Get those invoices paid quicker!

invoice paid

The problems faced by small business due to late payments have been very much in the news lately, as a business owner you are very aware of the importance of getting paid on time and that payment delays can seriously disrupt cash flow. When searching for ways to speed up payment, keep in mind that the most effective solutions are often the most simple. The invoice you send your customer is, hands down, the most important communication in regards to getting paid. With a few simple adjustments and additions to your invoices, you can actually speed payment from customers and increase your chances of getting paid…

– Please and thank you
Good etiquette is always important, but when it comes to invoicing, minding your manners can actually increase the probability of getting paid. By adding a “please” or “thank you” to an invoice, you can improve the chance of getting that invoice paid quickly by more than 5 percent. That simple adjustment could end up resulting in thousands of £’s per year.

– Customized details
Make it a habit to ask all of your customers what they require on invoices. It will take some time upfront to make these inquiries, but you will save time and money down the road if you don’t have to re-invoice a customer due to missing or incorrect information. You might want to ask: Do you need a purchase order (P.O.) number or is an invoice number enough? Do you need a detailed breakdown of services or will a general description suffice? Is there any individual I must direct the invoice to?

– Days vs. Net
By simply using the term days over the term net, will help you to get paid on time. Terms like net 30, net 60, etc. make a lot of sense on the business end, but customers don’t always know what they mean. When you include phrasing like “payment due within 30 days,” the customer immediately identifies the time frame. This is stronger than, say, due upon receipt, which gives the customer room to waffle about when the invoice was received and does not offer a strict timeline.

– Interest fee
If you aren’t already charging interest on late payments, you absolutely must begin. Late fees add urgency to invoices, ensuring they don’t end up at the bottom of the bills-to-pay pile. Be sure to reference late fees in the initial customer contract and make certain to restate them in the invoice. Let your clients know exactly what the fee percentage is and when it applies (i.e., a 2 percent interest fee will be charged per month on late payments.) This lets the customer see what additional payments they would have to make if they don’t get that invoice in on time.

– Incentives
Beyond motivating payment with late fees, try positively incentivizing customers to pay you early. Incentives might include a 1 to 2 percent discount if payment is received within a specific “early” time frame. Include these incentives in the invoice so the customer is immediately motivated to react to the offer. Also, consider offering future discounts, credits, gift certificates or merchandise as possible incentives. In the end, you’re saying thank you for making that payment a priority. It’s rewarding your customers for their business, increasing their loyalty, and helping you get paid.

– Include electronic payment options
You will see a much quicker response when you give customers the opportunity to have an invoice paid electronically.

Here at DNA Accountants, we can help you to get onboard with cloud accounting to take some of the pain out of your invoicing each month, get in touch, we’re happy to talk business.

DNA Accountants

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Accountants: Not just here for Tax Returns!

tax returns

January, the time when everyone gets themselves in a tiz about their self-assessment tax returns. But imagine you had someone on hand all year, not just January, keeping on top of your numbers, making sure you keep more of the money you earn rather than paying it in tax. These people do exist and we are ACCOUNTANTS.

When you work for yourself or run a small business, every penny is important and keeping on top of where they are all coming from or going to is a job in itself. Give yourself a break and pass on all these jobs to us, you didn’t start-up your business to be a number cruncher, but we did. Here are 5 good reasons for you to let go and let us take care of your numbers:

– We will save you time
Having to do the paperwork can be time consuming and actually take time away from the task in hand (the one that you actually want to do). Employing an accountant, who is au fait with the latest tax laws, rules and regulations and deadlines, not to mention one who completely understands what format HMRC requires all the information in, can save you hours and hours.

– Reduce your tax liability
A good accountant (DNA, obviously!!) will be proactive, not reactive and will understand how to save you money and be able to give you good advice on the most tax efficient way of running your business. Knowing the best way to operate – whether it is as self-employed or a limited company – and the most tax efficient way to take money out of your company is something they will guide you on, based on your individual circumstances and situation. They will go through paying yourself through dividends, understanding what you can and can’t claim through company expenses and the benefits of using the flat rate VAT scheme.

