Cutting costs to improve profits will not necessarily work if the quality of what you offer suffers. However a good financial information system will provide you with relevant information to help you make cost cutting decisions. Using an online accounting so your accountant can help with this and keep the information accurate throughout the year, will also help. The following are proven ways to cutting costs and reducing expenses…

cutting costs

General Ways of Cutting Costs

 
 

Specific Examples of Cost Cutting

And For Some Specific Expenses For Cutting Costs…

Whilst fiscal responsibility is OK don’t waste all your time looking for ways of cutting costs.

Stock Controls
The costs of holding stock are…

Stock levels need to be minimized without running out of items so that
you can’t supply what the customer needs. You therefore need a stock
control system to get the balance right.

As such, the best stock level to hold is normally one that keeps the level of stock
necessary to support your normal level of trade. By doing this you will be
able to supply what your customers want most of the time while cutting costs.

Also, the following tips will help with stock control…

Delving into taxes when it concerns your business can always be a daunting time, and it is not always the most exciting part. However, it always needs to be dealt with at some point. To help you get started, we have gathered a few little tips to guide you on your way.

In this day and age, dealing with taxes can be complex. And whether your business is just starting out, or has been around for a few years, it can always be tricky to establish what is available to you, what you are entitled to, and your financial affairs. Before we get started if you are looking for some in-depth tax-saving tips from online accountants, then have a look at our range of free resources from special tax reports, tax calculators, and tax helpsheets. We can even email these directly to you (promise we won’t spam you).

1. Meet Deadlines and Stay Organised

One of the first and most important tips we can give you is to always meet your deadlines. Organisation is essential to any workplace. Any delayed filing with Companies House paperwork (confirmation statement), HMRC, FCA, and other regulatory accounts, can result in fines and other consequences. For a business, this can have devastating impacts as can affect your credit rating and banking commitments.

There are many documents you need to keep organised when you are running a business and keeping organised will reduce any hassle. It is also a great idea to map out future dates you need to be aware of. For instance:

Furthermore, make sure you always keep a copy of your documents, such as invoices and receipts in a safe place. According to HMRC, these business records need to be kept for six years, so keep them secure and protected. Also, records and receipts are needed from HMRC to expense claims or input VAT amounts, so make sure your business keeps proper supporting records.

2. Claim Anything You Are Entitled To

Make sure you claim anything you are entitled to such as ‘Capital Allowances’ to help with your business rates. Our friendly group of online accountants can talk you through this. Capital allowances can be claimed against taxable profit, meaning you can receive a reduction in capital expenditure such as business equipment. For example, there are:

AIA is available for British businesses, and is a form of tax relief designated for the purchase of business equipment. AIA applies to businesses of any size, and allows an immediate deduction against profits for capital expenditure up to a certain limit. Most businesses can claim on a portion of expenditure to most types of plant and machinery (except cars).

ECAs encourage business to invest in efficient and environmentally friendly equipment. This scheme allows you to claim 100% first-year allowances such as tax relief in efficient technologies. This will not only reduce investment costs, but your environmental impact. All in all, this will improve your cash flow and the time it takes to pay back your investment. However keep in mind, this can only be claimed for new plant and machinery, not second-hand or used.

Make sure you do some research to find out exactly what you are entitled to. There are multiple options out there that will benefit you and your business, to which you are 100% entitled to.

3. Working From Home?

If you are working from home, or a self-employed business owner you may be able to claim tax relief for:

Furthermore, you can claim a fixed nominal sum of £6 a week with no evidence of your extra costs. There can be many generous tax savings for those of you who work from home. So make sure you research and are aware of them.

4. Be Aware of Illegal Dividends

Dividends are payments for shareholders, directors, or investors for buying the company’s shares or stocks. Any company can pay dividends from retained profits after paying corporation tax and have met all liabilities. However, be aware of illegal dividends, or ‘Ultra Vires’. This can occur after declaring expenses based on bank balance rather than profits, yet dividends should only be paid from profits. Unfortunately, this is not unusual and can result in an overpayment and is costly to sort out at a later date.

5. Talk To Us

Of course there is a lot of information out there which is time consuming, as well as being tricky to navigate. Here at CloudBook Online Accountants, we want to make your life easier. We will work with you from the start to the very end of the year and will assist and support you every step of the way. Whether you are a UK based sole trader, small or medium business owner or property investor. We will help get your finances on track and help you stay organised with an easily reachable, friendly and qualified online accountant.

