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Whether a business starts life on the kitchen table or in a shared space, at some point, important decisions will need to be made about the most appropriate workspace.

The likelihood is that cost and size will drive your workspace decision, but there are also other important factors to consider…

Location, location, location

In an ideal world, many small business owners would like to choose the location of their workspace based on price, but it’s rarely that simple. For some businesses, it’s essential to be close to their clients or customers, which could mean you have to pay more than you might like.

The location also influences other factors such as recruitment. It’s beneficial to be in an area where there are prospective candidates with the skills you need or an area that candidates would be willing to relocate to. Of course, being close to parking, public transport, food, amenities and green space is also a benefit for employees.

What about a co-workspace?

Rather than having to buy, rent or lease your own private office, a co-workspace could provide the flexibility and facilities you need while reducing the costs. While some spaces cater for a diverse range of businesses, others focus on a particular sector and create an environment that’s tailored to the particular requirements of those business types.

As well as reducing the costs, there are also benefits associated with surrounding yourself with those involved in similar and complementary sectors. Co-workspaces also provide plenty of flexibility, allowing you to increase the size of the space you pay for as you grow.

Consider current needs and future growth

When choosing your workspace, make sure it doesn’t just suit your needs now but also provides the flexibility you need to grow. Before you sign a long-term lease, stop and think about what your business will look like over the next few years. Flexibility is vital, so look for space you could potentially expand into, negotiate a shorter lease or agree one that allows you to exit if you need to.

Technological requirements

With modern workplaces more connected than ever before and many businesses having remote workers and outsourced teams, it’s essential your workspace provides smooth and efficient access to the latest technology. That means having the necessary infrastructure to support fast internet and Wi-Fi in shared and public areas.

Functionality and visual appeal

The look of your workspace inside and out will have an impact on the way employees, clients and other stakeholders view your business. But as well as looking the part, it also needs to be a comfortable and professional space that supports the way you and your employees work. It should also help to maintain the wellness of your team, with meeting areas, breakout spaces and facilities that allow your staff to cycle or run to work if they choose to.

Overall, take your time

Although cost and size will be the two main factors that drive your workspace decision, our advice is to always do your homework and make sure you consider all the services and facilities your business needs before you sign on the dotted line.

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The government has announced its plans to ‘Make Tax Digital’, with the first phase of the process to be introduced in April 2019.

The move towards Making Tax Digital has been hailed as ‘the end of the tax return’ and it is intended to streamline the way taxes are reported in the UK, but what will it really mean for your business?

What does ‘Making Tax Digital’ actually mean?

Given that tax returns already need to be completed and filed online, you’d be forgiven for thinking that tax is already digital, but as it stands, apparently it’s not quite digital enough. Instead of filing digital tax returns at the end of the year, HM Revenue & Customs wants business taxpayers to use ‘functional compatible software’, such as cloud accounting platforms, to report their income and gains in real-time.

For the time being, HMRC has accepted a demand from small businesses that spreadsheets can continue to be used to record tax information, but only if they can be linked digitally to HMRC.

The first phase of the scheme

The first tax to be ‘digitised’ will be VAT, with corporate bodies, sole traders, partnerships, charities, schools and public bodies that meet the VAT threshold of £85,000 all required to submit their VAT returns digitally by April 2019. There will be no financial penalties during the first 12 months of the new reporting requirements to give businesses some time to adapt to the new way of doing things.

Currently, businesses are only required to keep a record of their total sales for their VAT return. Under the new system, that will change. Businesses will be required to keep a digital record of all their sales broken down by the VAT liability they attract (zero-rated, standard-rated etc.). They will also have to break down the purchases they make by VAT and retain information about the adjustments made for reverse charges on imported services, car leasing and business entertainment.