– Prevent you receiving hefty tax penalties and fines
Keeping on top of your tax submissions whether with the support of an accountant or not will help keep your company bank balance healthier by avoiding fines which can range between £150 for a day late submission of annual accounts to a whopping £1,500 fine for a six month delay!!!

– Help you to grow your business
We make it our goal to understand and get to know the ins and outs of your business, we also take great pride in seeing your business succeed.

– No tax worries
Tax is complex!!!! Depending on whether you are a Sole Trader, Limited Company or a Partnership, you need to: prepare your company year-end accounts, prepare abbreviated company accounts (if required), sort out your personal tax return, prepare corporation tax computations and Returns, VAT calculation submissions, liaise with HMRC and deal with Companies House.

Here at DNA Accountants we can prepare everything you need, saving you money and removing your worries, so you can get on with running your business. Get in touch today and we will make sure you proceed with your business on the right footing.

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Tis the season to be jolly (and tax free!!)

tax free

Did you know that HMRC seasonal rules allow employers to throw staff a tax free Christmas party!! It’s true – the seasonal allowance can be used to subsidise employee food, drink, travel or accommodation. Employers have been reminded that in the run up to Christmas, HMRC’s seasonal gift rule allows bosses to treat their staff to a tax free Christmas party, up to the value of £150 per employee. A Christmas party is a great way to reward staff for hard work, and as a little festive gift, HMRC allow up to £150 spend per employee completely tax free!!

The Institute of Chartered Accountants in England and Wales (ICAEW) has reminded businesses that HMRC’s seasonal gift rules provide a yearly tax-free Christmas party allowance that can be used to subsidise food, drink, travel or accommodation.

For tax free status to apply to seasonal gifts according to HMRC’s rules, all employee spending must be below £150 per head.

If the £150 limit is exceeded, employers would no longer be entitled to tax free status, and income tax and national insurance would need to be paid on all business expenditure.

Tax free Christmas party invites can be extended to employee’s partners as well, providing that the cost per head is kept under the £150 limit.

The Christmas tax exemption can be enjoyed by businesses of any size, so long as it’s within the £150 budget, also many employers may also be able to take advantage of the so-called “trivial benefits” exemption. Under this rule, if an end-of-year gift to an employee costs less than £50, it can be considered trivial, and may therefore be entitled to tax free status. So, business owners can now not only treat their employees to a tax-free Christmas party, but add a little gift to that as well.

Cash or cash vouchers are not entitled to tax exemption under HMRC’s seasonal gift and trivial benefit rules, and gifts can only be considered for tax-free status if the cost of providing that benefit to employees doesn’t exceed £50.

Similarly, employee gifts that don’t qualify for tax exemption include those which an employee is entitled to as part of a contractual obligation with their employer (for example, in a salary sacrifice-type arrangement). Neither does tax-free status apply if a gift is given in recognition of a specific service or task performed by an employee as part of their job role.

 

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HMRC – Credit Card Crunch!

credit card

HMRC will no longer be accepting credit card payments when you pay your self-assessment bill.

From January 13, self-employed, sole traders and company directors will no longer be able to use their own personal credit card to pay their self-assessment tax bills

Under current rules, all taxpayers can pay their HM Revenue & Customs (HMRC) with a personal credit card using either their online account or, if they prefer to receive paper statements they can settle their tax bill using a paying-in slip.

Why is this change being implemented?

From 13 January 2018, retailers and traders will no longer be allowed to charge consumers for paying on plastic when making a purchase, this includes HMRC. Therefore this now affects anyone paying HMRC – something that HM Revenue & Customs have been very quiet about up till now, so this could create a very large and unwanted post- Christmas financial surprise for many people and is not likely to be well received by the UK’s many tax paying individuals! For some, it may be because they actually receive rewards from their credit card providers for others it may be the ease of being able to spread their tax bill over a few months at 0% – whatever the reason, they are now no longer going to be an option.

