Don't be an ostrich when it comes to your cash flow!

Cash flow is fundamental to the success of any business. But can you be proactive about protecting it rather than reactive once it all goes wrong?

Money is difficult and expensive to borrow.

So it makes sense for any small business to keep their cash flow flowing.

The question is, what’s the best way to build up a cushion when your start-up is sapping you dry?

Business planning

Every business has its own unique set of goals and objectives.

But if there is one thing every single one needs to prioritise it is maximising cash flow.

After all, the more cash flow a company has, the more profitable it is likely to be.

At its basest form, managing cash flow is accomplished by having more money coming into the organisation than money going out.

This might sound simple, but many new entrepreneurs find out all too often just how difficult it is to balance their accounts receivable with their accounts payable.

Don’t be an ostrich

Taking an “ostrich” approach to your business finances is often the way that small businesses find themselves in hot water.

This is why the savvier business owners choose delegate over DIY.

An accountant can help you forecast your financials to protect your cash flow. They can also help you understand the process of financial planning so you can take more control of your outgoings and incomings.

Keep a diary

My first top tip is to keep a diary of all tax payment deadlines.

This will ensure you have the cash ready for every payment avoiding interest penalties.

Putting aside an allocated percentage of your income each month will make sure you can cover all these payments.

But don’t be tempted to dip into the tax money and not replenishing it.

Meeting deadlines

Remember, the due date for submitting accounts depends on whether you operate as a sole trader or a limited company.

Taxable income for sole traders is calculated on a 6 April to 5 April basis and accounts are needed to back up the tax return so it makes sense for sole traders (and partnerships) to have an accounting year that runs from 1 April to 31 March.

The relevant accounts need to be completed before the following 31st January, to be used when completing your self-assessment tax return due on that date.

For limited companies you can more or less choose your accounting year to suit yourself and your business but you still need to complete and file accounts every year with Companies House.

Self-assessment tax submissions must be made by the 31 January to avoid penalties.

VAT returns and payments are due on a quarterly basis.

Avoid a bottle neck

My second top tip is to put in place a solid accounts receivable process. This will help you to track and manage your company assets, including your invoices and payments.

You should try to have your billing terms, acceptable payment forms, interest charges, and credit check process set in stone.

After all, one of the most common reasons why invoices go unpaid is because they can sometimes be confusing and hard to understand.

Clear invoices can be essential to getting them paid on time.

Another way to protect your cash flow is to ask for part-payment up front.

This works particularly well if you are contracted to provide a large order or you take on a time-consuming project for a client.

The terms should also require full payment of the remainder upon the completion of the job.

Hold on to your cash

The longer you hold on to your cash the more you will have for your business, so consider paying your bills by the due date and not earlier.

Of course, this is unless you can negotiate a discount on your invoice if you pay your balance before its due date.

If you are struggling to pay on time, check on the credit terms that your small business's suppliers allow.

Most suppliers allow 30 days to pay but you may be able to get them to extend that term to 60 or even 90 days, allowing you to keep the money in your cash flow pipeline longer.

Contact us

We can help your business to protect its cash flow with careful financial planning. Call us today for more information.

Are you entitled to free childcare?

The long-awaited tax-free childcare scheme launched on 28 April 2017 and will be rolled out during the course of the year.

It means that around two million households in the UK will be eligible for help with the cost of childcare.

But how do you find out if you are one of them?

How it works

The government's new Childcare Choices website is now operative, allowing parents to find out about available support.

The website includes a childcare calculator for parents to compare all the government's childcare offers and check what works best for their families.

It includes information on the tax-free childcare, universal credit and the new 30-hour free childcare offer.

This will be implemented from September 2017, providing 30 hours free childcare for working parents of three and four year olds in England - doubling the current 15 hours of free childcare currently available and saving eligible working families up to £5,000 a year.

The other options

Tax-free childcare will be available to parents of children up to the age of 11 (or 16 if disabled) who meet certain criteria.

This will be rolled out gradually but parents of children who will be under four on 31st August, and parents of disabled children, can apply now.

To access the offer you have to open an online account to pay for registered childcare. The government will then top-up the money you pay into the account.

For every £8 you pay in, the government will add an extra £2 and you can receive up to £2,000 per child, or £4,000 if disabled.

You, and any partner, must each expect to earn (on average) at least £120 per week (equal to 16 hours at the National Minimum or Living Wage) to qualify. 

If you, or your partner, are on maternity, paternity or adoption leave, or you're unable to work because you are disabled or have caring responsibilities, you could still be eligible. 

If either you, or your partner, expect to earn £100,000 or more, you can’t get Tax-Free Childcare. 

And you can’t use Tax-Free Childcare at the same time as childcare vouchers, Universal Credit or tax credits.

If eligible, you can use it to help pay:

◦       Registered childminders, nurseries and nannies

◦       Registered after-school clubs and play schemes

◦       Registered schools

Double the free childcare

From September 2017, the new 30 hours free childcare offer for working parents of three and four year olds in England will double the current 15 hours of free childcare currently available, saving eligible working families up to £5,000 a year.

Eligible parents will be able to apply online through the childcare service. They will receive a code - this will allow parents to arrange their childcare place ahead of September 2017. Parents can take their code to their provider or council, along with their National Insurance Number and child's date of birth. Their provider or council will check the code is authentic and allocate them a free childcare place.

Parents will be able to apply for tax-free childcare and the 30 hours offer in one go through the government's new digital childcare service. Eligible parents can benefit from both tax-free childcare and 30 hours free childcare at the same

Childcare vouchers

If you are a working parent who does not qualify for tax-free childcare and have a child who is not old enough to qualify for free childcare under the 30-hour scheme, there are other ways you can offset the cost of childcare.

The most common of these is a salary sacrifice scheme where the employee agrees to an amount being deducted from their salary before tax and NI is calculated. This results in the employee paying less tax and NI.

The employer then pays the deducted amount to the company that administers the childcare vouchers. This company then arranges for the vouchers to be issued to the employee or direct to the childcare provider.

The maximum amount that any employee can sacrifice is £243 per month or £55 per week.

If you would like any help on your tax matters, taking into account any childcare complications, give us a call today.