The potential implications for businesses
  • Initial costs – If you do not currently use cloud accounting software in your business then the requirement to use ‘functional compatible software’ could bring an additional cost. However, HMRC suggests that businesses will save on the costs of compliance from 2021, so the hope is that any additional expense now will be recuperated in time.
  • An increased reliance on accountants – There are some concerns that the requirement to share your information with HMRC on a continuous basis might mean businesses need more assistance from their accountants, which will increase their costs.
  • More efficient businesses – The good news is that not all the implications of the new tax system will be negative. Rather than relying on paper ledgers and clumsy spreadsheets, the use of cloud accounting software will allow businesses to identify and rectify mistakes immediately and potentially avoid financial penalties from HMRC. When it comes to claiming expenses, rather than digging through a box of receipts at the end of the year, expenses can be recorded as and when they’re incurred.
Are you ready to ‘Make Tax Digital?’

At KPMG Small Business Accounting, we can provide the specialist assistance you need to turn the new tax reporting requirements into a positive change for your business.

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Attracting and retaining the top talent are two staffing issues business owners constantly face. 

While excellent pay rates and opportunities to progress are two of the most common ways to overcome these challenges, they are certainly not the only strategies you can use to incentivise your team. In this guide, we’re going to explore some of the more creative approaches to staff incentives that will motivate your employees to do their best work and reward them when they do…

Introduce bonus payments throughout the year

Bonuses come in many forms, but while end-of-year bonus schemes are often poorly run, lack transparency and can actually serve to demotivate the team, there are other types of bonus that can be better received.

One-off bonus payments can be introduced throughout the year to incentivise employees to meet key challenges and help the business grow. For example, if a lack of awards is holding the business back then any employee who wins an award for the business should be paid a bonus.

Some employers do similar by introducing an ‘idea bounty’, which is a payment for ideas that help to improve the business, whether it’s simple steps to streamline internal processes or wider reaching changes. If the ideas are fully fleshed out (with processes) and go on to be implemented then a bonus should be paid. This should be proportionate to the value added to the business.

Make employees business owners too

The opportunity to participate in the ownership of the business and share in its success can be an effective way to attract, retain and incentivise employees. This is particularly the case for smaller firms that want to attract the best talent but do not have the budget to compete on salary.

As well as aligning the interests of the employees with the business strategy and helping to retain key members of the team, there are also a number of other benefits associated with this approach. Firstly, there are advantages for the cash-flow of the business as no money leaves the company. The reward of shares is also very cost efficient as it maximises the net return for the employee and reduces costs for the employer.

Let staff choose how they are rewarded

One size doesn’t fit all when it comes to incentivising employees. What one employee might really value could fall flat with other members of the team. For that reason, it’s often best to let employees choose their own incentives, whether it’s additional time off, a monetary reward or days out. Everyone values flexibility in their lives and having a plan that allows employees to choose their own benefits and perks can really pay off.

Offer paid time off for community pursuits

Another perk we have seen more of in recent years are businesses offering high performing employees paid time off to explore creative and community-driven pursuits. Giving staff time to volunteer demonstrates the company’s commitment to the community and its social conscience. With social causes becoming more and more important to modern employees, this is one incentive your team will really thank you for.

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What does the EU’s General Data Protection Regulation (GDPR) mean for your business and what impact is it likely to have in real terms?

Most small business owners will be aware that the EU’s General Data Protection Regulation comes into force on 25 May 2018, but few will know what that means in real terms. There are severe penalties for those who do not enforce the strict new rules, so it’s essential you understand the responsibilities the regulation will bring.

Research has shown that even global businesses aren’t ready for the new regulations, with just a third (33%) currently having a plan to comply with GDPR in place. However, the sooner you start the journey to becoming GDPR-compliant, the lower the likelihood of receiving a fine, bad publicity or even becoming embroiled in a legal process will be.

What is the General Data Protection Regulation (GDPR)?

The main aim of the GDPR is to enforce and permanently change the way businesses collect, store and use personal data. The key requirements of the regulation include:

  • Auditing the current data protection measures you have in place;
  • Documenting all the information you hold;
  • Ensuring all your data collection procedures are GDPR-compliant.