So, we hope you have discovered some new information about tax and your business. Get in contact with us if you have any questions, or are interested in any services from our online accountants.

Mad Marketing Ideas

Here are a few examples of some more off the wall, out of the box type thinking marketing ideas. Try to use them as a basis for your own ideas or as inspiration to come up with your own. Being unusual or eccentric will often pay dividends…

  • A restaurant owner could get in a taxi, talks to the driver all about his restaurant and end up back at his restaurant without going anywhere. He gets the undivided attention of the Taxi Driver for just a few pounds. He can then offer him a free meal. Taxi drivers are an excellent source of referrals for restaurants.
  • On a wine list, have humorous description such as “What To Drink When Lost In A Desert”.
  • Hire assistants for the day to make your office look busy when you’re a new business without customers.
  • Send your own label wine as gifts.
  • Send a DVD or CD with your sales message on. When you use digital media to send a sales message they can’t be skim read like sales letters and they have to listen to them in the order you’ve recorded them.
  • Create your own holidays or special days and you can even enter them into Chases Calendar Of Events.
  • Put signs advertising your business up in front of your house and ask all your friends if you can do the same. You can probably get away with doing this for a short period and end up with signs all around town. They should at least let people know what you do and have your phone number on.
  • Ring all of the competitors in Yellow Pages looking for any phone lines that are now disconnected. Then ring BT and ask for the number to be allocated to you, which you then put on divert to your normal line. You’ll then pick up any prospects looking for your type of service.
  • We accept Burger King Coupons and give double value.
  • Offer to take over certain segments of a business not fitting in with a competitors client profile such as small clients and vice versa. You don’t want trouble clients so look to lose them and even better if you can lose them to competitors.

 

And finally “My Accountant Thinks I’m Crazy Sale”

This is a tongue in cheek sales letter that talks about your annoyance at your nagging, domineering, penny pinching, scrooge-ish accountant. How he bullies you, pushes you around and watches you like a hawk…but now he’s out of town on vacation for the week and you’re going to have some fun… with the wildest, most generous offers in the history of your business.

 
 

How We Can Help You

We’ll happily listen to any of your own mad marketing ideas and give you feedback.

Disclaimer

Travel Expenses

The tax treatment of travel expenses can be surprisingly complicated. Here we explain what can you claim for travel expenses.

Cheap accountants

 

The starting point is that employees are entitled to tax free payments for a business journey. The employer can either pay the employee tax free for the cost incurred or the employee can claim for tax relief on any shortfall through their tax return.

The fact that an employee may have made a saving is irrelevant. So if the employee normally drives 10 miles from home to the office but is then required to drive 50 miles from home to a business client, the full 50 miles are claimable, not just the excess 40 miles. The rate of approved mileage allowance by HMRC for employees using their own cars for business travel is 45p per mile for the first 10,000 miles per year and 25p per mile thereafter. It should be noted that this mileage allowance rate includes a certain amount for fuel on which VAT can be reclaimed by the employer when backed with appropriate records.

If colleagues are in the same car for the same journey, you can claim an additional 5p per business mile per colleague.

 

Qualifying travel expenses

You can claim the cost of travel expenses incurred in the performance of your duties or travelling to or from a place you have to attend in the performance of your duties as long as your journey is not ordinary commuting between your home and your permanent workplace or private travel.

Therefore site based employees can claim the cost of travelling from home to site, although this is not allowed if the job at the site is EXPECTED to last for more than 24 months. If the position at site actually lasts longer than 24 months then they fail to qualify from the point at which they knew the 24 months would be exceeded. This should be distinguished from a permanent place of work which does not qualify at any time.

The subsistence expenses such as meals and accommodation in connection with this travel are also allowable. Car parking, toll fees and congestion charges are also allowable.

The fact that an employee may divert for a private purpose such as to do some shopping on the way home does not prevent it being a business journey if the primary purpose was business.

 

Permanent workplace(s)

A permanent workplace is usually the normal place where the employee goes to work although is actually defined as any place where an employee regularly attends in the course of their duties and which is not deemed to be of limited duration or for some other temporary purpose. It is possible to have two permanent workplaces and as a guide if more than 40% of your time is spent at the second workplace this can become a permanent workplace as well, although it is always necessary to look at the facts of the case. In some cases, spending less than this can also make it a permanent workplace.

