Blog Layout
Budget 2021
ADM Accountancy • March 5, 2021
Chancellor Rishi Sunak has outlined his economic plans during his budget statement of 3rd March 2021. Below, we have outlined the areas we feel will be of interest to our clients.
Furlough Scheme
The main highlights include the extension of the furlough scheme to the end of September. It is worth noting that during the extension period, employers’ contributions are set to increase gradually. (In the same manner as when the chancellor initially attempted to phase it out in October last year.)
During April to June, the furlough scheme will still cover 80% of employees' salaries for the hours they are not working, up to a maximum of £2,500 a month, with employers only asked to pay pension and National insurance contributions. Employers are still expected to pay workers normally for the hours worked.
If you currently have staff furloughed, you should be aware that, as an employer, you will be asked to contribute 10% in July and 20% in August and September.
Self-Employed Income Support Scheme (SEIS)
The SEIS will continue with the fourth grant available for the period February to April, and a new fifth grant from May.
The major change is that new self-employed individuals who completed a FY2019-20 Self-assessment Tax Return before midnight on 2nd March will now be eligible for the grants.
The rules for the fourth grant remain unchanged and applications can be submitted through the government website from April. However, it is worth noting that for the fifth grant, only those self-employed individuals where their turnover has fallen by 30% or more will be entitled to the full grant. Those where the fall is less than 30% will be entitled to a reduced amount.
Corporation Tax
The current 19% rate of corporation tax will continue until April 2023 when it will be increased to 25%, the chancellor has announced. Companies with profits of £50,000 or less will continue to pay at 19% even after 1st April 2023. Those with profits between £50,000 and £250,000 will pay tax at the main 25% rate reduced by a marginal relief, providing a gradual increase in the effective Corporation Tax rate.
The change back to more than one Corporation Tax rate also means the re-introduction of the 'associated companies' rules to prevent business owners trying to keep profits below the £250k threshold by having separate companies.
Capital Allowances - 'Super Deduction'
Companies will be able to claim a 130% deduction on the purchase of most new plant and machinery investments that normally qualify for the 18% writing down allowance, if the expenditure is incurred after 1st April 2021 and before 31 March 2023. The allowance will enable a tax deduction exceeding the cost of the asset.
Other Business Support
For hospitality, holiday accommodation and similar businesses, for which the reduced rate of VAT of 5% was introduced last year, it was confirmed that the 5% rate will now remain in place until 30th September, with a stepped increased from 1st October 2021 to 12.5%, before returning to the standard 20% rate from 1st April 2022.
Non-essential retail businesses which are due to re-open on 12th April will be entitled to claim a £6,000 grant per premises. Up to £18,000 grants will be available for hospitality, leisure, gyms and personal care businesses.
The Bounce Back Loan Scheme (BBS) scheme will come to an end on 31st March 2021, and will be replaced by a Recovery Loan Scheme. Loans are available from £25k to £10m to help businesses restart and cope with the next stage of the recovery. The Government will guarantee 80% of the loan.
Business Rates holidays will continue until the end of June.
The Help to Grow Management Scheme, offering MBA-style management training for SME business leaders with five or more employees, will be available. Also, a Help to Grow Digital Scheme, which includes offering up to 50% discount for new software for use in CRM, Selling Platforms and accounts and finance management will be available.
Personal Tax
There are no changes to rates of Income Tax or National Insurance.
The Personal Allowance increases from 5th April to £12,570, and will be frozen until April 2026.
The threshold at which you pay higher-rate Income Tax is increased to £50,270 from 5th April and frozen until April 2026.
Capital Gains
Unexpectedly, there were no changes announced to Capital Gains Tax.
If you have any questions or would like to discuss how the budget may effect you, or you wish to consider any business or tax planning required, as a result of the budget changes, please do not hesitate to contact us on 01242 679767.
Share:
More from our blog...
Every business owner must know where the money in their company comes from and where it goes. That’s why financial management is one of the most important things to keep in mind. What is a business budget? Simply put, it's a financial plan that gives a company relevant information on revenue, expenditure, and capital. Business owners also use them as guides to forecast earnings and expenditures and perhaps to hold someone accountable for mistakes and such. If you want an accurate budget estimate, follow the six steps below. Step 1 – Estimate fixed costs The first step is to work out the fixed costs, which is relatively easy. Simply list all expenses and then identify those that show repetitive costs that don't change by the month. These include expenses such as rent, equipment leases, insurance, manufacturing costs, etc. Add up all the fixed costs to get the number and use it for a period of 3, 6, or 12 months. Step 2 – Identify variable expenses Variable expenses are those that are not constant - the complete opposite of fixed costs. Although it's easy to identify variable expenses, it's harder to forecast the numbers as they vary every month. To identify and get an accurate prediction of variable costs, it's critical to record and tally them for a period of time. You’ll soon get an average number of each variable expense. Step 3 – Work out one-time costs Most businesses also have one-time expenses. And although it’s not nearly as frequent as fixed and variable costs, a business budget wouldn't be complete without accounting for the 'sunk costs'. Buying new software or equipment are examples of one-time costs, so is something like getting new furniture for the office. Step 4 – Project your revenue The next logical step is to project your future revenue. After all, one of the reasons to build a business budget is to have something that would allow business owners to compare actual and projected revenue. This particular step allows for the setting of clear goals and understanding how to meet those objectives. Step 5 – Track profits and losses Working out the net profit margin is another necessary step. You can do this by deducting expenses, taxes, and any accrued interest from revenue. The money left over, as a percentage of revenue, indicates the net profit margin. This is a key indicator of profitability and can help highlight issues in cash flow, management, marketing, operating costs, and other areas. Step 6 – Adjust the budget No one should see a business budget as set in stone. It’s because the changing market trends, consumer demand, and other factors can influence the budget. Therefore, the final step is to make the necessary tweaks. A business budget is not static but rather a flexible estimation. By tweaking the budget, you can position your company to adapt to exterior changes. It can also help in changing goals or diverting funds towards meeting the most important objectives faster. Remember, having a business budget is not enough to ensure financial stability. Every business also has to set up an emergency fund with the budget as a guide. Continually revisiting the budget is a must. And failure to re-evaluate can affect the company's financial health and lead to overspending in all the wrong places. If you need help with budgeting and business accounting, the team at ADM Accountancy would love to hear from you. Call 01242 679767 or visit www.admaccountancy.co.uk .
