I will start this, the eighth of our bite sized start up guides by saying VAT has to be one of the most complex areas of UK taxation and as such professional advice should be taken at all times, don’t try and ‘go it alone’.

There are two types of VAT registration - compulsory and voluntary.

Compulsory - once your turnover exceeds £61,000 (From 1 April 2006) you are required to register with HMR&C for the purposes of VAT. It should be noted that your turnover may exceed £61,000 within months or it may be over a rolling twelve month period. In these situations you need to inform HMR&C within 30 days at the end of the month in which the value of your turnover exceeds £61,000.

Another compulsory registration would be if you have bought a business which is a going concern that is already VAT registered.

Voluntary - in certain circumstances it is possible to register on a voluntary basis even though your turnover is less than £61,000. It should be pointed out that this is not suitable for everyone and professional advice should always be sought before registering on a voluntary basis.

Other voluntary registrations maybe if your turnover is zero-rated (no VAT is charged on sales) yet expenses you incur have VAT on them, again, take professional advice first.

How often do I have to do my VAT Return?

VAT Returns are generally completed every three months. However, you can now use the annual accounting scheme. With this scheme you pay monthly or quarterly installments towards an annual VAT bill and at the end of the year you submit a single annual return and any balance due. The annual accounting scheme is only available if your turnover is under £1,350,000.

How is my VAT accounted for?

The following methods are available to you and your business to account for VAT:

Invoice basis - under this method you declared VAT on sales and reclaim VAT on expenses based on the invoice dates, irrespective of when those invoices are paid.

Cash accounting - under this method you only pay the VAT over on your sales once you receive the money, and likewise with expenses, you can only reclaim the VAT once you have paid for items. This method has a limited, once your turnover exceeds £660,000.

Flat rate scheme - VAT is calculated as a flat percentage of your turnover. The percentages are decided according to the trade sector your business operates in.

Retail schemes - If you sell direct to the public you may not be able to issue a VAT invoice for each sale, in which case there are several retail schemes available that may help.

Can I do my VAT online?

You have the choice on how you return your VAT to HMR&C, you can either submit it on the traditional paper form or use the new online facility. The advantages with the online system is you are given longer to submit your return, an extra 7 days in fact, you also get those extra 7 days to pay your VAT.

There is more help available on VAT by visit the Value Added Tax section of the HMR&C website.

There is also a Frequently Asked Questions section.

Remember, the above is only a bite sized guide to give you a helping hand, take professional advice at all times.

Tags: Business Start Up, HMR&C, VAT, Value Added Tax, Entrepreneur, Self Employed, Small Business, SME, OMB, Bookkeeping

Okay, I know this is the least favorite part of running your own business, having to keep ‘the books’.

As a practicing accountant I can also say it is my least favorite part when a client turns up with records that are in a mess, and as a result of sorting this mess out, I am then left with the quandary of a level of fee that does not represent any value for the poor client.

It is so important, boring and dull maybe, but, it is important that you understand you have to keep proper records, not only for the tax and vat man, but also for yourself, yes yourself, how else do you know who you owe, who owes you, or if your actually making or worse losing money.

You need to look on your books as your very own window on the health and well being of your business.

So, now you know why you need to keep books, but how do you go about it.

There are many ways to keep records, from nothing (not recommended), then there is manual and next you have countless software packages, all varying in price.

Nothing at all

Worth a mention I guess - DO NOT USE THIS METHOD! There, mention over.

Manual records

If you have decided that pen and paper is your preferred choice then it would be easiest if your records are maintained on what is called a ‘receipts and payments basis’.

You will record who you pay, and who pays you when the transaction takes place, and if you are vat registered your vat will be accounted for at this time also.

You can of course run your vat on what is called an ‘invoice basis’. This method involves you claiming vat back on expenditure and paying vat on sales when the invoices are raised, irrespective of when payment is made. This would mean you need an extra couple of books for this alone, and can lead to making the whole issue far more complex.

Manual records are great if you run a small business with little real need for tracking a significant number of transactions, but once your business starts to grow getting the right information from a set of manual records will prove time consuming, and time is something you may not have a lot of.

Computerised records

This is my preferred choice; using the right package for your needs and with suitable training and support of course.

This method allows you to keep your records in either the ‘receipts and payments basis’ or the ‘invoice basis’ as mentioned above, but which ever method you opt for it will not become a messy and complex affair because the software system will deal with everything for you behind the scenes.