Although the GDPR is an EU directive, the UK government has confirmed the new rules will be implemented regardless of the form our withdrawal from Europe takes. For that reason, there’s no point delaying your strategy to deal with the new regulations and in fact, you’d be wise to start planning now.

What does the GDPR mean for small businesses?

The new regulation applies to all businesses selling to and storing personal information about consumers in Europe. It effectively takes power away from businesses that collect and use data for monetary gain and gives it back to individuals, prospects, customers, contractors and employees.

According to the GDPR, personal data includes information such as names, email addresses, photos, bank details, social networking sites, locations details and computer IP addresses. It gives individuals a number of rights in regard to this information, including:

  • The right to access data held about them
  • The right to be forgotten
  • The right to transfer their data from one service to another
  • The right to be informed before data is gathered
  • The right to have information corrected
  • The right to request their data is not used for processing
  • The right to object to their data being used
  • The right to be notified of a data breach
What must small businesses do to comply?

The GDPR is certainly not just an IT issue – far from it. Instead, it has wide-ranging implications for the whole company, including how marketing and sales activities are handled. The Information Commissioner’s Office has created a checklist that details the steps organisations should take to ensure they are ready for May 2018.

If you are concerned with your ability to cope with the implications or simply don’t have the time to make the changes yourself, now is the time to seek assistance from a third-party such as a security firm or consultancy. You may also need to appoint a data protection officer who is responsible for ongoing GDPR-compliance.

The hidden benefits

Although businesses will have to keep up with a number of extra requirements in regard to how they handle and process personal data, GDPR-compliance could also change your business for the better. Small businesses can use GDPR as a stepping stone to best practice around the handling, control and security of information and improve the quality and integrity of the information they hold.

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For your business to succeed, those ideal candidates must gel into a team that can bring your vision to life by creating a cohesive, cooperative working environment.
Below we examine some of the key aspects of building a successful team in more detail.
Articulate your dream

Get the foundations right by communicating your business outlook. This gives individuals the rationalised knowledge and subsequent belief in a common goal which in turn forms the first step to forging a knockout team.

Regular group meetings will give you a chance to involve your employees in a discussion about how your visions and values need to be applied week-in, week-out. These values must begin at the top; project a genuine, open, honest and motivated attitude and that’s what you’ll nurture.

Pride in product and service

Team engagement will be stronger if individuals feels good about what they deliver, so make sure you’re vocal about the pride you take in what you supply as a business.

The value team members get from their roles will depend how well they can do their jobs, so resist the urge to micromanage; focus instead on providing the right tools and training, and trust your employees to get on with what they were hired to do.

We all make mistakes, so if you get negative feedback then address it as a collective. This puts you in control of your team’s understanding, and lets you drive from the front regarding how you’re going to bounce back and make the most from experience.

Really shout about the positive feedback; gift-vouchers, team-building holidays and other non-financial rewards are a great way to boost healthy, intrinsic motivation which gets everyone in the right frame of mind.

A future-proof team

You should know by now that Millennials are the future of business; they represent a new breed of employee that’s a lot more focussed on building a healthy work / life balance.

Start embracing future working trends by getting more mobility into your small business. Through free online tools like Slack, your team can share files and discuss work through dedicated subject forums. This boosts collaboration and works whether employees are sitting side by side, or miles apart.

Virtual teams

A future-ready mindset will rely on your ability to build virtual teams into your business ecosystem.

While software is essential for this hosting, you also need to ensure that employees are given the training and tools they need in order to optimise new methods.

Think about hiring a tutor or organising formal guidance sessions for all staff members, not only to broaden skillsets but to educate about how virtual collaboration enriches the team in a wider context, and helps to accelerate productivity.

Outsourcing

There’s a lot to think about, but remember you can’t do it all alone. Outsourcing is a great way of redistributing the work burden and lightening the load on staff shoulders.

For instance, outsourcing payroll will put your finances in the hands of experts, but at a fraction of the cost of a full-time accountant.

In the same spirit, automation software can deal with heavy administration that slows up productivity in departments that have to handle high volumes of repetitive work.

