Business Support

The beginning of a new year is an opportune time to undertake basic business planning. One aspect that needs continuous management is to protect your business capital.

The downturn in global trade continues to be affected by the war in Ukraine, the situation in the Middle East and now the disruption to movement of goods in the Red Sea. This is compounded by persistent inflation, high interest rates and consequent increases in costs.

In the face of these challenges what can beleaguered business owners do to protect their capital base and be in a position step back into the ring as and when consumers start to edge out of their front doors and start spending?

Here’s a few ideas for you to think about:

1. List all of your fixed costs, those that you have to pay even if you have no income coming in and cancel as many as you can that can be re-established when markets open up again. Obviously, many will be tied to contracts that cannot be broken. In which case:
2. Contact suppliers, landlords, service providers etc., and see if you can negotiate a moratorium on payments for a period, a reduction in payments or the cancellation of contracts.
3. When this work is done rework your business plan for the next year and speak to your bank or other sources to secure any cash required to meet the likely dips in cash resources.
4. Importantly, start to think about waking up your business when consumer interest in spending starts to increase demand for your goods or services.

And finally, speak to us. There is no substitute for sharing this planning process with your professional adviser. We know your business. We know how you have burned the midnight oil to develop your business and the problems you have overcome along the way. We can, and we want to help. Call now so we can start to consider your options.

The government Valuation Office Agency have issued the following warning to business owners who may have received unprompted approaches by an agent offering to negotiate a reduction in their business rates bill.

The Valuation Office Agency (VOA) is urging businesses to protect themselves from rogue business rates agents.

New rateable values for business properties came into effect in April 2023. Councils used these new values to calculate business rates bills. Businesses can challenge their valuation if they think it’s incorrect. They can use a rating agent do this.

But some rogue agents submit inaccurate information. This could result in penalties or increased rates bills. Be cautious of anyone who guarantees they can secure big business rates reductions.

Gary L Watson, Institute of Revenues, Rating, Valuation Chief Executive, said: 

“We strongly advise businesses do their own research and explore different options before appointing an agent. Make sure you choose your own agent – don’t let an agent choose you."

As Christmas arrives the week before the calendar year-end, many of us will enjoy a week’s shut down and have time to relax and enjoy the break with our family and friends.

The break also gives us time to consider our plans, personal and business, for the coming year.

Readers of this post who have not seriously considered their finances would be well advised to dust off their laptops and evaluate their “what-if” choices for 2024.

• If your present income exceeds your outgoings will that enviable state of affairs continue?
• How will you be affected by continuing upward pressure on prices?
• Is it time to consider creating new income streams?
• If your planned outgoings exceed your planned income, how will you fund the shortfall? From savings, by drifting into debt?
• And don’t forget to include debt repayment in your cashflow forecasts.

We have all experienced tough economic challenges as the effects of the banking crisis, Brexit, COVID and the war in Ukraine have impacted our daily lives. High inflation, high interest rates and a depressed economy are a direct result, and it is not clear if 2024 will see a significant reversal in these trends.

And so, if you get the time, give a little serious thought to your prospects for 2024 over the coming holiday. The scouting maxim, be prepared, comes to mind. Plan for the worst, hope for the best.

There are two ways to consider the effects or benefits of business and personal expenditure.

The payment of rates or utility costs are an essential part of our daily expenditure, but it would be difficult to view them as an investment.

Whereas the cost of building a new online sales platform for your business may open up the prospect to win additional sales for your business or additional income for your family finances. But the costs of the build are a real expense.

Any costs that you undertake that will have a direct impact on improving your financial situation should be considered an investment rather than an expense.

Having made this distinction, it makes sense, when you are considering cost cutting or planning your finances, to protect investment costs and see if you can reduce those costs that are not going to have a direct, positive influence in 2024.

In certain cases, the two distinctions may rub shoulders with each other. For example, investing in solar technology, while not impacting your ability to earn more, may help you reduce your ongoing electricity costs.