Are you uncertain about the level of success you achieved? There's a quick way to get an overview of your finances. Not enough companies run a profitability analysis - a defining indicator of profit. Such an analysis relates to costs and overall revenue and it can provide insights into how a business runs. The occasional analysis can also indicate if it's time to make some changes. Maybe some clients require too much time for the money. Perhaps there are other opportunities around the corner that you can jump on. Either way, it should be on your list of tasks if you want to ensure long-term business growth. And here's a simple blueprint to follow for a successful profitability analysis. Step #1. Calculate Margins Two of the most important variables in a profitability analysis are gross and net profit margins. You can get the gross profit margin by knowing your sales revenue minus the cost of labour. For the net profit margin, you must subtract all expenses from your revenue to get the magic number - the margin - and then divide the previous result by your revenue Don't forget to look at the segment profits, too. Odds are you offer a suite of services that each has its own revenue stream. Take the numbers for each segment, subtract the costs, and include overheads in your calculation. If you do this, you get a more detailed insight into how money moves in your business. Step #2. Perform Client Valuation Here, you must look at each client and figure out how much each of them brings. Performing a client valuation essentially means to determine the worth of each client. So, subtract from the revenue all of your costs, such as marketing, hourly labour, travel expenses, and so on. After all, you want to find out the costs of keeping each client satisfied. Some clients may not pay a lot for your services. But you may have a better profit margin with them if their projects take very little time from you or your team. Maybe you have good cash flow. But it's possible that when you draw the line, there's not a lot of profit in it. Step #3. Look at the Past Numbers A thorough profitability analysis looks at past quarters over the years. Why? Although your current numbers may look good on paper, you need something to compare them to if you want to know where you stand. Step #4. Benchmark Industry Ratios Your numbers only mean something in the context of your niche. It’s because profitability numbers aren't the same in accounting as in health care, education, e-commerce, etc. If you look at your past and current numbers, you can figure out your business's progress so far. But what about compared to your competitors? What about your position in relation to the market? Always be sure to check average industry ratios to give you a better sense of where your company is as opposed to where it should be. Do It for Peace of Mind and Direction A good profitability analysis can help curb anxiety when it comes to your business. At the same time, it can tell you what you should be doing to improve and grow it. If you ever find your business lacking direction, remember that an analysis can help you spot issues that you couldn't otherwise. It’s a game changer. Speak to one of the team at ADM Accountancy about creating a personalised analysis for your business on 01242 679767. 
Rapid business growth is incredibly exciting but there are some pitfalls, too. In fact, when poorly managed, rapid growth can actually damage your business. That’s no reason to shy away from growth, but it is important to understand how to best manage it so that you can keep customer satisfaction high as your company expands. Let’s take a look at four key strategies to employ. 1) Hire the Right Team The right team will make all the difference to your business growth. Focus on hiring employees who demonstrate a great attitude. You can train an employee up, but it’s very difficult to change a negative mindset. Of course, the right skills are important but in order to keep turnover rate low and morale high, you need to make sure that new hires fit in well with your company culture. Research by the BDC Network found that a positive company culture can increase operating income by 19% and earnings growth by 28%. 2) Stay on Top of Your Finances When your profits and revenue are rising, it’s tempting to sit back, relax and let your finances take care of themselves, but that would be a big mistake. No matter how well your company is faring, it’s important to create a budget and review it regularly. In fact, the faster your business is growing, the more attention your finances need. Growth, revenue and cash flow changes mean that you will have to implement changes to your current system of financial management. Growth often comes with big costs, too, such as equipment repairs and new hires. You may find yourself in need of financial guidance as your business expands. The time for DIY money management has well and truly passed. Now that your needs are more complex, it may be time to hire a virtual CFO so that you will have access to top-level financial advice without taking on the cost and commitment of an in-house hire. 3) Utilise Working Capital Cash flow management is one of the biggest challenges of business growth. Often, a significant amount of spending is involved in preparation for growth and you may find your reserves running low, even as your profits and revenue soar. A working capital loan can help enormously with funding a high volume of orders, securing new inventory, purchasing new equipment or hiring new team members. There are many different options available, so it’s best to speak to your accountant about the right one for your business. 4) Focus on Your USP As you grow, it’s important that you don’t lose sight of what makes your business unique. Your USP is what will make you stand out from the crowd and continue to attract success. Continue speaking directly to the audience that has gotten you this far and look for new and innovative ways to meet their needs. Data and analytics are enormously helpful with this. AI tools can provide you with valuable feedback to show you what you’re doing well and which activities generate the most profit. This data can then inform your next steps. Keep an eye on this data, too, as new patterns may be revealed as your business evolves. Business growth puts significant demands on business owners, but by hiring the right team, keeping a handle on your finances, utilising working capital and staying focused on your USP, it can be an amazing and exciting process that leads you towards success. Call ADM Accountancy for expert advice with your business accounting on 01242 679767.
