Use social networking to your advantage

If you are new to social networking sites, have a good look at what’s out there and pick what you feel will be the most beneficial to you and your business.  Ask yourself questions such as, who is your target audience? Who will manage this? What key points do I want to get across?

Once you have chosen what you feel will be the most beneficial site (you may want to use two!) you can begin creating your account.

The first and probably the most crucial step is to set up your profile, initially go for the basics such as name, location etc but remember to choose wisely as an error at this stage can cripple your online presence before you even get going!  The key is to ensure any profile expresses how you wish your business to be perceived, it’s ok to include some personal/neutral points regarding hobbies and interests but keep it professional.

Be a friend to find a friend. You must participate in social networking sites in order to gain any visibility, recognition or traction.  Remember the idea is to get you and your business noticed!

Create a list of messages you wish to convey. Never hard sell, however use links, conversation, short posts and help others to convey your brand or your expertise. “Hey, buy from me!” as your first post is like a used car salesman and will come across as too aggressive and hard-sell.

Blogs make excellent items to talk about. Offer advice, links, help and conversation. But don’t get mean or post anything inflammatory. Your posts remain online for a long time. Google even archives some, such as Twitter posts, so be certain you want to say what you say before posting them.

Once you’re up and running you will find that some will seem more natural and easier to use to you than others. There’s no one right or wrong site. Use what works.

But you’ve got to be out there, networking, sharing something worthwhile to get noticed!

About the author: Gemma Petty is an assistant Client Manager at Adams & Moore Chartered Certified Accountants. For more information or to ask how we may be able to assist you, contact Gemma via email at gemma@adamsandmoore.co.uk

Using your own car for business – A quick reminder.

If you are an employee or director using your own car you are able to make a tax free claim for mileage.  From the 6^th of April this year the mileage allowance on which you can claim tax relief was increased from 40p to 45p per mile. However, as before, this applies only for the first 10,000 business miles in the tax year, with the excess mileage only qualifying for a mileage allowance of 25p per mile.

 Employers do not have to pay mileage allowance nor do they have to pay 45p per mile, however if they pay less than 45p any shortfall can be claimed by the employee/director as a tax relief. If your employer pays you more than the statutory rate, the excess will be taxed.

 Do not forget that if you drive your own car on a business trip and take colleagues with you, your employer (which of course includes your own company) can also pay you a tax-free 5p per mile per passenger, so yourself and two colleagues in your car and you can claim 55p per mile tax free.  But the Revenue in their inimitable way will not allow any tax relief claim should the employer not be willing to pay this additional 5p per person, strange but true!

 The self-employed among you who have not yet reached the VAT threshold (currently £73,000) can also use these new rates to make a claim for business mileage, but of course you will also have the option of to claim the actual business use expense.

 Volunteer drivers can also use the rates to calculate the taxable profit on mileage allowances received from hospitals, social service agencies and other voluntary organisations.

About the author: Nigel Dack FATT is a client manager at Adams and Moore Charetered Certified Accountants.  Contact Nigel at Nigel@adamsandmoore.co.uk if you have any questions or wish to find out how we can help you. 

Buy green, and get £5,000 off a brand new car

JUST A QUICK NOTE FOR ANYONE THINKING OF BUYING AN ULTRA-LOW EMISSION CAR such as the ‘Smart fortwo’.  From January this year, the government has been giving a grant of 25% up to a maximum of £5,000 against the cost of a newcar.

How do you claim this?  Merely agree to buy the car from a recognised dealer who will automatically reduce the price by £5,000 but will ask you a few questions as to why you are buying the car.  More details on the Department for Transport website.

    I took a look at the first car on the Department for Transports list of qualifying cars, the ‘Mitsubishi i-MiEV’, which is small but is a four door hatch back.  The Mitsubishi company makes the following claims about running costs for this very innovative car:

• Costs just £270 to charge for 12,000 miles driving (£2.09 per full charge based on an average of 10p per kWh). If you are using the Economy7 tariff then the cost for 12,000 miles could be as little as £135 (£1.05 per full charge based on an average of 5p per kWh)
• Low servicing costs and downtime – only 4 major working parts compared to over 300 in a typical internal combustion engine
• The i-MiEV Mitsubishi Service Plan (MSP) covers the first three years servicing at a cost of just £300
• Servicing carried out by any one of Mitsubishi’s 133 service dealers
• Exempt from road tax
• First year capital allowances for fleet vehicles
• Zero benefit-in-kind company car tax
• Exempt from London Congestion Charge
• Free parking in some London boroughs and cities such as Milton Keynes
• 5 year battery warranty and 3 year vehicle warranty

Almost negligible running costs, free parking and the government gives you £5,000 to help buy it! 

