9 Tips for business success

Being an accountant is not just about the numbers. Through the work we do with business owners we often identify the issues or problems that are holding them back and because we have seen it before, we can advise on solutions or a different way forward. I have worked with a number of business over the years and I realised fairly quickly that the key principles necessary for success are generally common to all businesses. This is a list of 9 tips for business success that you might find useful.

1. Know your customer: This may sound obvious, but you need to focus on what they need and want so not only are they happy to come to you today but they will come back next week. Good service, consistency and a decent product or service for a fair price is an absolute must. People are happy to go back to McDonalds again and again because they know what they are getting. Offer discounts or loyalty bonuses to repeat customers or a reward for referral. Focus specifically on the type of customers that you want and try to aim your marketing directly at them. Obtain feedback from customers about how they have heard of you and why they use your products or services so that you can tailor your marketing campaigns to your target market .

2. Know your products: In particular know the benefits of your product as seen from the viewpoint of the customer not just the features that it has. For instance if you are selling a  mid price range vacuum cleaner the features it might have over the basic model are its improved suction and that it is light weight. But you would need to emphasise to your customers the benefits of the improved cleanliness and that it is easy to carry upstairs. This should encourage them to think that the added value to them means spending the extra money is worthwhile.

3. Know your brand: This is what makes you unique out there from all your competitors. Your might be trying to compete on price but this is very difficult to sustain in the long term and generally only giants like Amazon or Tesco are able to achieve this because of their relationships with suppliers, wide customer base and the volume of sales that they have. If you have a niche product or service then you can compete on convenience as you may be the only provider for your local area such as a corner shop on a housing estate, or you are recognised as a significant supplier with a wide stock of obscure items, such as specialist model kits. Most businesses try to distinguish themselves using a unique selling point or USP. This might be the quality of your home made cakes that can’t be found anywhere else, or the quality of your cleaning service is such that you have a regular customer base. Whatever your strengths, make sure that you know what they are and can describe them to people as part of your marketing strategy.

4.Try to upsell:. When you have customers in front of you or online or on the phone, then it is easier to persuade them to buy more of your products or upgrade their choices which is all money for your margin, than it is for you to try to find new customers. Generally when they come to you for a specific product they will have already spent the money in their mind. So it is a smaller step to encourage them to spend the difference on upgrading than trying to persuade someone from cold to spend the whole amount in the first place. Offer a complete package or an upgrade as a deal. So a tea shop could offer a coffee and cake deal. A camera shop may offer a camera, memory card and case as part of a package, or an optician can offer higher quality scratch resistant lenses at a smaller increased price than normal.

5. Review your management accounts: The more upto date information that you have on your product sales and their associated costs the more accurately you can plan going forward. Maybe you have a range of products and there are three products that provide 75% of your profits, You would want to concentrate on those and maybe eliminate those products that are loss making. For instance you may have a product that sells for a reasonable amount, but if you are not selling many and it takes up a lot of your time then it is loss making. If you need advice on how to prepare management accounts then speak to us or your accountant, you may need to change your book keeping system to get the information you need. We can help you with this or we can provide a management accounts preparation service, just speak to us on 01606 602075.

6. Keep control of cash-flow: The main reason a number of businesses fail is not because of lack of sales but lack of cash. This is particularly a problem if a business is growing quickly and has money tied up in stock, assets, customer orders or debtors. Try and keep costs as low as possible and negotiate time to pay creditors. ensure you have a system in place to chase debtors. Plan your budget for your year ahead to work out when the big bills are due and try to ensure there will be enough cash or finance in place to pay them. Plan staffing requirements, can you manage with part time or temporary staff? If you will require extra finance allow plenty of time to get it in place and explore different options to get the best deal for your business.

7. Obtain advice: Sometimes we all need a second opinion to help us clarify our ideas and to test different options. This might be from family and friends or paid advice from your legal advisor or accountant. The best entrepreneurs surround themselves with a team of people to encourage them and to keep them in check occasionally. The entrepreneur will always make the final decisions but they will have all the information and advice they need. Consider who might be on your team, don’t be afraid to make use of them and think about approaching someone experienced in your field to be your mentor. As an accountant I think being there to support clients as and when they need us is a key part of the service we offer.