If your business is a car, then cash is the fuel in the tank. Without it, you’ll break down. Furthermore, if you have to stop every few miles to refuel then it becomes very difficult to pick up any significant speed. As a result, the journey will take twice as long. When you’re driving, it’s important to keep an eye on your petrol gauge. Similarly in business, you need to monitor your cash flow closely to identify any problems before they impede your progress. For small businesses, even one unexpected cash flow shortage can lead to a myriad of issues. For example, you may miss payment deadlines and then end up incurring penalty fees and interest. This in turn eats away at your profit margins. The sooner you can spot a potential threat to your cash flow, the more time you will have to prevent it and take steps to minimise the impact. Here’s how to spot an upcoming cash shortage in your business, and what to do about it. Cash flow forecasting In order to create a cash flow forecast, you first need to know how much money is actually entering and leaving your business each month. Once you have this data you can then forecast your cash flow over the coming months. Remember to factor in any additional upcoming expenses and seasonal spikes or slumps in sales. Note that your variable costs will change in accordance with seasonal fluctuations, too. Creating a cash flow forecast will allow you to identify potential problems and create a plan to protect your business. Compare forecasts to real data It’s important to measure how accurate your cash flow forecasts prove to be by comparing them to real data. This will help you to identify issues you may have failed to account for and create more accurate forecasts going forward. It also helps you measure your performance - were your sales significantly higher or lower than predicted? If so - why? Update your figures Don’t create a cash flow forecast once per year and consider it a job done. It’s important to regularly update your forecasts when any changes occur that could affect your cash flow, such as emergency costs, late payments, price increases or new sources of revenue. Prepare for multiple outcomes One problem that new business owners face is a lack of past data upon which to base their cash flow projections. In this case, you should create cash flow forecasts for multiple scenarios so that you will be able to keep a handle on your numbers whatever happens. First, take an educated guess at what your outcome will be. Then, create a second projection with 10% higher sales and a third with 10% lower. Finally, create a best and worst case scenario. There are no guarantees in business but being prepared for multiple outcomes puts you in a stronger position to handle whichever prediction proves true. Emergency measures It pays to prepare for the worst. Even if you’re in a strong cash position right now, it’s important to arrange multiple safety nets in case things to do go south. Ways to do this include: Arranging a line of credit, which is a preset borrowing limit that you can use at any time and pay back in a similar fashion to a traditional bank loan. Creating an emergency cash reserve. It’s always useful to create a cash buffer, and this could prove enormously helpful if disaster strikes. Ideally, you should aim to put aside enough to cover 6 months’ worth of operating expenses. Securing a business credit card. High interest rates mean that business credit cards are not suitable for long term borrowing. However, your card should offer a certain amount of days interest fee, which makes a credit card ideal for smoothing over short term blips. Cash flow shortages can present big problems for business owners, but by creating, updating and comparing forecasts regularly, it’s possible to take steps to prepare for upcoming issues and minimise the impact upon your business. The worst cash flow issues are the ones that take you by surprise, so it really does pay to be one step ahead. Contact ADM Accountancy on 01242 679767 to discuss accountancy solutions for your small business.
As a small business owner, it is important to stay on top of your financial transactions. This means tracking every sale and expenditure, in order to keep your business' finances organised. However, this can feel overwhelming when you first get started. You need to track your transactions in order to stay on top of your business' finances and ensure that you are paying the right amount of tax. In this article, we'll take you through how to track your business' finances and the different types of transactions that you need to be aware of. Let's dive in. Daily business transactions There are several different types of transactions that you need to track day-to-day for your small business. These include: Customer invoices Vendor invoices Payroll Banking transactions Customer cheques or deposit slips Cancelled cheques These are just a few of the transactions that you need to track on a daily basis. Depending on the type of business you run, there may be other transactions that you need to track as well. For example, if you sell products online, you will also need to track inventory and shipping costs. It's important to keep on top of these transactions, as they will give you a clear insight into your business' finances. This way, you can make sure that you are keeping accurate records and that your business is running smoothly. Month-end transactions At the end of each month, you will also need to track some additional transactions. These include: Bank reconciliation Accounts receivable Accounts payable Cheques and deposit registers Sales report Inventory ageing report Payroll register Monthly income statement Balance sheet Tracking these transactions will give you a clear picture of your business' financial health. This way, you can identify any areas where you may need to make changes or improvements. You should also compare these transactions against the previous month, as well as the same month last year, to get a clear picture of your business' growth. Year-end financial transactions At the end of the year, you will need to track some additional financial transactions. These include your annual: Income statement Balance sheet Cash flow statement These documents are important for tax purposes. They will also give you a good indication of your business' financial health for the year. This way, you can identify any areas where you may need to make changes or improvements before problems begin to pile up. Cloud accounting software It may seem impossible to keep track of all these transactions, but thankfully there are some tools that can help. Enter: cloud accounting software. Cloud accounting software makes it easy to track your business' finances and see where your money is going. This way, you can make sure that your records are accurate and up-to-date. With cloud accounting software, you can automate invoices, upload receipts via your smartphone, keep an eye on cash flow and generate detailed financial reports with the click of a button. This way, you can gain detailed financial insight into your business whilst also saving time. There are many different cloud accounting software options available, we recommend Xero as our preferred software for business. Each of these software options has different features and pricing plans. It’s best to speak to your accountant or financial advisor about the program and subscription package that best suits the needs of your business. Keeping on top of your small business' financial transactions is essential for keeping accurate records and ensuring that your business is running smoothly. Trust us, in three months’ time, you’ll be extremely glad that you started tracking today. Speak to one of the team at ADM Accountancy on 01242 679767 about our accounting packages.