    It would seem to me to be something that companies operating in and around the capital and larger cities should be at least considering, no car tax, not taxable as a benefit in kind, capital allowances available and exempt from congestion charge. 

About the author: Nigel Dack FATT is a client manager at Adams and Moore Charetered Certified Accountants.  Contact Nigel at Nigel@adamsandmoore.co.uk if you have any questions or wish to find out how we can help you. 

Performance Management – Food for thought

BUSINESS OWNERS AND FINANCERS NEED TO KNOW THAT THE COMPANIES THEY LOOK AFTER ARE IN GOOD SHAPE.  They can achieve this through the process of measurement, monitoring and managing.

    Reliance tends to be placed on annual report and accounts. Rightly so as more emphasis is usually placed on the verification of control accounts, which therefore more reliable.  A major problem with reliance on annual reports and accounts is that, by their nature they portray a historic view of the performance of the business.  An annual presentation therefore tends to more often be too late for decision making. 

    A better and more important tool in terms of day to day activity is the management accounts.

 Management accounts

In addition to the main body of the management accounts, a cash flow forecast, order book and above all a clear and concise analytical review of the figures should prove helpful.

Accounting ratios

 The starting points for analytical review are accounting ratios.

    Accounting ratios can offer an invaluable insight into a business’ performance. There are four critical ratios to consider –

• liquidity,
• solvency,
• efficiency, and
• profitability

Liquidity ratios

There are three types of liquidity ratio:

• Current ratio (calculated, current assets divided by current liabilities): This assesses whether you have sufficient assets to cover your liabilities. A ratio of two shows you have twice as many current assets as current liabilities.
• Quick or acid-test ratio (calculated, current assets (excluding stock) divided by current liabilities):  A ratio of one shows liquidity levels are high – an indication of solid financial health.
• Defensive interval (calculated, liquid assets divided by daily operating expenses. This measures how long your business could survive without cash coming in. This should be between 30 and 90 days.

 Solvency ratios

Gearing is a sign of solvency. It is determined by dividing loans and bank overdrafts by equity (shareholder funds).

The higher the gearing, the more vulnerable the entity is to increasing interest rates. Most lenders will refuse further finance where gearing exceeds 50 per cent.

Efficiency ratios

There are three types of efficiency ratio:

• Debtors’ turnover (calculated, average of credit sales divided by the average level of debtors):  This shows how long it takes to collect payments. A low ratio may mean payment terms need tightening up.
• Creditors’ turnover (calculated, average cost of sales divided by the average amount of credit that is taken from suppliers). This shows how long your business takes to pay suppliers. Suppliers may withdraw credit if you regularly pay late.
• Stock turnover – average cost of sales divided by the average value of stock. This ratio indicates how long you hold stock before selling. A lower stock turnover may mean lower profits.

Profitability ratios

Divide net profit before tax by the total value of capital employed (Profit before interest and tax divided by Total Assets less Current Liabilities) to see how good your return on the capital used in your business is.  This can then be compared with what the same amount of money (loans and shares) would have earned on deposit or in the stock market.

    You could also use the net profit ratio to evaluate your profitability.  Divide the net profit before tax by the turnover (net sales) to see how good your net profit is.  This can then be compared with the same ratio in other periods or with the ratio of your competitors.  Net profit ratio is one of the ratios used by analysts to determine whether a business is making progress.

Limitations of ratio analysis

When interpreting accounting ratios you should always bear in mind the following:

• comparative information is essential for any meaningful ratio analysis
• accounting ratios are based on profit and loss accounts and balance sheets which are subject to the limitations of historical cost accounting and one-off anomalies
• ratio analysis helps to build a picture of an entity, the effectiveness of the outcome depends on the quality of the financial information on which the ratios are based. The conclusions drawn from the accounting ratios will be flawed if they are based on poorly done accounts;
• past performance  is not necessarily the best indicator of future performance. 

Don’t run too quickly to conclusions

In conclusion, as good as financial ratios are, they should only be used as a starting point for further investigation into the performance of the entity.  Care needs to be exercised when formulating any conclusions; a change or difference in a ratio can usually be attributed to a number of factors not necessarily accounting in nature.