8. Monitor your marketplace and the competition: Things can change very quickly and you can get left behind all too easily, just think of Blackberry. Small businesses can have an advantage over bigger business in this respect as they are usually closer to their customers and have an ear to the ground. It is worth spending some time every so often thinking about this issue and identifying the threats and opportunities you face, keeping upto date with the developments in your sector and ways that you can improve what you are doing. Read industry or trade magazines that are relevant to your business. Encourage your staff to make suggestions and even implementing small changes can make a big difference in time.

9. Have goals for the future: It is impossible to stand still, and though this is a cliche, if you are not moving forward then you are going backwards. Think ahead and dream. Think about why you are doing what you are doing, and where you want to be in 5 years time. Put together a plan with your main goals, such as opening 3 more shops, having 10 employees on board or being the dominant supplier for your region. Add objectives to define your goals, they should be SMART to be effective, this means they have to be Specific, Measurable, Attainable, Realistic and Timely. You should then ensure you know what steps you need in place, day by day to achieve your objectives and ultimately your goal. Suppose you want to expand with a new shop, this is a specific objective. Consider then if this is reasonable, Do you have the finance in place and location in mind? What is your time frame for achieving it? Can you put in place criteria to measure your success, ie the date the shop opens. Is it attainable? Do you have the time and resources to go for it? Then put in your plan what steps you need to take to achieve the objectives and when, such as meetings with the bank or negotiations with letting agents.Then you will have in place your plan for success.



Tax Tip 4: Claiming expenses as an employee

If you are employed and/or a director there are a number of expenses which can be deducted against your income or against the income of your company before tax is charged.

Employees can claim for the costs of travelling to a place they have to attend in order to fulfill their work obligations as long as they are not commuting to their permanent work place. The costs of accommodation and meals while away on business are allowable. Site based employees with no permanent work place can claim for the costs of going to and from their site as long as the job is expected to last less than 2 years.

Employees using their own car or van can claim 45p a mile tax free for the first 10,000 business miles in a tax year and then each additional mile at 25p. Motor cyclists can claim 24p a mile and cyclists can claim 20p a mile.

Employees can claim expenses for tools and special clothing for special occupations, but the costs of normal clothing are not allowed even if they wouldn’t be worn outside of work.

Employers can pay expenses to employees who have to work from home. these are exempt as long as they are reasonable, this can include a proportion of the costs of light, heat, telephone calls but not council tax, or mortgage costs. Certain capital allowances for purchasing items such as office equipment may also be allowed. Employees that have a home working agreement with their employer can be paid up to £4 a week expenses tax free without having to provide supporting evidence.

Other allowable expenses for employers include

  • Pension scheme contributions.
  • Directors liability or professional indemnity insurance.
  • Professional subscriptions to approved organisations.
  • Provision of parking at your place of work.
  • An annual health screen or medical checkup.
  • The provision of eye care tests and/or glasses for employees that use computers.
  • Provision and administration costs of child care vouchers (up to £243 per month per employee and they have to be available to all employees)
  • Provision of a mobile phone.
  • Annual staff parties or functions up to a value of £150 per employee including VAT
  • Charitable donations under payroll schemes.
  • Cycles and related equipment if used mostly for work and available to all employees.

Business entertaining of clients is not tax deductible.

Employers may be required to pay Class 1A NIC on certain benefits even if the employee claims the same amount as a tax deductible expense, the employer should seek a dispensation from HMRC to make sure these items can be excluded as benefits from an employee’s P11D return.

This list is a guide and starting point to help you identify allowable expenses, but because this is a complex area it is not exhaustive. If you would like further information please seek more guidance from your accountant or HMRC on what you can claim.


Tax Tip 3: Pay into a pension scheme

Pension contributions receive tax relief and for higher rate taxpayers the relief obtained is 45%. The annual allowance in 2013-14 for pension savings is £50,000 and this will be reduced to £40,000 from 2014-15. You can also carry forward unused allowances from the previous 3 tax years.