Computerised systems now fall into two very different camps, the first are those that sit on your computer, and as such you need to take responsibility for ensuring you back your data up on a regular basis. Also, when you buy such a system the up front costs can be expensive.

Some such systems are Sage, TAS, Clearlybusiness, and VT transaction.

Next is the new generation of SaaS (Software as a Service) offerings, these operate in much the same way those that sit on your computer do, except you use them over an internet connection . They come with the distinct advantages that backing up of data is dealt with for you, you pay a low monthly cost (note: winweb is free for one user) and not an up front cost, you can access your records from anywhere in the world as long as you have access to the internet and your accountant can also log in and see what is going on financially in your business in real time.

Some of these providers are Winweb, Twinfield, Liberty Accounts and KashFlow.

You also need to decide who will keep your records, will this be you or your spouse? Keeping your books can be very time consuming, don’t under estimate this. 

Some people will use their accountants and other will use bookkeepers. If you are going to use a bookkeeper, the first port of call should be a Professional Book-keeping Institute.

Which ever method you decide you are going to use take professional advice first, it may save you a lot of time and effort and maybe money to.

Tags: Business Development, Business Idea, Business Start Up, Entrepreneur, Micro Business, Self Employed, Small Business, SME, OMB, Book-keeping, Book-keepers, Accountants, Winweb, Twinfield, Liberty Accounts, KashFlow, Sage, TAS, Clearlybusiness, VT transaction, SaaS

Anyone who reads my blog knows I have a soft spot for Stuart Jones. His practice is in Cumbria, an area beset with economic problems but Stuart fights his clients' corner and regularly takes local bureaucract to task. Yesterday, he demonstrated how he adds value to clients. In one case: value to client: £5,932. Fees: £3,050 - total value percentage 195%.

Whether you are a practitioner or client, it's worth following the link that shows the breakdown. Most important, it demonstrates that if practitioners concentrate on the things that are important, then value can be found from doing what would otherwise be viewed as routine work. Net result - happy clients.

If you're like me you use your credit card online to purchase domain names, update software, purchase new software or online services, buy the odd book here and there, and so on. The convenience of buying online just makes things happen faster - and we're in a time where everyone wants things now.

I received a letter from my bank today advising that someone from SHG.D…. tried to process a payment of SEK$20,338.32 - over $3,000 in my own currency to my credit card. The bank knocked it back, thankfully, and then wrote a letter advising me. Turns out there were several other attempts too, but because there were unavailable funds at the time, they knocked it back. I asked the bank officer about this as I saw no evidence on my account online of any debits and credits corresponding to this. She told me they suspected the attempts were fraudulent and that's why they hadn't shown up. She also said they were from middle Eastern countries and one was from Malta and they were fairly sure that I wasn't over there - nor had any of my previous spending habits shown amounts to these values.

I check into my account on a daily basis and reconcile my bookkeeping every 2-4 days, depending on how many entries have occurred. As so many of my clients now pay me online I need to be able to keep my ledgers up to date and it helps me see what else is going through the account - any cheques that have recently been processed, a periodic debit that hasn't gone through yet, and so on. It makes good sense to keep up to date with your accounting and the bank officer this morning confirmed it is also a good practice if you're running an online business. Another good thing is that I usually pay by Bpay and only use my Visa for small incidentals such as the items I listed above - another thing that alerted the bank to the large so-called purchases with my Visa card. Something else that assists is that I shift the larger proportion of my cleared funds into another account, which incidentally isn't connected to my Visa, so that has been a saving grace for me also.

I asked her how they got my credit card and she replied that often software is used to try out variations of numbers with expiry dates and when they find some that work they just keep using them - sounds like they must sell these numbers to others too, hence the use in different countries. I am careful about which sites I use my Visa on and was momentarily concerned that one of these may have been compromised but that doesn't appear to be the case.

I'm hoping my post on this topic may assist you, the reader, in developing a regular habit of keeping an eye on your bank accounts and monitoring any activity that may appear to unusual. KMT

credit cards, visa, fraud, fraudulent activity, accounting, buying online

Business Link has a great Tax Deadline tool for small business in the UK. Just answer a few questions, and they will sent you an e-mail to warn you about the up and coming tax events you and / or your business need to know about.

If nothing else it will help you to safeguard against penalties. Even if you have an tax-advisor, they could forget the deadline, happened to me more then once.

Needless to say that the Business Link website is full of great tips, information and knowledge for anyone running a business or thinking of starting one. I am a little critical of the business advisor service quality, but the website is a great resource.