In both instances, shifting monotonous workload responsibilities helps your team to avoid potentially costly mistakes, while freeing up time and energy resources for the good of the organisation.

Keep your feet on the ground

Ultimately, the team you develop will mirror your own approach, so always consider your behaviours before you try to alter those of others.

Remain approachable, understanding and friendly at all times, exhibiting the people skills that you’ve relied upon throughout your business journey.

Most importantly, remember that this is a learning process for all involved, and recognise that every new member of your organisation will bring fresh perspectives, unique qualities and new opportunities.

This flexible mindset will be essential to helping you nurture performance momentum so that your business and its people grow in the healthiest way possible.

To request a quote and hear more about how you can become one of our clients, call 0800 028 1028 now to speak with an advisor or click the button below. 

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Reminders of keeping a healthy cash flow come thick and fast as we make inroads into 2018.

Cash is the lifeblood of your business which means balancing the financial obligations is an ongoing deal and your constant attention is required. With this in mind, I’ve put together a few pieces of advice to enable you to keep the figures afloat.

via GIPHY

Cash flow analysis

Forecasting cash flow is an essential part of every business, so why not use technology to help you achieve full visibility? Software tools are now available that can flag up dangers ahead by analysing client payment histories set against how long you can put off making payments.

Key metrics such as accounts receivable and payable, credit terms and your inventory each influence cash flow. With analytical insight into each of these components, problems can easily be identified and solved more quickly.

Speed up receivables

Obviously, you can only have a healthy cash flow if you get paid, and there are a few ways you can speed up turnover on receivable income.

Money off for prompt or early payments and deposits on orders can get things moving, while credit checks on new clients can give you an idea of how likely you are to get paid on time.

Payment terms will also facilitate receivables. “Due upon receipt” is a commonly used wording but Net 10 (payment due within ten days, and Net 20 (within 20 days) or anywhere in between will get your money moving more quickly to where you need it to be.

It’s highly likely that you sell products and services through your website, so make sure that it’s working properly, and optimised for desktop and mobile device formats.

The most important part is enabling customers to pay you easily. Instant online card payment services such as Paypal support seamless and speedy cash transfers. Don’t be put off by payment fee, either; user-experience is a priority that holds the key to pushing sales up.

Stay on top of pricing

It’s easy to get carried away when growth occurs, but keeping a sober eye on your pricing and increasing costs will help you to anticipate cash flow problems.

While it can be tempting to withhold price increases at the risk of losing customers, small hikes are actually expected and will be respected by those who buy from you, so long as you inform of future changes in a timely, transparent and reasoned manner.

Stock wisely

Just because you require certain specialist products and services from one merchant, doesn’t mean you have to stick with that supplier when it comes to more everyday items.

Remember that big savings can be made if you stretch your purchases across different vendors, industry catalogues or cheaper dealerships. Holding your eggs in more than one basket also means you’ll be better equipped to ride out any supply shortages that may occur.

When it comes to your own inventory, try not to exceed industry standards in terms of what and how much you need. Merchants will offer large discounts on bulk buying, but they have their own interests at heart, not yours. Conduct regular stock takes and always look out for ways to streamline inventory to boost cash flow.

Strive for highs, prepare for lows

Unfortunately, tougher times often outweigh growth periods for small businesses. To maximise cash flow and profit, keep your eyes open to nip issues in the bud, and negate their impact on the bottom line.

Banks can be a useful place to turn to in leaner times, but ensure that you go to your manager with a clear business plan in place to stand a better chance of securing the funds you need.

People you buy from will have greater interest in your financial health, so don’t be afraid to call in the favours and draw on your sound industry reputation should you need to renegotiate terms in order to free up cash flow.

Final thought

And don’t panic. Cash flow issues are common to all small business owners – just remember there will often be many unturned stones beneath which will lie the answers you’re looking for.

As your organisation grows, your outgoings and incomes will fluctuate, testing your liquidity time and again. Taking time out to conduct a full analysis of your cash flow will yield clarity further down the line, helping you to ride out the bad times and put the good times to most effective use.