 At Adams and Moore we are empowering our clients with a set of management tools that assist them in understanding their figures and put them ahead of other businesses in competing for that limited resource – additional finance.

About the Author: Egbert Johnson FCCA is responsible for Audit and Accounts at Adams and Moore Chartered Certified Accountants.  For further enquiries or to ask how we may be able to assist you contact Egbert at Egbert@adamsandmoore.co.uk

Use (social) networking to your advantage!

IF YOU ARE NOT YET FAMILIAR WITH SOCIAL NETWORKING, have a good look at what’s out there and have a go; pick what you feel will be the most beneficial to you and your business. 

    Ask yourself questions such as, who is your target audience? Who will manage this? What key points do I want to get across?

    Once you have chosen what you feel will be the most beneficial site (you may want to use one, two, or even more!), you can begin creating your account.

First things First first     

The first and probably the most crucial step is to set up your profile. Initially go for the basics such as name, location, and email, but remember to choose wisely as an error at this stage could undermine your on line presence before you even get going!   The key is to ensure any profile expresses how you wish your business to be perceived, it is ok to include some personal/neutral points regarding hobbies and interests but keep it professional.

Be a friend to find a friend

You must participate in social networking sites in order to gain any visibility, recognition or traction.  Remember the idea is to get you and your business noticed!

    Create a list of messages you wish to convey. Never hard sell, however use links, conversation, short posts and help others to convey your brand or your expertise.

    “Hey, buy from me!” as your first post is like a used car salesman and will come across as too aggressive and hard-sell.

Blogs

Blogs make excellent items to talk about. Offer advice, links, help and conversation. But don’t get mean or post anything inflammatory.  Your posts remain online for a long time.  Google even archives some, such as Twitter posts, so be certain you want to say what you say before posting them.

    Once you’re up and running you will find that some will seem more natural and easier to use to you than others.   There’s no right or wrong site. Use what works.

   But you’ve got to be out there, networking, sharing something worthwhile to get noticed!

About the author: Gemma Petty is an assistant Client Manager at Adams and Moore Chartered Certified Accountants. For more information or to ask how we may be able to assist you, contact Gemma via email at gemma@adamsandmoore.co.uk

Recognising Income

FOR MOST BUSINESSES, INCOME RECOGNITION does not pose any problems. 

Income is recognised when a transaction is recorded with the certain expectation that payment has or will be received.

For most businesses, income is recognised on  the same date sales are made, which also tends to correspond to the date the sales invoice in raised.

For many other businesses, recognising income is no where as straight forward as that. For example, if;

• income is received prior to the goods being dispatched, manufactured or services performed,
• the services to be performed straddled more than one accounting year,
• there is some degree of uncertainty associated with the receipt of payments
• there are contract approval processes which are complex or under dispute

Left entirely to most directors, decisions to recognise income may not reflect the transaction in a clear unbiased fashion.

Accounting standards

To address this ambiguity, accounting standards which are usually derived from General Acceptable Accounting Practices (GAAP), have been established and adopted to guide the process of  income recognition. There are a couple of these, some of the most popular being;

1. IAS 18 Accounting Policies, Changes in Accounting Estimates and Errors
2. SSAP 9 Stocks and Long Term Contracts
3. FRS 5 Reporting the Substance of Transactions
4. UITF 40 Revenue Recognition and Service Contracts

As you may deduce from their headings, each of these cover different elements and scenarios associated with income generation for a range of business entities and transactions. However, they seldom cover every scenario, and sometimes conflict with other standards.

We could go into detail here, but the only party really likely to make a fuss as to when income is recognised is HM Revenue and Customs, because of the impact it ihas on the tax liability. For this reason, it is worth knowing whether an entity’s income is being recognised at the correct point in the trade cycle.

Get advice

Each case is different. If in doubt it is well worth getting some advice. The first point of call should be your accountants; given their knowledge of your business, they should be able to advice you without charging you an arm and a leg for what we generally consider to be routine advice.

About the author: Egbert Johnson FCCA is the Audit and Accounts Manager at Adams and Moore Chartered Certified Accountants. For more information and enquiries contact egbert@adamsandmoore.co.uk

Broader civil society engagement to help strengthen Africa’s largest democracy

Over three decades of military rule has left Nigeria’s social infrastructure in ruins. The 2011 elections taking place this April is widely expected to usher in a new democratically elected administration, which according to Time Magazine could further strengthen Nigeria’s young democracy, and usher in a new era of growth fuelled by foreign direct investment.