If we are to recover from the economic challenges of the past few years, we must address a more considered reclassification of our planned outgoings.

Be wary of reducing investment expenditure.

Other aspects of your expenditure that will also need consideration in this exercise could include:

• Will an investment in a new piece of plant really have a positive impact on your sales or could the expenditure be deferred until trading conditions improve?
• Do you really need to change your car? It may get you from A to B more comfortably, but it will likely use financial resources that may be more profitably employed in improving productivity and sales/income.

Trimming costs or expenditure that will have little impact on your future financial prospects makes sense.

Trimming “investment” costs that could have a positive impact makes less sense.

We recommend that your take this distinction into your planning for 2024. And if you need help creating plans, pick up the phone. We can help.

It’s the directors’ responsibility to file their company’s accounts, and make sure they’re filed on time. It’s important to understand your role and how late filing could affect your company.

Missing your filing deadline could affect your credit score or access to finance. It can affect how others view your company and whether they want to do business with you. There are also financial penalties and legal consequences – you could get a criminal record, a fine or disqualification.

If you employ an accountant to file your company’s accounts, it’s still your responsibility, as director, to make sure they’re filed on time.

Over 65% of companies use software filing as their preferred method.

There are a variety of software providers who offer a range of accounting packages to prepare and file accounts. Most types of accounts can be filed using software, depending on the functionality of the software package you’re using.

If you file using the Companies House online services, you will be sent an email to confirm safe receipt. You will also be sent a further email when your accounts are registered at Companies House.

Company accounts need to be filed nine months after the accounting year end.

Which means before the end of December 2023 you will need to file accounts with a year end of 31 March 2023.

And on or before the 1 January 2024, you will need to pay any Corporation Tax due for the same year, to 31 March 2023.

Most dictionaries define “bottom line” as “the most important thing to consider”.

In financial circles it’s taken to mean a focus on profitability (the last line on a P&L accounts) or net worth (the bottom line of your Balance Sheet) rather than an obsession with sales (the top line on a profit statement).

Sales/turnover is obviously a key element of your business activity and meeting sales targets is usually uppermost in the minds of most small business owners.

However, profits – particularly profits retained in a business – are the cheapest way to maintain and increase net worth and cash flow.

Without retained profits, you will need to increase borrowings or capital introduced to maintain your balance sheet bottom line.

If you succeed in retaining profits this will have an immediate, positive impact on net worth, and eventually, will help you reduce debt (borrowings) and increase cash flow.

A focus on sales should always be accompanied by a keen interest in the bottom line indicators. Most accounts software will make these numbers available at the click of a mouse. If you need help to discover how your account’s software could produce indicators that will help you better manage your business during the present difficult times, please call, we can help.

In some respects, the Chancellor’s predicament is deserving of a sympathetic ear; its as if he has a long journey ahead but has one foot firmly nailed to the floor.

Stagnant growth in the UK and global economy has driven up taxation in order to meet the goals set to reduce borrowing as a percentage of GDP.

Inflation is reducing but is still above the Bank England’s target to have inflation back to 2%. In which case we will likely have high interest rates for some time.

It is difficult to see how tax rates could fall in the short or even medium term without an increase in economic activity. If tax rates were reduced, the fall in revenue would have to be met by more austerity, which in turn, would exaggerate the current cost of living crisis.

Where does this leave UK business owners?

We should probably consider elasticity of demand for products and services delivered. For example, if you sell products or services where demand is high or where there are few or no readily available substitutes for your products, you are likely to meet less resistance to raising your selling prices to pass on your increased costs. In this way you can maintain profitability and cash flow.

Compare this with businesses who sell goods or services where there are lower cost substitutes or where demand can be deferred, for example, a new kitchen. Businesses affected in this way will be less likely to recover increased costs by raising their prices. Profits will fall followed by loss of cash reserves and solvency.

