Business | Alan Patient, Accountants South Woodford

5 ideas to improve cashflow

August 3, 2019 By Jon Baker Leave a Comment

A successful business is successful because it always has cash coming in, not because it sells a lot, or has a good margin. A (lack of) cashflow causes businesses to fail, or succeed. You’re not working hard for profit, you want CASH. How is your cashflow and do you regularly focus on improving it?

Do work invoice get paid

Good, that was simple. The problems exist where the gaps are in that sentence. Let’s examine the normal problem areas.

How to improve cash flow: Work in progress

Work in progress (or WIP) as it’s often called it is where you’ve started work and not finished it, or invoices that haven’t yet been raised. Maybe a web designer has done the work, but wiated for a month to get the client’s final words for the website, what causes your WIP problems? The longer the invoices sit around, the more likely the client will say “No”, query the amount, or even get stuck in their own cash flow problems!

There are two main issues here:

Not getting the job signed off quickly. A weekly review of work started and not invoiced will help you focus on getting old jobs completed, before new ones are started. It’s better to finish a job and get paid than start a new job!
Extras! Did your client as for more than was on the initial quote? This often leads to problems later, get written agreement to proceed beforehand, perhaps invoice the first amount immediately and and invoice the extras as soon possible after.

There’s a mindset prevalent in many business owners, an assumption is that finishing small little bits, has lower priority than doing other chargeable work.

How to improve cash flow: Deposits

Supermarkets don’t generally let customers consume the goods before paying. Why do small businesses? “Because that’s the way it’s always been” isnt’ a good reason. At least take a significant deposit upfront if you’re doing a lot of work.

How to improve cash flow: Debts

You’ve closed the deal, got a good (fair to both partiies of course) price, and you enjoyed doing the work……..then the problem, getting paid.

Customers receive their service, and then they get the bill. A delay in them getting round to paying can cause problems too. Chasing debts makes a lot of difference to your cash flow.

Two suggestions:

Outsource the debt chasing, perhaps even “just” a VA. Often the business owner is too close to the problem and too involved withthe client to make that call. An external person can more easily keep a focus and to politely remind the debtor.
Regular payments: Why not bill monthly (if you have regular work), or with stage payments?

5 ideas to improve cash flow

WIP: Invoice as soon as job is complete. Don’t fall into the trap of thinking it’s just a couple of extras, many companies do!
Outstanding debts: Get somebody specific (possibly outside of the firm) to be responsible for chasing, once you’ve given them a clear procedure.
Monthly payment: Ask clients to pay in instalments (via Direct Debit), cash flow problem goes away.
Selling in Monthly payments: “If you pay monthly there are no increases in fees this year”
Visibility: Lastly (perhaps because I’m a coach), I recommend having clearly visible KPIs. Every business I know that implements clear KPIs find it really helpful and it gives appropriate focus.

A lack of cash that makes more businesses fail than a lack of profit. Should you measure the total amount of cash in (paid in, less paid out) each month?

Delivering Customer Value

May 21, 2019 By Jon Baker Leave a Comment

Understanding what your customers really value can help you to market your products and services more effectively. We normally find that our clients want to earn more money from their business; may clients have recently found that delivering customer value is a great way to earn more profit.

What is customer value?

Customer value is the perception of what a product or service is worth to the customer. Customers don’t buy features – they buy benefits. Your customers buy your product or service because of the benefits they get. If you take the time to understand what your customers value and what they are willing to pay for, you will be able to market your business more effectively, win new customers from your competitors, probably increase your prices and certainly make more money.

Most businesses make the mistake of thinking about value purely in terms of money. They create special offers to promote their products and services, but all they are do is cut their profit margin in a race to the bottom. Of course most markets have a for a lowest priced competitor, but do you really want it to be you? It doesn’t work for everyone and means you need to cut your costs to the bone, and keep your selling prices low. For example in the airline industry – there isn’t room for more than a handful of low cost airlines. That’s why many of them are in financial difficulty – their costs have gone up, but there is downward pressure on pricing.

Value is about much more than just money.