So what’s the answer?

The first option is a “no-brainer”, simply pay your self-assessment tax bill prior to the deadline date of 13th January, don’t wait till the evening of 31st January to submit your payment (obviously we do not condone this!! We always advise that you are organised and pay your tax well before the end of the year). But this is obviously a short-term solution as it only works for this year.

If you leave it too late and make your self-assessment submission after 13th January 2018, to make the subsequent tax bill payment you will have to use a business credit card (which many people do not have) or choose to pay via bank transfer or debit card.

Frankie Tortora, the founder of freelancing digital magazine Doingitforthekids.net, says she believes that the changes will take many self-employed professionals by surprise.

“My fear is that a lot of people will be panicking come January,” she said.

“As much as we all work hard to ensure we’re on top of our cash flow, freelance life is inherently unpredictable and there will be situations where things just don’t go to plan.

“Removing the option to use a personal credit card will cause a lot of problems for a lot of people and, as far as I can tell, HMRC have made zero effort to communicate this change.”

If you are concerned about this change in policy affecting you, then please do get in touch and we can help you plan your cash flow.

DNA Accountants

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Don’t be afraid of… TAX Returns!!

paper tax return

Halloween is just days away, so what are you most scared of? Ghosts, ghouls, and things that go bump in the night? Or could it be that you’re more afraid of submitting your paper tax return!!

 

If you are submitting a paper tax return to HMRC for 2016/17 you should complete it and submit it to HMRC by 31 October 2017. And if you still have an outstanding return for 2015/16 which you wish to submit on paper, again you must do so before 31 October in order to avoid triggering further late filing penalties for the return being 12 months late.

 

What if I miss the deadline?

If you intend to submit a paper return for 2016/17 and do not do so by 31 October 2017 you still have the option of submitting an electronic return by 31 January 2018 to avoid late filing penalties. However, if a tax return for 2015/16 is submitted after 31 October 2017 in paper form rather than electronically then the maximum automatic late filing penalties will eventually be charged.

 

Can I appeal against the penalties?

You cannot usually make an appeal until after you have submitted your outstanding tax return so do not put off submitting! You may have missed the tax return deadline due to an unforeseeable event. This would be classed as ‘reasonable excuse’ and grounds to appeal a penalty charge. If the appeal is successful then the penalties will be cancelled.

 

If you have not submitted your tax return because you are unable or cannot afford to pay any tax due, then be aware that HMRC regard submitting a return and paying the tax due as two separate and distinct obligations. Penalties will continue to build up if you do not submit the return and you will not be able to arrange a debt payment plan with HMRC while the return is outstanding.

 

What is a ‘reasonable excuse’?

HMRC’s guidance states that a reasonable excuse is ‘something unexpected or outside your control that stopped you meeting your tax obligation’ and gives a few examples of situations that they would accept constitute a reasonable excuse, such as:

  • death of your partner shortly before the tax return or payment deadline
  • an unexpected stay in a hospital
  • computer or software failure just before or while preparing an online return.

Examples of reasonable excuse claims they will normally reject are given as follows:

  • reliance on someone else to send your return and they did not
  • cheque bounced or payment failed due to lack of funds
  • difficulties using the HMRC online system

What happens if my appeal is rejected?

If HMRC rejects your appeal you can request a review of their decision. The review will be carried out by another team from HMRC who have not been involved in making the original decision. If you lose a statutory review, they will provide you with details about how you can make a further appeal to the independent tax tribunal.

 

Will HMRC ever cancel the return?

Sometimes tax returns are issued by HMRC when the criteria for self-assessment are no longer met by the taxpayer. If HMRC has sent you a self-assessment tax return to complete but you do not think you need to submit one, you can contact HMRC to see if the tax return can be cancelled. If HMRC agrees, any associated penalties will automatically be withdrawn.

 

If you are still feeling a little “spooked” by your tax return get in touch with us here at DNA Accountants, we’re not afraid of taxes!!!