Before listing the components of a cash flow forecast, it’s crucial to understand the concept of what this kind of forecast is. Essentially, it’s a vital tool that helps you understand your finances. To be precise, a cash flow forecast is an estimation of how much money comes in and goes out of your company. And it can be as detailed as you need it to be and for whatever period. But for a cash flow forecast to be useful in any business, it needs to have the following components. 1. Projected Sales This is what all cash flow forecasts depend on. A good way to come up with projected sales figures is to look at historical data. You must use seasonal patterns, promotions, market trends, and past figures to estimate future sales. But if your company is new, it’s possible to make sales projections from competitor, supplier, and industry data. 2. Projected Expenses Every business has expenses, including rent, insurance, manufacturing, and others. That’s why it’s a key component when making a cash flow forecast. It’s essential to have a firm understanding of what goes out of the company for the next month or year, depending on the term of the forecast. 3. Projected Outgoing Payments To make an accurate cash flow forecast, you must know when payments have to go out. Make sure to check with suppliers, vendors, investors, banks, and service providers. Include that information in the forecast to know e xactly when you have to pay more. It should also give you a good idea of any delayed payments. 4. Projected Incoming Payments When working with repeat customers and clients, it’s easy to see patterns with your cash inflow. Look at historical data to see how people pay and identify how many of your customers pay upfront. You also have to figure out how many of them delay payments or perhaps often pay late fees. Knowing when money comes into your business will help you make a more accurate cash flow forecast. 5. Communication and Good Software Working with numbers isn’t as hard as it used to be, thanks to all the technology available today. That’s why software is a vital component when it comes to making a cash flow forecast. Of course, the accuracy of a forecast also depends on communication between various individuals and departments. If people don’t input the right numbers and ignore concerns or inefficiencies, you will end up with bad information in your database. Although cash flow forecasts rely on numbers to give you the desired projection, those numbers come from people. That’s why having clear lines of communication in a business can help ensure the accuracy of the data that you work with. Don’t Sleep on Projections You can’t rely on a single cash flow forecast for the whole duration of the business, especially if it’s a longer-term one. Lots of things can happen from year to year and month to month. And a forecast that looked promising two months ago may not hold true two weeks from now. That’s why it’s critical to create one early on, ideally at the start of every financial year. As you proceed, revisit the projection and adjust accordingly since cash flow forecasts are flexible. If you'd like support with Cash Flow Forecasting, contact the team at ADM Accountancy on 01242 679767 or visit: www.admaccountancy.co.uk
Bookkeeping is essential for tracking and understanding your business's financial performance. It helps you better understand where your money is coming from and where it’s going, and empowers you to make informed decisions that will help your business succeed. It also helps you stay compliant with tax laws, manage budgets, and make better decisions about how to allocate resources. Let's take a deeper dive into how bookkeeping can be beneficial for your business. 1. Better budgeting Bookkeeping can help you create and manage accurate budgets. It allows you to assess how much money is coming in from customers, expenses, and other sources, and gives you a better understanding of where your business stands financially. With this information, you can create more effective budget plans that will help you jettison your business to success. 2. Accurate financial reports Bookkeeping allows you to easily generate accurate financial reports that give you a better understanding of your business’s financial performance. This information can then be used to make more informed decisions about how to allocate resources, spot financial trends, and identify areas where you can save money. 3. Tax compliance and savings Bookkeeping helps you ensure that you are in compliance with tax laws by providing accurate financial information. This allows you to avoid costly mistakes and potential penalties from the IRS and other regulatory agencies. Additionally, bookkeeping can help you save money by enabling you to take advantage of deductions and other tax benefits that apply to your specific business. 4. Cash flow management Bookkeeping also helps you manage your cash flow more effectively. With accurate records of expenses and income, you can better plan for cash flow needs and avoid potential problems such as overdrafts or insufficient funds. This will help you make sure that your business has the money it needs to succeed. 5. Confidence One key benefit of bookkeeping is that it can give you peace of mind. Knowing exactly where your business stands financially will give you the confidence to take risks and make decisions that will help your business grow and succeed. 6. Setting targets and goals It's difficult to set specific goals when you have no idea what your numbers are, but bookkeeping can help you identify your current financial performance and help you come up with realistic targets to strive towards. You'll also be able to accurately measure your progress along the way because you'll have the data you need to track your progress. 7. Organised records Unorganised records are a ticking time bomb. Bookkeeping helps your business by keeping records organised and up to date, enabling you to quickly access the financial information you need when you need it. This makes it easier to answer questions, identify trends, and make decisions that will help your business succeed. If you let your records become too chaotic, you can be sure that your business won't reach its potential. That's why bookkeeping is so essential to the success of any business. With accurate and up-to-date financial information, you'll be able to make better decisions and take advantage of every opportunity that comes your way. As you can see, bookkeeping is an essential component of a successful business. It can help you stay compliant, manage budgets, and make better decisions. With accurate financial records, you'll be able to take your business to the next level. If you need help getting your bookkeeping in order, consider working with a professional bookkeeper or accountant to ensure accuracy and consistent record-keeping. With the right help and strategies in place, you can be sure that your business will be on its way to success.  Contact ADM Accountancy for all your bookkeeping requirements on 01242 679767 or visit admaccountancy.co.uk
Increasing sales volume is a significant profit driver for businesses, but it’s not the only way to earn more profit. Furthermore, increasing sales isn’t always a manageable strategy for small business owners and entrepreneurs who are just getting started, since it often requires a large inventory and hiring more staff. Let’s take a look at how you can boost your profits without selling more. What is profit margin? Your profit margin is the percentage of your turnover that you actually get to keep; it’s the margin by which your sales exceed your costs. So if you sell £1,000 and spend £600, your profit is £400, making your profit margin 40%. Bear in mind that average profit margins vary widely across industries and business models. Low profits Low profits are bad news because they make it difficult to invest in growth and protect your company during difficult times. There are many factors that can cause low profits including: Low sales High operating costs Poor inventory management Low customer retention rate Many business owners believe that selling more is the answer to the problem of low profits, but that’s not always true. There are several more efficient ways that can help you increase your profit margins and make more money without increasing your sales volume. Negotiate with suppliers Negotiating with suppliers can help you to reduce your expenses and thus create bigger profit margins. Shop around and speak to your suppliers about the possibility of bulk discounts or early payment incentives. Monitor inventory As mentioned, poor inventory management often plays a role in low profits. If you overstock on a product that doesn’t sell fast, you may lose money over time due to depreciation, expiration and misplacement. Increase prices Raising your prices is a straightforward way of increasing your profit margins. Underpricing your products in order to drive sales reduces your margins and makes it more difficult to cover your costs. Competing on price works well for big businesses because they can afford to focus on sales volume rather than high margins, but many small businesses will achieve greater success by focusing on quality, convenience and excellent service. Eliminate unprofitable items It’s important to understand the gross profit that you make from a particular product or service. If an item is making you very little in terms of profit then it may be worth getting rid of it so that you can replace it with something more profitable, or simply streamline your selection for simpler inventory management. Of course, you must weigh up profitability against sales volume. If you sell a very large volume of a product with a fairly low margin, it still may be worth keeping it. Get rid of slow-selling items Conversely, products and services with a very high gross profit margin are only actually profitable if they sell. Otherwise, they’re simply bulking up your inventory and tying up your assets. Reducing your supplies is an effective way of keeping your operating costs low and maximising your margins. Systemise Systemising your business will help you operate at maximum efficiency and thus reduce your costs. This means putting clearly defined processes in place and using technology to automate many menial tasks to save time. Essentially, it means having your business run like a well-oiled machine rather than a slow, spluttering engine. There are multiple ways to boost your profits without increasing sales, and many of these strategies may be better suited to the needs of a small business. Remember that it’s not about the money you make, it’s about the money you get to keep. ADM Accountancy specialises in supporting small businesses and SMEs within the Professional Services sector, with all their accountancy needs. Call us today on 01242 679767.