Amidst all its problems, the discerning realise that though it is running on only one or perhaps two of potentially twelve economic cylinders, with its GDP per annum fast approaching $400b, Nigeria is already an economic powerhouse with significant future potential, at least in Africa’s context.

Today, Nigeria is the world’s sixth largest oil producer, plays host to the Continent’s largest, and one of the world’s fastest growing Telecoms markets. With a GDP more than ten times the size of Ghana’s, it is second only to South Africa on the sub-continent in economic strength. It is no surprise, Nigeria earned a place in Goldman Sachs Next 11 – the list of 11 countries that could overtake the G7 over time.

Yet, amidst all this promise and potential, over 70 million Nigerians live on less than a $1.25 a day.

Kick starting the process of change

Nigeria has huge, complex problems that will not be solved overnight; but this should not stop Nigerians from kickstarting the process of change.

In 2010, the Next Generation – an independent think tank chaired by Ngozi Okoji-Iweala, managing director World Bank, and Nigeria’s former Finance Minister, produced an influential report on the future of Nigeria which concluded that:

“By 2030, young people, not oil will be Nigeria’s most valuable asset”

The report concludes that this positive picture of the future will not be achieved without the right level of investment in education, healthcare and social infrastructure.

The realisation of Nigeria’s potential lies in developing highly-skilled upwardly mobile citizens. 

Growing sectarian and religious conflict – the unintended consequences of lack of investment in education, suggest that the implications are dire if nothing is done to engage and equip the next generation with the skills they need to meaningfully engage with an increasingly competitive, networked, knowledge-based society.

Turning to solutions

Following a roundtable discussion on the future of education in Nigeria, organised in December 2010 by the All Party Parliamentary Group on Education at the House of Commons, Westminster, Ambassador Dozie Nwanna OON, the acting Nigerian High Commissioner asked Adams & Moore to assist in engaging a wide range of stakeholders in a process that would produce a delivery framework for all those working to improve Nigeria’s education sector over the next 10 years.

A summit was held in February 2011, and brought together senior ministers and officials from the Nigerian Federal Ministry of Education, State Commissioners of Education and a host of indigenous and UK-based civil society organisations.

The summit concluded that the key challenge facing the Nigerian Education system is not so much the absence of credible policies, but the ability to translate these policies into tangible outcomes; and proceeded to develop a high level delivery framework for all those working to develop Nigeria’s education sector.

The high level framework will be populated by the Future By Us working group over the coming months and launched in Abuja – Nigeria’s Federal capital in November 2011.

Mallam Bolaji Abdullahi, the Kwara State Commissioner of Education speaking at the summit had this to say;

“I must commend the efforts of His Excellency the acting Nigerian High Commissioner, and the organisers of this summit, as this is the first time in Nigeria’s recent history that a foreign mission has organised such an influential policy review that will no doubt contribute to the achieving the change we all want to see in Nigeria.”

An interim report on the summit findings, which includes 20 policy initiatives that can readily be implemented, was produced and submitted at the request of the Federal Ministry of Education to the Presidential Taskforce Team on Education, ahead of the April 2011 General Election.

Ambassador Dozie Nwanna OON, the acting Nigerian High Commissioner to the UK had this to say:

“I commend the efforts of all the talented and dedicated men and women who convened in London to develop a high level framework for all those working to improve Nigeria’s education sector over the next 10 years, and the many others who contributed to the success of the event… I look forward to working with you on other projects (Adams and Moore Chartered Certified Accountants) to further the work of the Nigerian High Comission in the United Kingdom”

We are delighted to have been asked to assist with the development of a framework that will establish the Federal Republic of Nigeria on the path of progress. You can access the interim report via this link.

About the author: Gori Olusina Daniel BSc MSc (Warwick) leads Adams and Moore’s Public Sector practice. For enquiries or more information please contact Gori@adamsandmoore.co.uk

Audit Exemption Thresholds

Egbert Johnson FCCA, A&M Audit & Accounts Manager writes

I find the audit exemption threshold a very confusing concept for non-accountants. In my experience, whenever a query regarding the threshold comes up, most people tend to respond by asking,

“is it the 2 out of 3 criteria?”.