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5 Money Management Tips for Small Business Owners

money management

Whether you like them or not, finances are a necessary part of running a small business, so to get some insight on effective procedures that entrepreneurs can adopt to improve their money management we’ve compiled our top five tips for all small business owners:

 

  1. Don’t mix business and personal expenses.

There are so many reasons not to mix your business and personal accounts, including tax issues, personal liability, and jumbled accounting records, just to name a few. When things get tight, resist that urge to secure your business finances with personal funds. It may give you that quick fix you need at the time but it will no doubt create a mess that you are only going to have to deal with at a later date.

The best way to maintain a clear separation of your expenses is to set yourself a personal budget and a business budget. Try and adhere to them strictly and separately so that credit cards and loans for your business don’t get used for your personal finances and vice versa. Your bookkeeper and accountant will be eternally grateful if you separate the two when it comes to managing your books and paying your taxes.

 

  1. Negotiate with vendors before signing!!

Sometimes you have to do some digging or shopping around for a good bargain. When making purchases from vendors or contracting with suppliers, try negotiating for a better deal.

Also please don’t forget to examine purchase terms like late payment penalties when making a decision. You don’t want to be caught out at a later date.

 

  1. Pay your bills on time, every time.

Treat your business bills as you do your personal finances. You don’t pay personal finances late so business payments shouldn’t be any different.

Credit card and loan payment late fees can cost you dearly, but paying small late fees on vendor and utility bills consistently adds up, too. The same goes for taxes: paying too late can result in serious penalties.

It can be beneficial to set up monthly reminders to make sure there are no business bills falling through the cracks. For young businesses especially, the profit-loss margins are thin. Avoiding late fees could be the difference between ending the year in the red or in the black.

 

  1. Be a little Frugal.

Okay, we aren’t expecting you to become an extreme couponer like the ones on American tv shows to save money on ordinary business expenses but we do suggest that you follow through on rebate offers for office equipment and supplies, buy furniture and major equipment secondhand, and go green to save money on utilities. 

 

  1. Spend some time on an accounting refresher. 

Being a small business owner doesn’t automatically make you a money whizz/expert, but you’ll still have to make big money-related decisions for your company and understand how cash moves in and out of your small business.

 

The more you understand your business finances and cash flow, the better prepared you’ll be to make smart money management decisions. And, while these tips will get you started, nothing replaces being proactive and hands-on when it comes to managing your money—no matter how big or small the financial challenge. If you need help with your business finances then please do get in touch with us here at DNA Accountants we are always happy to talk business.

 

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Start-Up Advice: Choosing a Business Entity

Choosing Business Entity

So you’ve decided to Start-Up that business idea floating about in your head, and turn it into a reality; you’ve got a name, now you just need an Entity- but which is right? Limited Company, Sole Trader or Partnership?

You should assess the types based on your available time, commitment and resources, and consider long-term goals for your business. Although you can change your ownership type at any time, you should decide carefully, because the form of business you choose will affect the way you file paperwork, face personal liability, pay taxes and, if necessary, file for bankruptcy protection.

Sole Trader

One person owns and manages a sole tradeship, which means you are responsible for all debts incurred.

Advantages: Easy. Inexpensive. Complete control of operating decisions. Generated income goes to owner to keep or reinvest. Easy to dissolve if the business does not go as planned.

Disadvantages: Unlimited liability. Funding difficulties. Less attractive to prospective employees.

Tax requirements: Sending a Self Assessment tax return every year, paying Income Tax on your profits and Class 2 and Class 4 National Insurance.

Limited Company

A limited company is an organisation that you can set up to run your business – it’s responsible in its own right for everything it does and its finances are separate to your personal finances. Any profit it makes is owned by the company, after it pays Corporation Tax. The company can then share its profits.

Advantages: Higher take home pay, claim on a wider range of expenses, entitled to the Flat Rate VAT scheme, personal assets are covered and you have complete control of your business.

