Using a Company to Save Tax
The book contains lots of calculations demonstrating what the best tax situation would be. To be honest I ended up skimming over a lot of these as I found it difficult to follow them as I read along, however if I do find that I need to research some of this myself (rather than just asking our accountant) then it’s good to know that they are there to go back to and look at in more detail.
If nothing else, the book has made me aware of just how much I don’t know and how complicated tax issues are. Thank goodness for accountants who are there to understand these things for us! This is an area that I obviously don’t take to naturally and I did have to force myself to keep reading at times (luckily it’s a pretty short book at 110 pages) but I feel like a better person for finishing it. Yes, it’s not an easy read but it’s a highly valuable book for the information that it imparts.
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Keeping It Simple: Small Business Bookkeeping, Self-Assessment & VAT
The first part of the book is mostly aimed at sole traders, though I still found the simple explanation of bookkeeping records extremely relevant to our business (which is a limited company). Then to make me even happier there is a section on ‘Accounting for Limited Companies’ which explains some of the additional records that a company needs to keep. I’ve never seen such a clear explanation of a director’s loan account! There is then a fairly extensive section on VAT with some excellent advice to help you decide whether you should register for VAT or not (it doesn’t just boil down to how much your turnover is). Finally, the book ends with some general advice on small business issues – accounting software, taking on an employee, and choosing a bookkeeper or accountant.
I suppose I should say that the book doesn’t cover absolutely everything, however it’s not setting out to. If it had it would have become overly complicated like a lot of other accounting books. Instead it sets out just enough to get you started and gives you pointers as to what else you may need to find out about. It is nice and clearly laid out, with lots of example spreadsheets and uses case studies to help explain different scenarios.
The book’s blurb starts with “This plain-English guide is essential reading for all small business owners” and I couldn’t agree more. I wish that I’d had a copy when I was first starting out, it would definitely have helped me get my accounts on a firm footing, but even a few years down the line it’s clarified some issues for me and given me an idea of how I can improve my accounts in a managing the business context rather than just essential records for tax purposes.
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Accepting recurring payments
We’re working on an idea for a service which would involve collecting fees from our clients monthly, so I’ve been doing some research into options for accepting recurring payments. My first thought was direct debit but it’s quite a difficult one to get a handle on. My first thought was to try our bank on the basis that if they couldn’t provide it as a service they could at least give us some advice on how to go about it. What a foolish idea that was. I got through to some guy who basically said ‘we don’t do it’ and sent me to a website that didn’t look like what we need at all.
I’ve also tried emailing Business Link for some advice but not a peep out of them yet (am I surprised?).
Thankfully I’ve got the A1Business Forums to go to for help. What would I do without the forum? I’ve had some really useful advice from there and it looks like these are my options:
- A direct debit ‘middleman’ service whereby we pay a per transaction fee for charging by direct debit.
- A payment processing service service as WorldPay or PayPal which would offer us some kind of payment by ‘subscription’ as long as we’re collecting the same amount each month (which in theory we should be).
I’m not sure what the best option will be. I’ve sent off an enquiry to WorldPay to find out what they can do for us. Meanwhile I need to find out what I can about the middleman services and read up on PayPal. Even though PayPal may not come across as the most ‘professional’ approach to taking payments it should be a nice easy way into it so might be all we need to get the ball rolling.
Not a great start to the week
I had the second instalment of the Managing Your Finances course today. I’m trying hard to think of something positive to say about it but unfortunately I think it may have been a wasted day. I can’t say that I learnt very much at all. That’s not to say that the course was badly taught – for what it was I think the tutor did a pretty good job and I got the feeling that some of the people on the course were picking up some good tips. However, it was at completely the wrong level for me. Perhaps I should have checked out more thoroughly what it was about before signing up for it – will definitely do that next time.
The problem was that it was all stuff I knew and carrying on the ‘basic numeracy’ theme from last week I didn’t have much problem doing the sums. I’ve come to the conclusion that I don’t need to be taught how to fill out a cashflow forecast, I can figure that out for myself, what I would have found more useful was an overview of the tools/records that are useful when managing business finances so that I can feel more confident that I’ve got it all covered. Basic bookkeeping I’m fine at, but something about reports I could be generating to help me assess our finances would have been really useful.
I have to admit that I’m also feeling pretty grumpy about the day because we had no heating for half of it and lunch was a fiasco (one veggie sandwich between three vegetarians). Next course I go on I’m taking my own lunch, whether they reckon they’re providing it or not!
Wasting my time?
I had a bit of a revelation at the weekend. I worked out what our turnover would be if we both did 4 hours of billable work a day at our standard hourly rate. Bit of a shock because it was around three times what we are actually bringing in. That’s not good is it? Though in some ways it’s encouraging because it means that we do have the capacity to bring in much more with just the two of us working on the business.
So, what are we doing so wrong that we’re not bringing in that much? In an 8-hour working day it should surely be quite straightforward to work 4 billable hours, shouldn’t it? We always seem very busy but are we spending too much time on admin, or is it that we’re just so bad at quoting that we end up working for much less than our hourly rate? That’s what we need to work out.
Based on my findings we’ve started tracking much more closely how much of our day is spent on work that we can class as billable. So far we’re finding that in a normal working day it can be quite difficult to do the required 4 hours – quite a bit of time is spent preparing quotes for prospective clients, which we can’t charge for, and then there’s the necessary admin tasks and keeping on top of emails. Still, I’m not giving up on the 4-hour target, I think we need to work on our efficiency and make sure that we actively aim for that every day. Hopefully this will have a knock-on effect to how quickly we get things finished and our general project management (yep, back to the project management again!).
Let’s see if we can make a breakthrough!
Not quite what I was expecting
I was on a course all day on Monday. It was ‘Managing Your Finances’ and what I (and the other course members) were expecting were some practical tips on managing finance in a business context – budgeting, forecasting, records you need to keep etc. I knew it wasn’t going to be a bookkeeping course but was expecting an overview of what’s involved with managing business finances.
But no, what the tutor had been briefed to give us was a course on basic numeracy. Hmm. The theory was that you needed the building blocks of basic numeracy to be able to manage your finances, which does make sense. However, I’ve always been pretty strong on maths so it seemed a bit too ‘basic’ for me. We started the day with a 50-question quiz starting with “8 + _ = 0″ (with a choice of answers!) and getting very slightly harder as it went along. Let’s just say that I established that I can add, subtract etc.
So, not quite what I was expecting, however the tutor soon picked up on the fact that we were after something a bit more businessy and is going to cover what we want to know next week. Maybe the course organisers need to be more careful about making sure the course description and the tutor’s brief actually agree.
Apart from not feeling like I was learning an awful lot it was a really fun day. The other people on the course were all lovely and there was a really good atmosphere. So, definitely not a wasted day. I’m quite looking forward to the next one.