Keeping your small business financially sound is one of the most difficult - and important - aspects of running a successful company. When something is amiss with your financial management, it can quickly spiral out of control and threaten the very existence of your business. We've put together a list of the most basic steps you need to take to ensure that your small business stays on track financially. Of course, seeking expert advice is always recommended, but these tips will help you get started in the right direction. 1) Track Your Expenses Carefully This should go without saying, but it's important to keep a close eye on your expenses. In fact, you need your records to be impeccable. Many small business owners make the mistake of letting their spending get out of control, without realizing how much it is actually impacting their bottom line. Create a budget and stick to it as closely as possible. You should know exactly what you're spending and why. This will enable you to understand which costs are generating a sufficient return and where you may be able to cut costs. 2) Keep Your Personal and Business Finances Separate One of the biggest financial mistakes you can make is commingling your personal and business finances. Not only does this make it much more difficult to track your expenses, but it can also lead to serious legal problems down the road. If you want to keep your small business financially sound, it's crucial that you maintain a clear separation between your personal and business finances. 3) Manage Your Taxes Properly (from Day One) Another mistake that many small business owners make is failing to properly manage their taxes. This can be a complicated process, but it's important to ensure that you're paying all of the taxes you owe and taking advantage of any deductions or credits you're entitled to. Failing to properly manage your taxes can lead to significant problems down the road, so it's important to get this right from the start. 4) Put a Solid Invoicing System in Place Late payments and unpaid invoices are one of the biggest financial problems faced by small businesses. If you want to ensure that your small business is financially sound, you need to put a solid invoicing system in place. This should include sending invoices out in a timely manner and following up with clients who are late in paying. You may also want to consider using software that can help you automatically send reminders and track payments. This is especially useful if you need to send a large volume of invoices each month. 5) Build a Healthy Cash Reserve One of the best ways to ensure that your small business is financially sound is to build up a healthy cash reserve. Now, this is certainly easier said than done, but it's important to have a buffer of cash on hand in case of unexpected expenses or slow periods. Ideally, you should aim to have enough cash to cover 3-6 months of operating expenses. This will ensure that you're prepared for anything that comes your way. Of course, these are just a few of the most important steps you need to take to ensure that your small business is financially sound. For more detailed advice, be sure to seek out the help of a qualified accountant or financial advisor.  Speak to one of the team at ADM Accountancy on 01242 679767 , who would be happy to help.
If you're not using cloud accounting software for your small business accounts, then you're making your life much more difficult than it needs to be. The days of having to manually enter accounting data into outdated software programs are long gone. Cloud accounting simplifies the process by providing a range of features that make managing your finances much easier. Let's take a closer look at how. 1 - Easy access In the past, accessing accounting data could be difficult when there was no one at the office. With cloud accounting, you gain easy access from anywhere in the world, so you can review and manage your accounts no matter where you are. You can do it from your smartphone, tablet, or laptop, so you can keep up with your finances even if you're away from the office. 2 - Automated processes With cloud accounting, you can automate mundane tasks like invoicing and bill payments. This eliminates the need to enter data manually, saving you time and energy that can be put towards other activities. Automation also helps to prevent human errors, making your financial data more accurate. 3 - Real-Time collaboration Cloud accounting allows multiple users to access and collaborate on financial data at the same time. This makes it easier to have real-time conversations about financial issues and make timely decisions that can help your business grow. 4 - Automated data entry No more manually entering data into a system. With cloud accounting software, you can automate data entry for receipts and invoices so your workspace is always up to date. This also reduces data entry errors, giving you greater control over your finances. Plus, let's be honest: data entry is boring and time-consuming. Automation makes it easier and more efficient so that you can put your time and energy to better use. 5 - Security Cloud accounting software keeps your data far more secure than if it were stored locally. It's also updated regularly, so you can be sure that your data is always secure and up to date. And because multiple users can access the data at the same time, you don't have to worry about keeping track of multiple copies of documents. Should disaster strike and your system go down, your data will still be safe and secure in the cloud. 6 - Third-party app integration Cloud accounting software integrates with other third-party apps and services, allowing you to automate tasks like payroll and tax filing. For example, you can connect your cloud accounting software to an online payroll provider and have it automatically calculate employee salaries, deductions, and taxes. This integration also makes it easier to track expenses, giving you greater control over your finances. 7 - Simplicity Cloud accounting software simplifies your books and makes the process of managing your finances easier than ever. By automating mundane tasks, you can free up more time to focus on other important aspects of your business. Plus, simplified and centralised data makes it easier for you to understand what's happening in your business, meaning that you can make better and more informed decisions. Final thoughts Using cloud accounting software can make managing your business's finances easier and more efficient. With features like easy access, automated processes, real-time collaboration, automated data entry and third-party app integration, you can rest assured that your financial data is secure and up to date. Plus, you can use the extra time saved to focus on other aspects of your business, giving you a competitive edge. Founded in 2009, ADM Accountancy Services Ltd specialises in supporting small businesses and SMEs within the Professional Services sector, with all their accountancy needs. Speak to one of the team at ADM Accountancy on 01242 679767.