Disadvantages: A certain amount of paperwork involved, accounts need to be filed every year, costly if contracting for a short period of time and not ideal for contracts less than £25,000 per year.

Tax requirements: At the end of its financial year, your limited company must prepare full (‘statutory’) annual accounts.

You then use this information to:

  • send accounts to Companies House
  • pay Corporation Tax – or tell HM Revenue and Customs (HMRC) that your limited company doesn’t owe any
  • send a Company Tax Return to HMRC

Partnerships

In a business partnership, you and your business partner (or partners) personally share responsibility for your business. You can share all your business’s profits between the partners. Each partner pays tax on their share of the profits.

Advantages: Businesses as partnerships do not have to pay income tax; each partner files the profits or losses of the business on his or her own personal income tax return. This way the business does not get taxed separately.

Easy to establish.
There is an increased ability to raise funds when there is more than one owner
Disadvantages: Each partner is individually liable for the debts and obligations of the business; if the business does not have enough assets to pay back business debts, creditors can take the personal assets of the partners.

A partner cannot transfer an interest in the business without the unanimous consent of the partners.
Partnerships can potentially be unstable because of the danger of dissolution if one partner wants to withdrawal from the business or dies.
Tax Requirements: The nominated partner must send a partnership Self Assessment tax return every year.

All the partners must:

  • send a personal Self Assessment tax return every year
  • pay Income Tax on their share of the partnership’s profits
  • pay National Insurance
  • The partnership will also have to register for VAT if you expect its takings to be more than £85,000 a year.

If you are about to commence your start-up journey, please do get in touch with us here at DNA Accountants we are always happy to talk business.

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VAT: Know the Facts

VAT Facts

All businesses which have an annual turnover of more than the current VAT threshold (£85,000) must register for VAT and complete a quarterly VAT return, once your business is registered you must do three things:

  • You must charge VAT (20%) on the goods or services you sell to customers and other businesses
  • You must pay VAT on the goods and services you buy from other businesses
  • You must file a VAT return every quarter to HMRC.

The practicalities

You must register for VAT either if your turnover for the previous 12 months exceeded the threshold – currently £85,000 – or if you think that your turnover will soon go over this amount.
When adding it on to invoices you should show the VAT amount separately, listing the cost of the goods or services before VAT, the cost of VAT and what rate it was charged at, and the total amount owed.
There are three different rates of VAT that can be charged – standard rate (currently 20%), reduced rate (currently 5%) and zero rate (0%). Some goods and services are also exempt from VAT, such as antiques and education services.
There are also specific VAT rules that apply to certain trades and industries – the motor trade for example.
You can register to pay VAT online at the Government gateway website, www.gateway.gov.uk.
The VAT threshold may change once a year when the government announces the Budget for the coming year – usually in March or April – so ensure you are always charging the correct amount.
You must charge VAT on the full sale price, even if you accept goods in part exchange or barter instead of money.

Things to consider
If you are selling to other VAT-registered businesses then adding VAT to your invoice will be straightforward as they will be able to reclaim the VAT they have paid. However if you have been selling to individual customers for some time before becoming VAT-registered, then adding on effectively amounts to increasing the price they must pay by 20% as they will not be able to claim the VAT back. If you feel you are not able to do this without affecting the sales you are able to make then you may need to take the hit to your margins for some or all of the VAT amount.

If you are unclear as to how these rules affect your business, please do get in touch with us here at DNA Accountants we are always happy to talk money.

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HMRC Marriage Allowance….

marriage allowance

…. for RICHER, for poorer.

July is wedding season – along with the rings, cake, and glasses of fizz, getting married could actually make you better off!!! The Marriage Allowance was introduced by HMRC in April 2015 and could save you £230 in tax, but the take up has been very low, as couples just don’t know about it, so it’s well worth checking if you are eligible.