Put yourself in your customer’s shoes – your customers think of value in terms of goals, benefits and results. They are seeking an outcome and this is what drives their purchasing decision. For example, we might save a client £6,000 on their tax bill (that’s not unusual), we might need to charge our client £2,000 but the monetary value to the client is £4,000. What if this is only the beginning? What if the customer wants to grow their business over the next 5 years. That’s where we add value by providing advisory services , to help them to achieve that goal. Our happy clients pay for the additional service because it helps them to achieve their goal. How could you adapt that in your business, so you help your customers get more value from what you do?

The overall perception of value is, from a customer’s perspective, also influenced by experience. If you were difficult to deal with and your customer has to regularly drive to your office to sign paperwork, have face to face meetings, etc. your customer will not think that your service is great, they may even question whether it is worth the money. But if you did your meetings over Skype, at a time convenient for your customer and provided documents by email with e-signature capability, your customer may value the convenience and efficient service to the extent that they may even be willing to pay more for that service.

Amazon.com is a great example. The high street is struggling yet the world’s largest online retailer continues to grow. Why? Because its customers value the convenience, the vast range of product choices on offer and the ease of purchasing. Amazon has aligned its business model with the values of its customers and that is why it continues to succeed.

How can we help you?

Creating more customer value doesn’t have to cost you more money, and can help you to increase your profit. We can’t deliver your customer value for you, sorry. However if you want help to understand why you’re not making as much money from your business as you used to and what to do about it, we certainly can.

Call us for a free, no obligation consultation. We understand money, you understand your business and we can help you focus on the right money decisions in your business.

Tax planning to minimise the high income child benefit charge

May 16, 2019 By Jon Baker Leave a Comment

The substantial increase in the higher rate threshold to £50,000 is good news for many taxpayers. However child benefit starts being clawed back at that same figure, and there has been no increase in that threshold since the High Income Child Benefit Charge was introduced in 2013/14.

High income child benefit charge

The charge applies if you have adjusted net income over £50,000 and either:
you or your partner get Child Benefit
someone else gets Child Benefit for a child living with you and they contribute at least an equal amount towards the child’s upkeep

It doesn’t matter if the child living with you is not your own child. Your adjusted net income is your total taxable income before any personal allowances and less things like Gift Aid and pension contributions.

The charge is 1% for every £100 that adjusted net income exceeds £50,000 multiplied by the child benefit claimed in respect of the children. Child benefit continues to be paid at the rate of £20.70 a week for the eldest child and £13.70 for each additional child.

Example of tax planning to save tax

A couple with 2 children would receive £1,789 a year in child benefit. If the husband, a sole trader, made a profit of £55,000 (also his adjusted net income) after paying his wife a salary of £12,000 he would have to pay the high income child benefit charge of £894 (for 2018/19) in addition to his normal income tax and NIC bill.

If he brought his wife into partnership and they shared profits equally their income would be £32,500 each and there would be no high income child benefit charge. Similarly, if the business was a limited company they would be able to equalize their income so that the charge would not be payable.

How Alan Patient & Co help clients save tax

We don’t just deliver accounts to our clients, we help clients to understand their accounts and more importantly what they need to do so that they can meet their own dreams. If you run a business in North East London and want to meet us and see how you could make more profit in your business, call us.

3 tips to raise your prices without losing customers

May 14, 2019 By Jon Baker Leave a Comment

The cost of running your business goes up every year if you’re like most of our clients. The real question is when did you last increase your prices? We help our clients to understand their profit margins and the impact that has on what they can take home for themselves; but many business owners worry that if they were to increase prices, they would lose customers.

However, a customer will often be willing to pay a higher price if they feel they are getting value for their money.