To request a quote and hear more about how you can become one of our clients, call 0800 028 1028 now to speak with an advisor or click the button below. 

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According to research by online business transfer agent Bizdaq, the average UK small business is worth £90,000 – £4,000 less than last year, but still more than the 2015 average (£89,000). 

If your business is in the south, it’s likely to be more valuable, says Bizdaq, on average £2,000 more than elsewhere, although the average value of businesses in the south has fallen by £6,000, compared with an average decrease of £1,000 for businesses in the north.

The average value of a small business in South London is still £67,000, thirty grand less than the average value in North London (£97,000), but nowhere near as valuable as North-West London (£169,000), says Bizdaq, which has produced an interesting map of small business values across the UK.
 

Why value your business?

Bizdaq based its findings on data from almost 7,500 small-business valuations performed over the past three years, seeking to provide a reliable benchmark of how much an owner could expect to make from selling their small business.

But owners have their businesses valued for many other reasons, of course. Examples include getting a valuation done before introducing an employee share option scheme or selling a share in their business to an investor.

Business valuations are often required when an owner is getting divorced and a settlement must be worked out. Otherwise, a valuation can result from an irreconcilable dispute with a business partner or fellow director, when one party wants to buy the other out.
 

How are businesses valued?

Earnings multiples are often used to value established businesses. The P/E [price to earnings] ratio (PER) represents the value of a business divided by its post-tax profits. So, if your post-tax profits were £100,000 and you were offered £300,000 for your business, the P/E ratio would be 3. You could then compare this to the standard PER for your sector or business type to help you decide whether a fair price had been offered.

You might simply multiply your post-tax profits by the relevant PER to value your business, but you risk undervaluing your business if you ignore other factors, for example, if your profits are growing year on year or you have valuable assets within your business. Alternatively, you could overvalue your business if you do not factor in all liabilities.

Sometimes cash flow forecasts are used to work out the value of a business or there might be a “going rate” within a sector. Alternatively, value can be based on much it would cost to create a similar business (called “entry cost”). A business’s assets and liabilities are usually key considerations when valuing a business.
 

Factors that affect value

American investor, Warren Buffett (reported by Forbes to have a net worth of $81.1bn), describes valuing a business as “part art, part science”. According to Buffet: “Accounting numbers are the beginning, not the end, of business valuation,” because balance sheet figures alone won’t always tell you everything you need to know.

Likely future trading results are more important than previous trading history, while intangible assets, such as your intellectual property, brand, reputation, etc, can be hugely valuable. Older, more stable business with appealing assets and healthy monthly cash revenues usually have a greater market value than younger business with fewer assets and less predictable income. That said, newer businesses with unique knowledge, products or skills can be extremely valuable.

Valuing a business can be challenging and involve a lot of effort. And if you plan to sell your business, ultimately, your business, however much you value it, is only actually worth the price someone is prepared to pay for it. Take the time to explore all aspects that make your business what it really is, that way before taking any big steps you’re at least taking these with a clearer picture.

To request a quote and hear more about how you can become one of our clients, call 0800 028 1028 now to speak with an advisor or click the button below. 

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You may have used your own savings when starting your own business, many people do. Friends or family might have lent you money. You may have been fortunate enough to secure a start-up grant or loan, or your bank might have provided a solution to some of your start-up funding needs.

Now that your business is more established, it might have its own cash reserves, but investing them all in growing your business could leave you dangerously short of working capital (and you might need more anyway). So, what are your likely funding options if you want to grow your business?

1.) Bank loan

Although fewer small businesses are applying for bank loans, approval rates remain high. According to UK Finance (the body that now represents banks in the UK), in Q2 2017, 81 per cent of small-business loan applications were approved, so getting a bank loan might not be as difficult as you imagine.

Speak to your current business bank to find out what funding solutions they can provide. Ask what security is required and carefully consider whether you can afford the monthly repayments (seek advice from your accountant).