Tags: Accountants, Accounting, Bookkeeping, Business Development, Business Infrastructure, Business Mentoring, Business Start Up, Cash-Flow, Entrepreneur, Home Business, Micro Business, Business Link, Selfemployed, Small Business, smb, sme, SOHO, Teleworking, United Kingdom, Very Small Business, Virtual Assitants, VSB

The influence of the Internet on business is changing almost daily. Not only do more companies build their own websites, but they start to understand how to improve communication. Still, too many people consider the Internet as an additional advertising platform or sales channel. Of course, the World Wide Web can perform these functions, but a much more important prospect is often overlooked.

Think about it. You are used to working with the computer. Now you also have a mobile phone, so you can be reached anytime. The next step is a PDA (Personal Digital Assistant), which allows you to carry data and in formation without having to carry a laptop. The trend is already visible: Access to vital business information anytime, anywhere. The Internet seems the ideal platform to achieve this goal. The benefits are clear:

• Data accessible and editable anytime, anywhere

• Data constantly backed up in remote location

• Integrated online tools avgoiding data duplication

• Sharing of data between multiple users

• 24 hour access to data for customers and suppliers

• One interface for all your communication

With the speedy development of mobile phone technology it will very soon be possible to access all your business intelligence not only through a PC but also through your phone or PDA.

Winweb OnlineOffice was designed to use the flexibility and accessibility of the Internet for business intelligence. Your small business can now benefit from a sophisticated IT system without the cost of setting up your own in-house solution.

Tags: Accounting, Business Development, Business Infrastructure, Business Start Up, E-Commerce, Home Business, IT, Micro Business, On-demand, Outsourcing, Selfemployed, Small Business, smb, sme, sme-blog, Software as a Service, Web Technology, WinWeb

There I was happily swimming along, when I saw them again, the fish family I had seen before.

The fish family is called www.sme-blog.net and what’s more some of their friends are my friends too! They seem to be friendly so I think I swim along. They are also helping the small fish, that is good because there is so much to do.

Best of all, there are fish like me in this family, it is good to know that we do not need to do all the work ourselves. It is much more fun to have friends to do all the hard work with.

Thank you Philip, for your great post on your great site.

Tags: Accountants, Business Development, Business Start Up, Small Business, smb, sme, WinWeb

I just had another “Beware” moment. As an accounting software vendor we have clients who call us up and ask us to help them find an accountant in their area. Not big numbers yet, but steadily increasing. In some areas we do not have partner accountants yet.

If we get an enquiry from a client for an area with out partner, we have Rachael & Gina, who try to find an accountant for our client. This morning we had an enquiry from Plymouth!

Rachael & Gina, sprang into action to find someone to service our client (the deal: free client, on free software, free to use for the accountant with all the SaaS benefits) or in other words some lucky accountant ( or so we thought) who was going to get a new client, with a little effort. Small client, but wants also business advice, about £300 to £600 p.a., I guess.

15 calls later, NO one wanted the business! Did we do something wrong? Unbelievable, 100% of the accountants we called so far had no interest in a new client. We do NOT ask for any commission or anything like that, totally FOC for the accountant and client. All advertised that they deal with small business.

Reminds me of what Jason said a couple of days ago. Seems to me that our free accountant search database on our Homepage, will have an empty spot in Plymouth, when it is launched next month.

BTW, we are still looking for accountant partners in a number of areas, so if you are interested, especially if you live in or around Plymouth, have a look at our accountant micro-site.

〔16/06〕Update: I am happy to report that we found not only one but two great accounting firms that have taken up the challenge to accept clients of ours into their practice. That brings the total of partner firms in the UK to seventy plus. Soon we will be able to offer our clients local accountants everywhere in the UK.

Tags: Accountants, Accounting, Business Mentoring, Business Start Up, Home Business, smb, sme, sme-blog, WinWeb

In response to my recent post “Evolution of Software as a Service (SaaS)”, Jason Holden made a comment that caught my attention:

…. The interesting thing about that is, most other accountants who say ‘oh no my client is used to Sage etc.’, well how do you explain that we are moving clients off a static version of Sage on their PC and onto winweb with all the benefits of our real-time support without any complaints, after all they are guided by their accountants advice not the other way round– so lets be honest the barrier is not the clients, it is the accountants who feel safe with Sage etc., clients don’t care! ……

I am asking myself is that really a fair statement? And should clients care?

From a micro and small business point of view, I have always understood accountants to be of three types the bookkeeper accountant, the bookkeeper accountant with a Software as a Service (SaaS) offering and the business advisor accountant using Software as a Service offering, who also offers bookkeeping.