3 tips to increase your prices

Product bundling: A good way to increase your prices can be to bundle products or services together and offer the combined bundle at a price that offers value to the customer. For example, a phone contract might have a higher price but it may include a bundle such as unlimited calls and 20GB of data per month. The key is providing value to the customer. Very often you can add something into the bundle that has a high value to the client and a low cost to you.
Differentiate your offering. Perhaps you could offer new online services to your customers such as an online portal or an app. Maybe you could create faster, more efficient processes so that your customers get a faster, more efficient product or service from your firm, compared to the competition. If you offer something that is seen to be the best in its class, that offers a benefit to your customers, you may be able to increase your prices.
Test the pricing strategy: You can test a higher pricing strategy on new customers. Your existing customers might be resistant to a price increase but new clients will be unfamiliar with your pricing so they may accept the higher price if they feel that you offer more value to them than your competitors.

Once you’ve increased your prices

If you do increase prices for your existing customers, you need to communicate well and explain clearly why you had to make the decision to increase your prices. Do your market research to make sure that your pricing isn’t completely out of line with competitors. If your business is not significantly different to the nearest competition, you may run the risk of losing clients. What many of our clients found was that their competitors had increased prices, and thy hadn’t! The really interesting thing here is that they hadn’t been getting new customers, because customers are rarely as price sensitive as you believe they are.

Large sudden jumps in your prices will not go down well. Instead, introduce gradual increases such as 5% or 10% per year, depending on the type of business that you run. Everyone knows that the cost of doing business goes up each year. If you communicate with your customers, they may be more receptive to small increases.

The most important point is to monitor your gross profit margin, your competitor prices and to remember that happy customers who are getting great value are more likely to accept a price increase than unhappy ones.

How can we help you?

We can’t do your price increases for you, sorry. However if you want help to understand why you’re not making as much money from your business as you used to and what to do about it, we certainly can. Call us for a free, no obligation consultation. We understand money, you understand your business and we can help you focus on the right money decisions in your business.

Is this the end of 9 to 5.

August 31, 2018 By Alan Patient Leave a Comment

Times are changing for many businesses and it is found that we would now like to choose our hours as long as the work gets completed.

A survey was completed and found that just six per cent of people now work the traditional shift, almost half of people work flexibly, job sharing or working compressed hours, allowing them to juggle other commitments.

The study, which surveyed 4,000 people, found the most desired shift begins at 8am and finishes at 4pm, with 37 per cent of people choosing those hours.

The second most popular shift is 7am until 3pm, which was chosen by 21 per cent of people who took the survey.

Other studies found that Londoners want to start work late, with over a quarter wishing to start work after 9am, compared with just 12 per cent in the rest of the South and 13 per cent in the North, to avoid rush hour on London’s busy public transport system.

Another 13 per cent of people wanted an 8.30am start working until 4.30pm, and 10 per cent preferred 7am until 3pm.

No matter what age it was looked upon that people with no children or with grown-up children were equally likely to want the earlier working day as those with school-age children.

But the pattern shifts for people who live in London – and those in their late teens and early twenties.

Early starts are less popular by these two groups, with 19 per cent of 18-24 year olds saying they would like to start work after 9am compared to just 9 per cent of people aged 54 to 65.

If you are looking to start a company please contact us or complete your free submission form. Looking forward to hearing from you.

The Accountant – UK Box Office

November 10, 2016 By Alan Patient

Did you know that The Accountant has entered the UK box office at number three, the highest new entry.

The weekend of the opening it took £1.6m at from 496 cinemas, including £115,000 in previews.

The Accountant who stars Ben Affleck whose character is called Christian Wolff, makes his living as a freelance accountant for dangerous criminal organizations.

This film is a must see. Life as an accountant has definitely changed as you never know what your accountant may be up to on the weekend!!!!!!!

The Confirmation Statement has Replaced the Annual Return.

July 15, 2016 By Alan Patient Leave a Comment

Register of persons with significant Control

Did you know that the legislation has changed for Limited Companies.

From 1st July 2016 the Annual return to Companies House has been replaced by an annual Confirmation Statement, which requires additional details of “people with significant control” (PSC’s).

Identifying the PSC:

Please note, at the same time, Companies House have shortened the completion deadline for this return to 14 days.

Finally, once a year you will need to review the information Companies House hold about your company. Companies House will send the registered address an e-reminder once activated.