We can help. Call now so that we can consider your options. What is clear, is that unlike our Chancellor, we can make choices and business planning during these uncertain times is a must-do activity.

The Enterprise Investment Scheme (EIS) is designed to help smaller higher-risk trading companies to raise finance by offering a range of tax reliefs to investors who purchase new shares in those companies. 

To claim investor EIS tax reliefs, the company which issues the shares has to meet a number of rules regarding the kind of company it is, the amount of money it can raise, how and when that money must be employed for the purposes of the trade, and the nature of its trading activities.

The main qualifying criteria for EIS investee businesses are as follows: 

• The maximum amount of funds that a company can raise through investments qualifying for the EIS is £5M in any 12 months with a maximum of £12m over the company’s lifetime. There are higher limits for ‘knowledge-intensive’ companies. 
• There is a maximum limit on the number of employees that the investee company can have when shares are issued. The company must have less than 250 full-time employees or their part-time equivalents. For groups of companies, the limit applies across the group. There are higher limits for ‘knowledge-intensive’ companies. 
• The company’s gross assets (or the group assets if the company is a parent company) must not exceed £15 million before any shares are issued and not be more than £16 million immediately afterwards. 
• There are also time limits as to when investments can be raised by the company and how and when the money must be spent.  

It is important that businesses looking to raise finance using the EIS scheme ensure that they qualify. Otherwise, their investors will be unable to claim the promised tax reliefs. HMRC offer an ‘advance assurance’ service that can help ensure everything is in order before raising finance.

To be a director, you must be over 16 and not currently disqualified. 

As a director your responsibilities include:

• filing your company’s annual accounts and reports or appoint an accountant to do it for you
• reporting changes in you or your company’s situation including changes of address
• sending a confirmation statement every year to Company’s House
• pay Corporation Tax, VAT, PAYE and National Insurance contributions due on time

Other key duties include:

Company’s constitution
You must follow the written constitution of your company. This is created when you set up your company.

Promote the success of the company
This means considering the impact your company has on others, the environment, any employees and colleagues. It also requires you to act in the interest of creditors if you are insolvent.

Independent judgement
Take advice, but always make decisions for yourself.

Exercise reasonable care, skill and diligence
Use the skills you have in the best way possible.

Avoid conflicts of interest
Do not take advantage of your position as a director to gain unfair advantages or create conflicts in business or other relationships.

Third-party benefits
Generally, you shouldn’t accept benefits from third parties that may cause conflicts of interest.

Interests in a transaction
You must tell other directors if you personally benefit from a company transaction.

Please call if you are uncertain what other duties directors have or any other matters that will help you decide if a corporate structure is the best option for your new business.

The government has announced £4.5 billion in funding for British manufacturing to increase investment in eight sectors across the UK. The funding will be available from 2025 for five years, providing industry with longer term certainty about their investments.

Over £2 billion has been earmarked for the automotive industry and £975 million for aerospace, supporting the manufacturing, supply chain and development of zero emission vehicles, and investment in energy efficient and zero-carbon aircraft equipment. 

Alongside this, the government has committed to £960 million for a Green Industries Growth Accelerator to support clean energy manufacturing, and £520 million for life sciences manufacturing to build resilience for future health emergencies and capitalise on the UK’s world-leading research and development.

With the entire manufacturing sector making up over 43% of all UK exports and employing around 2.6 million people, this funding is targeted at the UK’s strongest, world leading sectors; including where the industry is undergoing fundamental changes to remain at the forefront of the global transition to net zero, like the move to zero emission vehicles in the automotive industry.

The Green Industries Growth Accelerator investment will support the expansion of strong, home-grown, clean energy supply chains across the UK, including carbon capture, utilisation and storage, electricity networks, hydrogen, nuclear and offshore wind. This will enable the UK to seize growth opportunities through the transition to net zero, building on our world-leading decarbonisation record and strong deployment offer.