will be taxed as income rather than as capital gains if a similar business is started up within 2 years.

Are you a small business owner looking for tax advice for the new financial year? Get in touch, the HB Accountants team would be happy to connect with you to see how we can help your financial planning and accounts.

As responsible professionals, we always advise seeking professional advice on your unique circumstances before proceeding with any of the points raised in this article.

 

Posted in Tax

HB Ladies Networking Lunch

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HB Accountants are delighted to announce that we are holding an exclusive Ladies Networking Lunch at Hanbury Manor in Ware, Hertfordshire.

When: Thursday 21st April, 12pm
Where: Hanbury Manor, Ware
Cost: £25 per person, including 2 course lunch

MARRIOTT HANBURY MANOR HOTEL AND COUNTRY CLUB, WARE, HERTFORDSHIRE, SG12 OSD (TEL: 01920 487722). THE BUILSING IS A JACOBEAN-STYLE MANSION DESIGNED BY SIR ERNEST GEORGE.

Our unique format enables female business owners to meet, network and market their businesses in a relaxed yet professional atmosphere. Our lunches have always been a great success with around 30 ladies from a variety of business industries attending.

With no professional lock-out, the lunch will start at 12.30pm and you are invited to arrive any time from 12pm. Whilst the lunch finishes at 2pm, ladies are welcome to stay behind to continue networking for as long as they like.