No. Actually, when you talk about audit exemption criteria, 3 out of the 3 pre-conditions need to be met to qualify for audit exemption.

Companies seeking exemption must:

• Qualify as ‘small’
• Have a turnover of not more than £6.5million
• Have a balance sheet total of not more than £3.26million

The confusion seems to lie with the first pre-condition. To qualify as a small company, a company must meet 2 of the following 3 criteria:

• The average number of employees must be 50 or fewer
• The balance sheet total must £3.26million or less
• Annual turnover must be £6.5million or less

Other considerations

Having met the minimum requirements to quality for exemption, the company’s articles and memorandum of association should not include any stipulation overriding the exemption.

It is important to note that even when all these criteria are met, the exemption will not be granted should the pre-requisite proportion of members move or vote for a company’s accounts to be audited.

About the author: Egbert Johnson is the manager responsible for Audit and Accounts at Adams and Moore Chartered Certified Accounts. For more information contact Egbert on Egbert@adamsandmoore.co.uk

Better late than never – get connected

Gemma Petty, Assistant Client Manager at A&M writes

Social networking has effectively invented new ways for people to connect and build relationships, but it is essentially more or less like personal networking, without the badly cooked meal.

Just like a Chamber of Commerce meeting or a professional networking event, through the wide array of social networking tools and sites, you will meet many people.

Some you will do business with, some may turn may turn out to be much more, others you may choose to ignore. But you’ve got to be out there, networking, sharing something worthwhile to get noticed.

The big players in social networking include LinkedIn, Twitter and Facebook. 

LinkedIn is the world’s largest professional network with over 80 million members and still growing. LinkedIn connects you to your trusted contacts and helps you exchange knowledge, ideas, and opportunities with a broader network of professionals. If you are in business, you should be on LinkedIn.

Twitter is a real-time information network that connects you to the latest information about what you find interesting. Simply find the public streams you find most compelling and follow the conversations. At the heart of Twitter are Tweets – small bursts of information no more than 140 characters in length. Connected to each Tweet is a rich details pane that provides additional information, deeper context and embedded media. You can tell your story within your Tweet, or you can think of a Tweet as the headline, and use the details pane to tell the rest with links to your website, photos, videos and other media content.

 Facebook is a social networking website intended to connect friends, family, and business associates. It is the largest of the networking sites. It began as a college networking website and has expanded to include anyone and everyone.

Facebook advertising works a bit like Google Ad Words in that you bid for keywords and compete to get your ads shown. Your choice of keywords determines how effective your advertising campaign will be. Facebook has an analytical tool that gives you some information and reports on click rates, etc. These reports will help you to refine your target market more effectively.

 All 3 of these social networking sites can be accessed via your blackberry, iPhone or android smart phone which will enable you to stay connected even when you do not have access to your computer.

 With social networking and online businesses booming all over the world make sure your online footprint is a huge size 12 and get yourself connected!

About the author: Gemma Petty  is responsible for providing A&M clients with ad hoc advise and support, and on their behalf, oversees the delivery of the entire portfolio of compliance and advisory services delivered by A&M specialist teams. For more information email Gemma on gemma@adamsandmoore.co.uk

HMRC to clamp down on poor record keeping

HMRC in a recently issued consultation document report that poor record keeping may be a problem in around 40% of all SME sized businesses.

To tackle this, HMRC have announced they are planning to check up to 50,000 SME business records annually in a new initiative that will take effect from the second half of 2011.

According to HMRC, 

“the loss of tax through poor record keeping, particularly in the current economic climate, cannot continue and HMRC is therefore, determined to use the powers at its disposal to improve business record keeping and so reduce the losses to the Exchequer that stems from poor business records”

To address this, HMRC intend to impose penalties for significant record keeping failures as a means of driving improvements in record keeping and increasing tax receipts to the Exchequer.

“There are so many things you need to think about when you’re running a business; getting your price point right so that you attract the right number and sort of customers to turn a profit. You need to stay ahead of the competition, manage staff and suppliers, understand your client needs as they evolve and act quickly to resolve problems when they arise. We advice you avoid unnecessary fines and leave us to take on the hassle of making sure you are up to date with your records. It is what we do.” - Daniel Tabiri ACCA (Manager, A&M Bookkeeping and Management Accounts division)

Contact us for further advice if you would like to discuss the nature and extent of the record keeping requirements for your business.