Recent years have seen many “challenger banks” emerge as rivals the high-street heavyweights, so explore all options. And if you’re turned down for a loan because you can’t offer security, the Enterprise Finance Guarantee scheme might offer your business a solution.
 

2.) Government grants and loans

It’s not just start-ups that can apply for government grants and loans. New businesses (up to two years old) can apply to borrow between £500 and £25,000 for a lower, fixed interest rate from the government-backed Start Up Loans Company. Visit government website Gov.uk to find out what government finance and support is available in your region or sector.
 

3.) Business angels

You’ve seen Dragons’ Den? Of course you have. Well, basically, the Dragons are business angels, that is, highly successful business people and entrepreneurs who invest (typically £20,000-£200,000) in early-life small business in return for equity (ie a share). They usually sit on the company’s board and help decide how the business is developed.

According to The British Business Angels Association (BBAA), angels invest some £1.5bn a year, making them “the UK’s largest source of investment for start-ups and early-stage businesses seeking to grow”. The BBAA’s website features a wealth of information if you want to find out more about angel investment. Angels usually have lots of experience, knowledge, contacts and money, but it will involve giving up some control and ownership of your business.

4.) Crowdfunding 

A relatively new option, crowdfunding can offer a way to raise finance by asking a large number of people to each pay a small amount to help a business to launch or grow. Founded in 2010, Funding Circle was the first online platform to provide peer-to-peer lending to small UK businesses and it has since facilitated more than £2.2bn in loans to SMEs. There are other options.

“Debt crowdfunding” (also called “peer-to-peer” business lending) is where investors get their money back plus interest, while “equity crowdfunding” is where people invest in exchange for shares or a small stake in the business or project. Visit the UK Crowdfunding Association website for more information.

5.) Venture capital and private equity

As explained on the BVCA website, “venture capital” refers to funds invested in companies “in the seed (concept), start-up (within three years of establishment) and early stages of development”.

Private equity is “finance provided in return for an equity stake in potentially high-growth [unquoted] companies” and is often used to fund management buy-ins or buy-outs. The business management team’s credibility, competence, ambition and growth strategy can all help to determine whether investment takes place. If it does, some ownership and control must be conceded to the private equity firm. For more information, the BVCA website features a guide to private equity and venture capital FAQs.

Proper planning…

In many cases, you’ll need a mix of funding sources if you want to grow your business. Obviously, you should work out how much you need and how you’ll spend it. Investors will expect a clear idea of when they’ll get a return, while lenders will want to be sure your numbers add up. In all cases, you’re more likely to succeed if you come armed with a sound business plan.

 Read our guide to find out how to create a business plan for growth HERE To request a quote and hear more about how you can become one of our clients, call 0800 028 1028 now to speak with an advisor or click the button below. 

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Halloween (or Hallowe’en) is celebrated after darkness descends on 31 October, the day before All Hallows Day (aka All Saints Day). In the UK, the custom dates back thousands of years to the ancient Celtic festival of Samhain, which marked the end of summer and the harvest, and the beginning of winter.

The Celts built large bonfires to ward off spirits they believed revisited the mortal world on Samhain, and pumpkins were carved originally in the USA for the same reason. In the UK pumpkins have largely replaced turnips, which were more commonly used.

As regards to UK consumer spending, Halloween has overtaken Valentine’s Day to become the UK’s third-biggest event after Christmas and Easter. Last year, Britons spent an estimated £310m on Halloween, up 5 per cent from £295m in 2015 (in 2002 it was just £12m). About 10m pumpkins are grown in the UK every year, with 95 per cent of them reportedly bought in the run-up to Halloween.

 

The lifeblood of business

The surge in Halloween spending, which will no doubt take place again this year, will benefit many UK retail and agricultural businesses. However, other businesses could get an unexpected scare if they’re not careful – and one that isn’t caused by ghosts or ghouls.