Missing payroll can be a nightmare for any business owner. Not only do you have to worry about the financial repercussions of not paying your employees, but you may also have to deal with legal consequences, too. However, if you find yourself in this situation, there’s no need to spiral because there are a few things you can do to mitigate the damage. Missing payroll There are a few common reasons why businesses miss payroll. The most common reason is simply that the business doesn't have enough money to pay their employees this month. This can be due to a slow period or unexpected expenses, or due to poor budgeting. Businesses also sometimes miss payroll because of a mistake somewhere in the payroll process. This could be due to using outdated software, an error in calculating hours worked, miscalculating taxes, or failing to properly process payroll deductions. Whatever the reason for missing payroll, it's important to take action immediately. The longer you wait, the more damage you'll do to your employees and your business. Better budgeting If you're missing payroll because you don't have enough money, then you need to take a close look at your budget. See where you can make cuts in other areas so that you can free up some cash to cover payroll. You may also need to take out a loan or line of credit to cover the shortfall. You should also take a close look at your budget to see where you can make changes so that you don't find yourself in this situation again. Ideally, you should have a cash reserve to act as a buffer so that even when an unexpected expense occurs or you have a quiet month, you still have enough funds available to pay your staff on time. Cash flow forecasting Another tool that can help you avoid missing payroll is cash flow forecasting. This involves estimating how much money will be coming into your business and when, and then using that information to plan your spending. This can help you identify potential problem areas so that you can take steps to avoid them. Payroll mistakes If you've missed payroll because of a mistake in the process, then you need to take steps to correct the mistake and prevent it from happening again. Being paid late or incorrectly angers and frustrates employees, so it's important to take action to make sure that this doesn't become a regular occurrence. Otherwise, you risk losing good employees. If you're using out-of-date software, consider upgrading to something more modern that will automate some of the payroll process and help you to avoid mistakes. If you're miscalculating hours worked, consider using time tracking software so that you have a more accurate record of employee hours. It's also worth considering outsourcing payroll to an accountant who can handle the process for you. This will help you to avoid the hassle and stress of dealing with payroll yourself, which can be a huge help when you're busy with other aspects of running your business. Communication Whatever the reason for missing payroll, it's important to communicate with your employees. They need to know what's going on and when they can expect to be paid. Be honest with them about the situation and keep them updated on what's happening. If you're having financial difficulties, let them know and explain what steps you're taking to rectify the situation. In the wake of a payroll error, transparency is key to maintaining employee trust. Missing payroll can cause a lot of damage to your business and employees, but there are steps you can take to mitigate the damage. Better budgeting, cash flow forecasting, and payroll mistakes can help you avoid missing payroll in the future. Communicating with employees is also key during these difficult times. If you're really struggling with payroll, hiring an accountant to advise you and manage your payroll is the easiest and most effective way to ensure that your business can stay afloat. In addition to putting efficient payroll systems in place, they will also help you to budget and forecast your cash flow properly to ensure that you always have enough money to meet your financial obligations. Call ADM Accountancy on 01242 679767 or visit www.admaccountancy.co.uk
When it comes to running a business, it's important to focus on the customers that are the most profitable. Not all customers are created equal, and some customers may even be dragging your business down. In this blog post, we will discuss how to identify your most profitable customers, and the next steps to take once you've established who your biggest profit drivers are. Differentiate Between Revenue and Profit Just because a customer spends a lot of money with you does not mean that they generate a lot of profit. To get a clear understanding of who your most profitable customers are, you need to take a closer look at your profit margins. To do this, you need to calculate your gross profit margin for each customer. This number will tell you what percentage of revenue is left after accounting for the costs of goods sold. For example, let's say that you have a customer who spends £100 with your company every month. To calculate your gross profit margin, you would take the total revenue (£100) and subtract the cost of goods or services sold (£40). This would leave you with a gross profit of £60. To calculate the gross profit margin, you would then take that £60 and divide it by the total revenue of £100, and this would leave you with a 60% margin. On the other hand, if a customer spends £300 per month with you but it costs you £250 to deliver their goods or services, you would be making a profit of £50. Despite the higher customer spend, your profit margin would stand at 16.6%. In this case, the customer who spends less with you is actually more profitable. So, while customer spend is important to consider, it's not the be-all and end-all when determining who your most valuable customers are. Sales Volume However, while one customer may generate an impressive profit margin, they may not necessarily drive a high volume of sales. In this case, you might want to consider customers who generate a high volume of sales, even if their profit margins are slightly lower. For example, let's say that you have two customers - Customer A spends £100 with you per month and has a gross profit margin of 60%, while Customer B spends £2,000 with you per month but only has a gross profit margin of 30%. Customer B is still generating twice as much profit for your business, even though their profit margin is lower. Consider Customer Lifetime Value When determining who your most profitable customers are, it's also important to consider customer lifetime value (CLV). This metric looks at the total amount of revenue that a customer will generate for your business over the course of their relationship with you. To calculate CLV, you need to take into account a number of factors, including the average purchase value, the number of purchases per year, customer retention rate, and the profit margin. For example, let's say that the average customer spends £100 with you per year, makes two purchases per year, and has a retention rate of 50%. Additionally, let's say that your profit margin is 50%. To calculate the CLV, you would take the average purchase value (£100) and multiply it by the number of purchases per year (2). This would give you a customer value of £200. You would then multiply this by the customer retention rate (50%), which would give you a CLV of £100. As you can see, the customer lifetime value can give you a more holistic view of how profitable a customer is likely to be in the long run. Trimming the Fat Sometimes, if a customer or client is simply not profitable, you might have to let them go. This can be a difficult decision to make, but it's important to remember that not every customer is going to be right for your business. Your time, and your staff's time, is a valuable resource. If you're spending too much time and effort trying to service a customer who isn't generating enough revenue or profit, then you may well be better off without them. By focusing on customers who really drive value for your business, you can free up time and resources to better serve your most profitable clients. This helps you to create a leaner and more profitable business that is ultimately more enjoyable and rewarding to run. Final Thoughts When it comes to determining who your most profitable customers are, there is no one-size-fits-all answer. It's important to take a variety of factors into account, including customer spend, gross profit margin, customer lifetime value, and more. By taking the time to analyse your data and understand how different customers contribute to your business' bottom line, you can make more informed decisions about where to focus your efforts – and increase profits in the process. ADM Accountancy Services Ltd is a Chartered Management Accountants based in Bishop's Cleeve, Cheltenham. We support clients' businesses throughout Cheltenham and the surrounding areas, including Tewkesbury, Gloucester, Stroud and Evesham. Call 01242 679767 or visit HOME - ADM ACCOUNTANCY SERVICES