 

Triangular Journeys

Where the employee travels from home to say a client and then to the office then the whole journey will qualify as business travel, which can be beneficial. However, it is important that the primary purpose of this is business and the work related diversion is not done just to claim the business journey.

 

Use of Home as Office

Aside from making claims for use of home of office, if the employees home can be classified as a permanent workplace on the facts then journeys to the head office should qualify as business journeys.

 

Record Keeping

Employers should keep records in support of all business travel expenses and subsistence expenses and where possible try to get dispensations for the amount of travel expenses paid agreed with HMRC.

 

How We Can Help You

We can advise you on the tax treatment of your travel expenses and subsistence expenses. Advice is included in our low monthly fixed fees.

Disclaimer

The procedure of ‘self-billing’ is frequently used in the publishing and construction sectors, where a large business customer engages lots of smaller businesses as suppliers (eg authors or subcontractors). The customer issues self-billed invoices on behalf of the small suppliers, usually with the payment to each supplier.

If you are operating self-billing you must comply with the conditions set out in the VAT Notice 700/62: Self Billing. These conditions have recently changed, so make sure you download the latest version of the VAT notice from the HMRC website. In particular there is a new legal requirement to mark all self-billed invoices as ‘SELF BILLING’.

The key requirement of self-billing is that the suppliers must actively agree to self-billing, and provide the customer with their VAT details (registration number and address). Those that do not sign a self-billing agreement must issue their own invoices to the customer.

When you operate self-billing you should review your self-billing agreements at least once a year. This involves checking with the supplier that their billing details are still correct, and whether their business is VAT registered or not. In the recent recession many businesses have deregistered for VAT but have carried on trading.

It is important to get the supplier’s VAT details right. If you issue a self-billing invoice on behalf of a supplier, that includes VAT, when the supplier is not VAT registered, your business will over-claim VAT. This will result in penalties and interest for your business.

Your annual review of self-billing agreements does not have to be conducted all at the same time; the agreements can be reviewed on a rolling basis.

Newsletter issue – August 2013. Sign up to Save Tax!

Costly mistakes
Convictions for tax evasion by HM Revenue & Customs (HMRC) are expected to continue on an upward trend due to increased targets, the creation of new HMRC taskforces and the increased use of technology to tackle tax evasion.

Prison sentences for acts of dishonestly defrauding HMRC are likely to become more prevalent, and few people will feel any sympathy for those who deliberately evade tax.

Honest mistakes can also be penalised, and with increased targets and pressure on HMRC to increase its tax collection, we are unlikely to see much leniency given to the taxpayer. Inaccuracy penalties apply to errors which understate or misrepresent a tax liability. The penalties charged depend on the severity, starting from up to 30% of the additional tax due for a lack of reasonable care, going up to 70% for deliberate errors.

So with penalties at nearly a third of the error, the lack of reasonable care when dealing with tax can be very costly. A lot of trust is placed in the hands of accountants to deal with tax correctly, but how do you know they are getting it right?

Would you use a Quack (unqualified doctor)?
Surprisingly the term Accountant, unlike Doctor, Dentist or Solicitor, is not a legally protected name. Even those without any background, experience or training can trade as an accountant. All they generally need to do is put up a sign above the door saying “Accountant”, and they are in business. In my experience most people would not use the services of an unqualified Doctor, Dentist or Solicitor and similarly would be uncomfortable using the services of an unqualified accountant.

Benefits of a qualified accountant
A qualified accountant is regulated by his or her professional body and is of course required to pass rigorous exams before admission to membership. Once admitted he is required to demonstrate that he has kept himself up to date with legislative changes, carries professional indemnity insurance and adheres to ethical rules of conduct. His work may also be independently inspected at regular intervals to ensure standards are being maintained.

How to tell if one is qualified
A qualified accountant will be evident by their own name being followed usually by the letters ACA, FCA, ACCA or FCCA and their firm’s name usually includes Chartered Accountants or Chartered Certified Accountants.

All accountants at CloudBook are qualified and carry one of the 4 qualifications above. Contact us today for a service you can trust.