Rising optimism in the economy can result in some businesses overreaching themselves to try and seize every opportunity – and ending up with serious cashflow problems.
Overtrading happens when a business has invested so much in stock and/or invoiced sales without being paid (debtors) that they have insufficient cash to pay creditors. In times of growth, particularly in businesses with long production/service lead times, increased costs are incurred and invoices received before sales are made, soaking up what is called the business’ “working capital”.
New or fast-growing businesses that are chasing new work but need to develop a financial management system that is synchronised with the payment cycle. The position is exasperated in a new business without a track record (making customers less willing to advance goods before payment) or those that have experienced difficulties during the recent recession, weakening confidence in their financial position.
Here are six useful tips for avoiding overtrading:
Highlights of AISMA Doctor Newsline, Summer 2014 include:
- Practice management guru Kathie Applebee opens this issue with a detailed examination of the changes about to take place to the enhanced services regime, offering valuable insight into a complex area.
- AISMA vice-chair Debbie Wood offers some timely advice on how a practice’s specialist advisors can help GPs and practice managers manage the changes to funding currently challenging practices across the UK.
- Martin Eades, managing partner at one of England’s most innovative GP practices offers his thoughts on just how fit GP practices are to make federations a true success, while legal eagle Alison Oliver has some advice for GPs on points to consider before taking on any outside work.
- And running throughout the issue are some ‘profit booster’ tips for GPs and practice managers – just what the doctor ordered in these challenging times!
If you would like to discuss any of the issues highlighted in this newsletter, or any other relevant matters, please contact our specialist healthcare team.
Around one third of staff working in guest houses, hotels, restaurants and pubs are now employed on zero hours contracts, according to the latest Tourism and Hospitality survey conducted by MHA.
Yet, despite the flexibility that this arrangement offers employers, well over 60% of these staff regularly work 20 hours or more – with more than three quarters of these routinely employed for 40 hours per week.
The survey paints a picture of an industry starting to benefit from an upturn in trading conditions, with 56% reporting improved profitability in the last 12 months and 58% predicting that 2014 will be better still. However, 50% cited turnover either stagnant or growing by less than 5% over the last 12 months.
Since 1988, when the first Charities SORP was issued, there has always been a single SORP. So why are we now seeing a second SORP option?
However, since the last SORP was released in 2005, there has been a major change in UK-Irish Generally Accepted Accounting Practice (GAAP) as it has become more closely aligned with international financial reporting standards. In order to ease the changes for small companies, the Financial Reporting Council has retained the old style GAAP in the form of the Financial Reporting Standard for Smaller entities (FRSSE) in the short term.
The FRSSE and FRS102 are very different both in the size of organisation they target, their terminology and accounting treatments and the nature of information which must be disclosed. These differences are sufficient enough to require a Charity SORP to apply to each accounting standard, so a choice must be made between the FRSSE SORP and a FRS 102 SORP.
As we embark on potentially our final round of annual SRA Accounts Rules 2011 audits, following the Solicitors Regulation Authority (SRA) publication of its consultation paper “Proportionate regulation: changes to reporting accounting requirements”, we are still finding issues with Rule 17. This rule relates to the collecting of fees from clients. During our audit work for our legal clients, we find that this is the rule most frequently breached; somewhat surprising in these times of austerity.
The main breaches we discover centre around properly rule 17.2 (implying the work has been done), and earmarked rule 17.3 (when you decide to use funds already held). The guidance notes to Rule 17 are more comprehensive with note (vii) explaining properly and note (viii) earmarking.
The second in a series of agricultural surveys conducted this year by MHA, the UK-wide group of accountancy and business advisory firms, reveals that the majority of farmers are optimistic about future growth and are planning for expansion where possible.
The MHA Agriculture Insight Survey was first conducted at LAMMA in January and rerun at Cereals 2014 in June. Collectively these surveys take into account the views of more than 200 farmers nationwide.
Key findings include:
- Despite falling prices, optimism for growth is high – 69% of those who responded were expecting growth.
- Expansion is an aspiration for many with 51% planning to increase their acreage.
- Succession planning is a concern which is moving up the agenda for many respondents.
The origins of Individual Savings Accounts (ISA) date back to April 1999. Its precursors, Personal Equity Plan (PEP) and Tax Exempt Special Savings Account (TESSA) go back still further. ISA provides individual investors the encouragement to invest in tax-efficient cash or stocks and shares. In the budget this year, this encouragement went a step further with the announcement of the New Individual Savings Account (NISA). But, what are the new changes and how do I get the best out of this type of Investment?
Until the budget, the rules allowed a limited investment each year into cash and or stocks and shares. This year, for example, you could save up to £5,940 in cash and the same amount in stocks and shares, or up to the full £11,880 in stocks and shares.
From 1st July 2014, the maximum limit for investment has been increased to £15,000, but more importantly, there are no restrictions as to whether investments are in cash or stocks and shares. In addition, you can now transfer from cash to stocks and shares or from stocks and shares to cash – historically it was only possible to transfer from cash to stocks and shares.
Google is offering a free online advertising service, amongst other free online services to charities, via its pay-per-click scheme.
Google for Non-Profits offers organisations access to highly discounted or free products. These tools can help you find new donors and volunteers and get supporters to take action.
Members of Google for Non-Profits will gain access to premium Google products and support, including:
- Google Ad Grants: Free AdWords advertising to promote your website on Google through keyword targeting.
- YouTube for Nonprofits: Premium branding capabilities on YouTube channels, increased uploading capacity and more.
- Google Earth Outreach Grants: Free licensing for Google Earth Pro and Maps API for Business.
- Google Apps for Nonprofits: Free version of Google Apps for Nonprofits
Google also provides suggestions for getting up and running with case studies from other charities who have moved some activities online.
For businesses operating in the digital sector, 1 January 2015 will present the first nasty hangover of the year. VAT changes from this date will apply to electronically supplied services such as broadcasting, telecommunications and e-services (BTE), to those consumers in other member states.
The rules now
The current VAT rules allow businesses supplying these services to private individuals within the EU to pay the usual 20% VAT. Sellers who are not VAT registered count such sales towards the UK threshold of £81,000 and effectively declare no VAT if they operate under the threshold.
The 2015 changes
From 2015, VAT is due in the member state of consumption and charged at local rates of VAT. These will have to be accounted for. The applicable VAT rates across the EU range from three percent on e-books in Luxembourg to 27 percent for standard rated supplies in Hungary, which creates other headaches on pricing. In order to avoid having to set up a VAT status in each member state you sell in (up to 27!), HMRC have introduced a special form allowing the compliance to be dealt with in the UK only and the VAT due in the various member states will be collected by HMRC and divvied out.