If you're running a business, then you need to understand net profit margin. In fact, this metric is one of the most important indicators of a company's financial health. In this quick guide, we'll explain what net profit margin is, how to calculate it and various factors that affect it. What is Net Profit Margin? Put simply, net profit is the amount of revenue that a company keeps after all of its expenses and taxes have been paid. The net profit margin is the percentage of revenue that the company keeps. So, if a company turns over £100,000 and keeps a net profit of £20,000, the net profit margin would be 20%. To calculate net profit margin, you first need to calculate net profit. You do this by subtracting all expenses from total revenue. This gives you the net profit figure. To get the margin, you then divide this figure by total revenue, and multiply by 100. With operating profit, you only subtract expenses that are directly related to the running of the business. This includes things like cost of goods sold, labour and rent. With net profit, you also subtract things like taxes and interest payments. Here's an example: Let's say a company has total revenue of £100,000 in a year. If its expenses total up to £60,000, then it's left with a net profit of £40,000. To calculate the margin, we divide the net profit by total revenue and multiply by 100. This gives us a net profit margin of 40%. Now that we know how to calculate it, let's take a look at some of the factors that can affect a company's net profit margin. Costs One of the most important factors affecting net profit margin is costs. The lower a company's costs in relation to revenue, the higher its margin will be. There are two main types of costs: Reduce variable costs. Variable costs are things like raw materials and labour that change in relation to production levels. If a company can find ways to reduce these costs, then its margin will increase. Reduce fixed costs. Fixed costs are things like rent and insurance that don't change in relation to production levels. Revenue Another important factor affecting net profit margin is revenue. The higher a company's revenue in relation to its costs, the higher its margin will be. There are two main ways to increase revenue: Increase prices. This is probably the most direct way to increase revenue. If a company raises its prices, then it will make more money on each sale. Increase sales volume. This is the other main way to increase revenue. If a company can sell more products or services, then it will make more money overall. Taxes Another important factor affecting net profit margin is taxes. By working with an accountant to create a good tax strategy, businesses can minimize the amount of taxes they have to pay and take full advantage of any incentives or breaks available to them. Comparing Net Profit Margin to Other Metrics Net profit margin is a useful metric, but it's important to put it into context. Here are some other financial metrics that can give you a more complete picture of a company's financial health: Gross profit margin. This metric measures the percentage of revenue that a company keeps after paying its cost of sales only. Operating profit margin. This metric measures the percentage of revenue that a company keeps after paying its operating costs. These are the costs associated with running the business, like labour and rent, as well as cost of sales. Return on assets, which is how much profit a company makes in relation to its assets. Debt-to-equity ratio. This metric measures a company's debt relative to its equity. As you can see, net profit margin is just one piece of the puzzle. To get a complete picture of a company's financial health, you need to look at a range of different metrics. Final Thoughts As you can see, net profit margin is a very important metric for businesses. It's a good idea to calculate it on a regular basis to track your company's financial health. By understanding the factors that affect it, you can gain a clearer picture of your business' overall financial health and make strategic decisions to improve your business's bottom line. Need help with your business accounting? Call ADM Accountancy on 01242 679767 or visit www.admaccountancy.co.uk .
Scaling your small business is incredibly exciting, but there’s a lot to think about. It’s important to have solid rules and guidelines in place, and a clear plan to follow. If you’re ready to scale up your small business then read on for seven top tips to help you do it. 1) Hold onto your values Your values should always be at the heart of your business, so be careful not to lose sight of them as you scale up. After all, these values have been instrumental in helping you achieve success so far, so don’t sacrifice them as your company grows. 2) Identify your barriers What is getting in the way of your growth? What could go wrong as you scale up? Take a step back, put your emotions to one side and take an honest, objective look at your business. Do you lack funding? Are you experiencing cash flow issues? Do you have a high staff turnover rate? Are there problems with your current premises? Identifying your barriers to growth is the first step to overcoming them so don’t be afraid to take a long, hard look at your business. Every business has its weaknesses, so don’t be disheartened by yours but instead view them as an opportunity to improve. 3) Run the business you want, not the business you have In order to scale up successfully, you need to bridge the gap between where you currently are and where you want to be. What works for you right now might break as you begin to grow, so it’s important to put systems and SOPs in place that will continue to work seamlessly as you scale up. Take a look at your cash flow, team, IT systems, workflows and supply chain to see what is going to creak or even break as your business expands, and prepare accordingly. 4) Build the right team Leading on from the previous point, building a strong team of employees is an essential part of scaling your small business. You will need to take on more staff as you grow and ensure that they share your values. When hiring, place special importance on attitude and willingness to learn; you can teach an employee new skills but it’s very difficult to fix a negative mindset. Staff morale is essential to productivity and a low turnover rate, so it’s in your best interests to create a supportive company culture that helps each team member reach their potential. Remember that making your staff feel seen, heard and appreciated goes a lot further than fancy merchandise or an extravagant Christmas party ever will. 5) Learn from the competition Study your competitors who have successfully scaled up - how did they do it? What worked well for them, and what could they have done better? How did they change as they grew? Your competitors constitute a valuable learning opportunity, particularly when it comes to business growth. 6) Stay focused on customer service The last thing you want to do when scaling up is antagonise your customers. You must remain consistent with the quality of your customer service; scaling up will do more harm than good if it causes all of your customers to flock elsewhere. Of course, mistakes do happen but it’s important to rectify them as soon as possible, maintain honest communication with your customers and make them feel valued to keep them coming back. 7) Monitor your cash flow Many of the biggest challenges businesses face during the scale-up phase are cash flow related. Whilst you do have to spend in order to grow, it’s important to keep a close eye on your cash flow throughout this process so that you know where every penny is going. This way, you can identify and solve any issues as soon as they arise, and see off potential threats before they come to fruition. It’s also important to prepare an adequate cash reserve for emergencies and unforeseen costs so that bumps in the road don’t cause a total breakdown. Summary Whilst the scale-up phase can be challenging for small business owners, it’s also exciting and provides a great opportunity to build an even better business. Whilst we can’t promise that employing the above seven tips will make scaling your business 100% worry free, they can make the process significantly smoother and easier. Call ADM Accountancy for advice and support with your business accounts on 01242 679767.