Whether at Halloween or any other time of year, suddenly running out of cash is one of the most worrying – if not frightening – experiences a business owner can have. Cash flow problem can suddenly creep up on you, while others businesses are continually haunted by them. Even seemingly successful businesses with healthy sales and margins can fail if they can’t access enough cash to pay their bills when they need to.

Cash is the lifeblood of all businesses, which is why sound cash flow management should be a key priority for your business. It begins with firmly controlling your costs, so that your spending never reaches scary levels. Your business must remain lean and efficient if it is to stay alive and avoid joining the entrepreneurial spirit world.

Your margins should also be as high as possible, while sound credit control is essential, which means being cautious when granting credit to customers, sending your invoices out promptly and chasing payment as soon as it’s due. Week to week, you should have a good idea how much cash is in your business bank account, roughly how much your business owes, how much it’s owed and when significant sums of money will enter and leave your business bank account.

Keeping your business alive

Working with sound cash flow forecasts can help to ensure that your business remains in the land of the living. Based on realistic assumptions of likely sales and costs, making cash flow forecasts allows you to look ahead and predict what cash will enter and leave your business in the months to come.

And if you can look ahead and see something scary heading your way, because your costs will be higher than your sales and you’re likely to run out of cash, you at least have time to act now to cut your costs, boost you sales or find short-term funding to ensure that your business doesn’t come to a gruesome, premature end.

Read our guide to effective cash flow management HERE To request a quote and hear more about how you can become one of our clients, call 0800 028 1028 now to speak with an advisor or click the button below. 

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Taking a potential or existing customer out for a meal can be a great way to establish good relationships and keep them strong.

And you won’t necessarily be faced with having to pay a heartburn-inducing restaurant bill, even if you really want to impress your guests. If you’re based in or close to London, some of the city’s restaurants may offer Michelin-starred lunches for £30 or less per person.

 

However, according to travel guide, Lonely Planet, a three-course dinner in a top London restaurant with wine now costs up to £90 per person (and that’s without tip or taxi). At £35 per person, a two-course dinner with a glass of wine is more affordable. Such prices aren’t exclusive to London, of course, but there may be cheaper options (websites such as lastminute.com, Bookatable and Groupon might enable your business to find money-saving deals at restaurants all over the UK).

What can you claim for?

If you work for a limited company, entertaining customers is not allowable for corporation tax purposes.

That means that although the bill can be claimed as a legitimate business expense – providing it’s reasonable and “wholly and exclusively” for business purposes – it can’t be taken off your profits when you or your accountant are completing your tax return and working out how much the company owes. The same is true for other entertainment costs, for example, taking a client or customer to a football match or other event.

And if you’re self-employed (aka a sole trader), entertaining clients or customers can’t be claimed as an allowable expense either. So, although your business can pay the bill, costs can’t be deducted when you or your accountant are working out how much income tax and NI is payable. Still, it’s more tax efficient that you paying for it out of your own pocket.

Benefit in kind?

If HMRC believes that the meal was for social rather than legitimate business reasons, it could be viewed as a “benefit in kind”, which means you could be personally liable for tax and NI.

In all cases, it’s wise to keep a brief record of the date, who you met for lunch or dinner and why, as well as till receipts, of course. It can make life much easier should HMRC investigate. Including entertainment costs that HMRC could view as excessive can prompt such an investigation.

 

If your business is VAT registered, you can’t reclaim any VAT paid on customer entertaining expenses.

What about giving gifts to customers?

With Christmas fast approaching, you may want to send a gift to a valued customer. So, what are the rules?

If you want these to be tax deductable as an expense, the value should be no more than £50 (per recipient) and be promotional in nature (ie the gift itself should bear your branding, not just the packaging or wrapping).

 

Unless you sell them, such gifts should not be alcohol, food, drink or vouchers that can be exchanged for these. If gifts aren’t seen as promotional or they’re worth more than £50, they will be classed as entertaining, so they will not be tax deductable. And if the gift is worth more than £50, HMRC will disallow the full cost, not just the amount over £50. If in doubt, as with all tax matters, seek advice from your accountant.

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