Support a business
- How can I mitigate my tax bill?
- Do I need an audit for an eventual buyer?
- My profits are up but so are my costs. Does it matter?
- I don’t have a business plan. Do I need one?
- Why do I need a budget?
- My bank is asking for management information. What should I give them?
How can I mitigate my tax bill?
Understanding the complex tax legislations and helping you to reduce your tax bill to the right level through maximising all available tax deductions to reduce taxable profits, is a key part of our tax advisory service.
Which direct expenses can you legally put through the business? For example, would it make better financial sense for your business to lease you a company car? You will pay personal tax on this as well, but overall you may be better off than if you went out and bought the car privately. You may be able to claim tax relief through claiming capital allowances by buying certain types of equipment and machinery through your business. The cost of very low emission cars can be written off in the first year.
If your business is innovative, or carries out research & development you may be able to claim enhanced tax relief with R&D Tax Credits. HMRC allow a tax deduction of significantly more than the actual expenses the company incurs.
If you receive a salary you could explore salary sacrifice schemes which can reduce tax and NIC costs, or director/shareholders could draw dividends as opposed to salary which would reduce the overall tax cost.
Tax is a complex subject and the cost of getting it wrong can be substantial through higher than necessary tax liabilities with HMRC. That is why talking to a specialised tax adviser is important. They will be able to help you find the most tax efficient structure both for you and your business.
Do I need an audit for an eventual buyer?
All entities including companies, LLPs and charities that meet certain criteria are required by law to have their accounts audited. Even if have not reached the audit threshold, you may still require to have your financial statements audited. It is often the case if you have entered into any loan finance agreements, either with banks or private equity, the provider may require you to have an audit in order to ensure an independent review has been conducted on figures presented to them.
If you are thinking of selling your business, we would recommend that you have an audit as potential acquirers will consider your business as more valuable and trustworthy.
My profits are up but so are my costs. Does it matter?
For most businesses, as sales grow it is inevitable that costs will also grow. Ordinarily businesses should be able to take advantage of economies of scale so that sales can grow faster than costs resulting in increased profit margins. If costs become a higher proportion of sales following a period of growth then you should be concerned and should fully understand why this has happened. There are acceptable reasons why this might have happened, for example, if you have had to invest in new hires to reach higher levels of sales. The key to being able to spot such trends is to make sure that you have accurate and timely management information to allow you to address potential issues as they arise.
Having a clear view on what are the fixed costs and what are variable costs in your business is essential. All businesses will face some fixed costs. However, a higher proportion of fixed costs makes your business more susceptible to problems from falling revenue. Consequently, investments in an increased fixed cost base should be reviewed more carefully. Sometimes a higher variable cost might be a better option than a lower fixed cost. For example, outsourcing various tasks can give you more flexibility than having in house staff.
I don’t have a business plan. Do I need one?
This question can be answered with a stream of clichés e.g “Fail to plan, plan to fail”, “If you don’t have a plan how do you know if you have succeeded?” The reasons that clichés exist is that they are usually correct. A simple internet search will tell you that a business’ chances of succeeding are much greater once a business plan has been created. You should always have a business plan to help set objectives for the business. It doesn’t need to be a very lengthy document and don’t let it gather dust in the corner, keep it up to date and keep it relevant. Make sure that you set non-financial targets as the reason for writing a plan is ensure that you are taking actions to move your business forward.
Our team can help you think through the key aspects and produce a solid business plan for your business.
Why do I need a budget?
Similar to a business plan, making a budget is essential. Set financial targets for sales growth, margin improvement, overhead levels, for example. By setting these targets and tracking them versus performance you are much more likely to achieve the improvements that you are looking for. Regular review of actual performance versus budget will enable you to have the opportunity to reverse negative trends before it is too late. Keep the budget relevant by updating to reflect actual performance as the year progresses.
My bank is asking for management information. What should I give them?
Normally banks want to see a profit and loss account and balance sheet but sometimes ask for more than that. Discuss the bank’s requirements with them and if they are asking for something that is difficult to produce and not particularly informative then tell them. Banks can be very flexible as to their requirements so long as minimum levels of information are delivered. The key to giving information to your bank is that it is accurate, banks need to trust what they receive and inconsistent information from month to month will only generate more questions and requests. Many clients ask us to help prepare or simply review their management accounts to improve the accuracy before they are sent to the bank.
Our outsourcing team can help you produce your management accounts and all information requested by your bank.