Bookkeeping might not be the most exciting part of running your small business, but it is an absolutely essential task that undoubtedly plays a big role in your financial success. Bad bookkeeping can lead to myriad problems down the line, such as missing out on tax deductions or having to pay unexpected penalties. Meanwhile, great bookkeeping helps you to maintain control and visibility of your finances, plan for the future, and make accurate decisions. What is bookkeeping? Bookkeeping is the process of tracking and recording all your financial transactions and is the foundation for all your accounting tasks. The end goal of any bookkeeping system is to have accurate financial records that you can use to make informed decisions. Bookkeeping terms to know Accounts Payable Accounts payable are the amounts of money that you owe to vendors and suppliers. This typically includes things like the bills from the website hosting service or your office supplies provider. Accounts Receivable Accounts receivable are the amounts of money that your customers owe you. This includes things like customer invoices, deposits, and payments towards services or products that you provide. Assets Assets are the items that your business owns. This includes physical assets such as computers, furniture, or vehicles, as well as intangible assets like intellectual property or software. Balance Sheet A balance sheet is a financial statement that summarizes the assets, liabilities, and equity of your business. Cost of Goods Sold The cost of goods sold (COGS) are the direct costs associated with producing goods or services, such as materials and labour. Expenses Expenses are the costs incurred in order to run your business, such as rent, office supplies, salary, or advertising. Equity Equity is the amount of money that your business has earned through profit or reinvestment. Liabilities Liabilities are debt that your business has taken on, such as loans, credit card balances, or lease payments. General Ledger The general ledger is the main record of your financial transactions, and it serves as a master account book for your business. It includes all accounts for your income, expenses, assets, liabilities, and equity. Journals Journals are used to record financial transactions in chronological order. These include cash disbursement journals, accounts payable journals, and accounts receivable journals. Reconciliation Reconciliation is the process of making sure that your financial records are accurate and up-to-date. This involves reviewing transactions, statements, and other documents to verify that they match up. Revenues Revenues are the income that your business earns from sales, services, or other activities. Payroll Payroll is the process of calculating and distributing wages to your employees. How to get your bookkeeping right Now that we've established some basic bookkeeping terms that you need to know, let's turn our attention to the actual process of getting your bookkeeping right. Here are some tips to help you get started. 1. Choose the right bookkeeping software There are plenty of great cloud software solutions and apps that make bookkeeping easier. Choosing the right one for your business will depend on a few key factors such as budget, features, and ease of use. 2. Set up a separate business bank account If you're using the same bank account for your business and personal transactions, or two businesses at once, that's a surefire way to make your bookkeeping far more complicated and frustrating than it needs to be. Setting up a separate bank account for your business will help you to keep everything organized and make tracking expenses much easier. 3. Automate as much as possible Having chosen the right bookkeeping software, it's important to take full advantage of its features. Look for ways to automate tasks like recurring bill payments, credit card charges, and customer invoices. Automating these processes can save you a lot of time and effort. 4. Stay on top of your records Bookkeeping is an ongoing process, so it's important to stay on top of your records. Make sure to update your accounts regularly, reconcile discrepancies in your bank statements, and review any invoices or receipts. 5. Create a process for document management Accurate bookkeeping requires that you keep up with all of your incoming and outgoing documents. Creating a process for document management will help you stay organized and make filing your taxes easier. 6. Budget for taxes One big mistake that many new business owners in particular tend to make is failing to budget for taxes. Set aside some money each month so that when tax season comes, you won't be caught by surprise. 7. Daily records A little-and-often approach to bookkeeping is the best way to ensure that you stay on top of your records. Make sure to keep a daily record of all transactions and reconcile your accounts weekly. 8. Track expenses carefully Having a clear record of all your expenses can help you to identify any potential problems or areas for improvement in the future. Take some time each month to review and categorize all your expenses. Bookkeeping is an essential part of running any business, and it's important to stay on top of it by taking the time to understand the basics and setting up a system that works for you. With the right tools and processes in place, bookkeeping can be manageable and empower you to make smarter decisions, creating a stronger and more financially solid business. Speak to one of the team at ADM Accountancy about our Bookkeeping service on 01242 679767 or visit: BOOKKEEPING - ADM ACCOUNTANCY SERVICES for more information
Head office
Unit 10, Homelands Commercial Centre
Vale Road
Bishop's Cleeve
Cheltenham
Gloucestershire
GL52 8PX
Registered in England and Wales. Registration Number: 06912489