The bookkeeper accountant is primarily interested to provide bookkeeping services and not much else to the client. And I would think there are enough companies that want exactly that service. To them it does not matter if they get last month numbers a few weeks later or even a few months. I think to use Sage or other boxed products is no problem at all.

If on the other hand you have a business start-up, or a growing business, and you want to see your numbers in real time, then the bookkeeping accountant can only offer this service with an on-demand, online Software as a Service product. Here both partners can work together in real time and a lot of IT headaches are taken from them at the same time (data backup, etc), the benefits are manyfold. David Terrar on his blog “Business Two Zero ” added the globalisation point to this discussion in his post about “Bricks, clicks and globalisation“. In this arena you can find a number of offerings like, Twinfield, Moore, Sage and our product AccountingOffice.

However, the business advisor accountant is a totally different “animal”, he/she wants to offer more services to the client in terms of advice for starting a business (lets face it who reads all these fancy start-up packs, that you can get everywhere) or running it. These accountants want to build a close client relationship, in oder to help the client to succeed, make the right financial and management decisions early on. And you only can do that when you are very closely connected or “integrated” with your clients business. This kind of service can not be delivered by software, online or not, alone. Live intervention of real people is required, the business advisor accountant, your virtual financial controller. Here you need a business infrastructure mentality, our OnlineOffice allows the advisor to see future development early on, sales forecasts, cash-flow forecast and the advisor is now also involved in the planning stages of the client business. The ROI for the client is enormous.

So was Jason’s statement fair, yes and no. It depends what kind of service you are looking for. You are the client and you should care.

〔13/06〕Update: Dennis has some interesting additions to my above post in “21st century accounting practitioners“.

Tags: Accountants, Accounting, Business Development, Business Infrastructure, Business Start Up, CPA, More Accounting, On-demand, Outsourcing, SaaS, Sage Accounting, sme-blog, Software as a Service, Twinfields, Web Technology, WinWeb

Dennis has a great new story this morning ( at 03:10 am ?) about “Sandhill Talks SaaS 2.0″. He also comments on my feelings toward SaaS. And he is quite right to say:

I’m pretty sure Stefan Topfer, CEO at Winweb would agree. His company’s offering sees accounting as a utility that underpins the business but which of itself is of little intrinsic value other than a necessary means of achieving compliance. Instead, he’s creating an infrastructure to support early stage business.

I am looking at this from a different perspective. All I care about is “client mortality”, the advantages of the SaaS model are enormous, but can be improved upon.

How do most small business and start-up business, like SOHO-, SME, SMB-, Micro-, Lifestyle-, Home-, DIY-, Hobby-, Boomer-, Professional-, Personal businesses start? You have an idea, then what? As if it is not enough to deal with your idea you need to worry about all kinds of admin functions to run any kind of business. That is were WinWeb comes in, we are trying to provide:

• A on-demand, online IT infrastructure (SaaS), that will enable to set you up to run your small business with in minutes, at a very low cost, so you can “try” your business idea for a month, a year, whatever. You do not need a bank loan or quit your job (in some cases, you will have to) to find out if your idea is worth it. If it is not, then you go back to the drawing board and try again later. No problem since you have no contract with us that logs you in with us.
• But most importantly of all, we use our SaaS model to have you not only work with colleagues anywhere @ anytime in real time, but also with your accountant. Now here is the thing, most of us when we started our small business did not know the first thing about accounting, financial planning, and when and when NOT (that’ll be me then) to buy that BMW 530i. Your accountant, if it’s a good one, will not only tell you but explain it to you, so you grow from someone with an idea to a “business” someone with an idea.
• The same is true for other “Virtual Assistants“: Call answering, bookkeeping, typing, credit control, etc. There are so many dedicated professional people out there, mainly working from home. There is no way you could hope, as a small business, to employ even one of these skill sets full-time, unless they are important to the core business. With our SaaS model you can time-share these specialists at a very low hourly rate.

The combination of the SaaS model with our Live! services provides a low cost, well looked after (accountant), and very versatile business infrastructure that does lower new business mortality rates and lowers barrier for business start-up.

BTW, I read a great post the “Entrepreneurship Gap” yesterday. Here you can find some ideas about starting up in business that I like.

Accounting, Bookkeeping, Business Development, Business Infrastructure, Business Start Up, CPAs, Finance, On-demand, Outsourcing, SaaS, sme-blog, Software as a Service, Virtual Assitants, Web Technology, WinWeb