Pension schemes have pension input periods and these may not coincide with the tax year. The pension savings allowance applies for the tax year in which the pension input period ends. For example if a pension input period finishes on the 31 May 2014, it will be the 2013-14 savings allowance of £40,000 that is applied.

The value of the pensions allowance depends on the type of pension scheme. In a money purchase scheme it is the amount of contributions put in either by you or your employer. In a defined benefit scheme it is the increase in value of your pension from the start of the pension input period to the end of the pension input period. Your pension scheme administrator should be able to tell you if your pension savings are over the annual allowance.

Pension savings above the total allowance will be liable for a tax charge. The tax charge depends on the level of your other taxable income.The amount that is in excess of your pension allowance is added to your income and taxed accordingly once personal allowances and income bands are taken into account.

The rules around the pension allowance can be quite complex depending on your circumstances and the type of pension you have so if you think your pension savings will be close to the pension allowance limit, then consider seeking more advice from your pension administrator, HMRC or your accountant.

Stakeholder pensions can be started for children, or non taxpayers (for example a non working spouse) and you can make contributions on their behalf which also obtains tax relief. The maximum annual contribution including tax relief is £3,600 per child or non taxpayer.

Tax Tip 2: Make use of personal allowances

The level of your personal allowance depends on your age and income. In 2013-14 if you were born on or after the 6 April 1948 and have an income of less than £100,000 then your personal allowance is £9,440. The personal allowance is reduced by £1 for every £2 of income above £100,000.

Those born before the 6 April 1948 have a personal allowance of £10,500 and those that are 75 and over have a personal allowance of £10,660 as long as their income is below a set limit. The limit is £26,100 in 13-14, the allowance is reduced by £1 for every £2 of income above this limit, The age related allowance is not reduced to below the standard personal allowance unless income is above £100,000. Eventually the  higher age allowance will be phased out as it has been frozen until the standard personal allowance has reached the same level.

Blind people can claim an extra personal allowance of £2,160 and there are no age or income restrictions. Married couples, or partners in a civil partnership have an allowance if one partner was born before 6 April 1935. The level of allowance depends on the level of income and the date of the marriage or civil partnership. See http://hmrc.gov.uk/incometax/married-allow.htm for more details.

If you run a family business, consider ways to maximise the use of your spouse’s or other family members’ personal allowances by employing them in the business. Care needs to be taken to ensure that employment complies with PAYE requirements, other legislation and that the employment can be justified for commercial reasons.

Tax Tip 1: Business Structure

For those of you that run your own business consider your business structure. Many businesses start out on a sole trader basis as it is straightforward and simple, but then as profits grow it may become more beneficial for commercial and tax reasons to change.

Family members who work within a business can be included in the ownership structure via a partnership arrangement, this splits the profits between family members and allows each partner to make full use of their personal allowances. The business has to complete a partnership return each year and the partners have to complete self assessment returns which include their share of the business profits.

A limited liability partnership is one step further than a general partnership. It is a separate legal entity in law and limits the liability of the partners as for a company, but the partners are still taxed as individuals on their earnings.

Many business including family run business form limited companies. This gives you more control on how and when you are taxed. You can take money out the company through a salary to make use of your personal allowances and to qualify for the state pension. Then the rest of your profits can be left in the company to reinvest after corporation tax, or taken out as dividends which are not subject to national insurance. The corporation tax rate on small company profits is 20% for 2013-14.

There are other advantages in forming a company despite the extra administration costs. The liabilities of the owners are limited and they will not be personally liable for losses made by the company, companies often carry more credibility with the public and suppliers and your company name is protected once registered with Companies House. A company structure can make it more straightforward to sell on the business or to obtain funding for expansion or development.

Contact an accountant to see if a change in structure would work for you and to see some initial calculations based on your earnings and profits.

Your chance to ask questions

So the practice is established and the new website is up and running. I want to set up a place where people can ask an accountant anything they like. It might be about your business or a tax question or it could be about me and what I do?

If your query is very complex or specific to your business then I may ask if I can contact you personally to discuss it further. If I feel the query is not appropriate then I reserve the right not to answer. However with that in mind feel free to ask what you like.