To qualify for the marriage allowance all of the following must apply:
– You are married or in a civil partnership (just living together doesn’t count)
– Your income is under £11,500 in total in this tax year
– Your partner’s income is between £11,501 and £45,000

If so, the Marriage Allowances lets you transfer £1,150 of your personal allowance to your husband, wife or civil partner, if they are the higher earner. That means effectively they can earn £1,150 more before they start paying tax, which will save you as a couple £230 a year.

If you were also eligible in 15/16, you can backdate your claim to 6 April 2015 and you can claim online via the HMRC website. It’s the non-tax payer who needs to apply and the allowance stays in force until one of you cancels it.

Once claimed, your partner will either have their tax code changed (and therefore pay less tax each month on their salary), or claim the allowance on their tax return, if they are self-employed.

The allowance is most likely to be used by part time workers or the newly self-employed with high initial costs. For the self-employed, it’s the profit figure that you need to be looking at to determine if you qualify, not your sales figure – so you should check each year if profits vary year on year.

If you are unclear as to how this affects you and your spouse, please do get in touch with us here at DNA Accountants we are always happy to talk money.

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5 Top Tips to Grow Your Business

top tips grow business

Have you managed to get yourself through the start-up face and think you are now ready to find ways to grow and expand your business? Then you have definitely come to the right place.

We have compiled some tried and tested methods that can help you take your business to the next level. Regardless of your industry, you can become highly successful by having the right mindset and following 5 top tips to grow your business:

Participate in Trade Shows

Trade shows can be a great way to grow. Trade shows/fairs are an exhibition at which businesses in a particular industry promote their products and services. These may be a great idea for growing your business as trade shows draw people who are already interested in the type of product or service you offer, that is half the battle! Participation in a trade show establishes a presence, whether big or small, for your company. They also give you a powerful platform for meeting new customers, reaching out to your existing clientèle, and building a more established and reliable brand. The trick is to select the trade shows you participate in carefully, seeking the right match for your product or service.

Extend your Market Reach

This method of growing your business may set you back some money but can definitely be well worth it in the long run. There are several ways of growing your business by making your product or service available to a new pool of customers; open a new office or store, expand sales via the internet perhaps by adding an online store to compliment your current setup. Another approach is to extend your reach through advertising. Once youve identified a new market, you might advertise in select media that targets that market. If your new market consists of a younger demographic, you may want to use social media for advertising e.g. Instagram and Twitter.

Know What you do and Don’t do

Some really good advice is, don’t try to be all things to all people. If you do this then this typically means you are not very good at any one particular thing. Trying to move in too many directions at the same time can cause a lack of focus which ends up causing a lack of real movement for the business in any one particular direction. This, unfortunately, can ultimately lead to failure. When you do that, you jeopardise your true strength to focus on. Know your product and focus on this in order to become as successful as you can. This will relieve pressures on your budget, team, and company as a whole.

Be Passionate

Having a passion for something is a great start! When you love what you do it shines through to the people surrounding you every day in the office, facility or production plant. Showing excitement and enthusiasm can really rub off on your team. This means that they will be working harder, being more focused, and ultimately more successful at their job. So what does this mean for you? If you have a hard working team happy to work for you, this will translate to a better end-product. If you are a negative person who constantly looks unhappy, this can have devastating effects for your end product as you may cause people to have no motivation and make the workplace a more challenging environment for staff.

Challenge Yourself to Always Keep Improving

No doubt the most important of our top tip tips – always challenge yourself. It is easy to think that, ‘’that was a successful month, I can take a back seat for a bit. No, no, no, please don’t think this way. There is always ways to do better (but of course give yourself a pat on the back for a good month). Technology is changing the world we live in every day. In order to stay relevant, it is important to innovate and want to get better. This could mean new programs, new thinking or new processes. In todays world it is very plausible that you are either moving forward or staying still and becoming obsolete. Constantly monitor your way of doing things and look for ways to improve your end product, client relations skills and efficiency. This will ultimately drive greater profitability.

If you need any help to take your organisation to the next level then get in touch, at DNA Accountants we are always happy to talk business.

 

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