Are you giving money away?

Do you discount? Do you cave in as soon as someone asks for a discount? Or do you play the game of negotiating? And if so, how pokerfaced are you? Let me take you through an example of discounting that caused problems for its owner directors.

Once upon a time there was a business with a turnover of £2m and profit of £50k. The three directors were not happy as they worked long hours and didn’t get much money for all the work they did. They had done everything they could to cut their expenses but they still couldn’t make a decent living. Once they started digging deeper into what was happening they discovered that their sales team were giving discounts of over £1m. Too strong to say they felt gutted? All the sacrifices the directors had made to sustain the business without having any rewards for themselves suddenly hit home.

However they knew the rules of leadership – the buck stops with them. They didn’t sack the sales team or rant and rave. After all they weren’t measuring anything! It became really important to measure those discounts, show the team the parameters they could work to and ensure a monitoring system was put in place. Not only that they gave their team extra sales training and specifically a workshop on negotiation skills.

Equally important they also put any discounts negotiated on their sales invoices. The reason was twofold, it made it easy for their management accounts to see how they were doing but also reminded their customers about the discount. Upshot was it ensured future sales negotiations with the same customers did not start at the discounted price but at the list price.

Don’t think your team know everything, whatever part they play in your business you must make training a part of what you do and guess what, that costs money – see my future blog on getting the price right.

So don't throw money away. Ensure you have thought about your discount policy and measure it.

We're producing a booklet 13 Mistakes that Small Business Owners Unwittingly Make which includes tips about pricing and it will be out on 30th June 2011.

However if you are interested in getting the booklet email Carolann@murrayassoc.co.uk and if you register your interest by 31^st May you can get it for Free (Normal price £5.95 incl. postage & packaging).

We are also hosting our regular Aberdeen Business Growth Club in Lloyds TSB Boardroom at 33 Queens Road Aberdeen on Thursday 19th May from 9 - 11:30am. The presentation is on Knowing Your Numbers - the fastest and easiest way to understand the numbers in your business. 

If interested in this event please book asap as places are limited by emailing Carolann@murrayassoc.co.uk or book online at http://www.murrayassociates.co.uk/events.htm

Will you be fined £3k by the tax man?

I haven't seen an enquiry at my practice for at least 2 years but that's all about to change. HMRC are targeting 50,000 small businesses each year and they are planning to check your record keeping for accuracy! You must keep till rolls, sales and purchase invoices, paying in slips, cheque stubs and bank statements for 6 years.

If HMRC assess your records as inadequate they can fine you £3k. They will probably start an investigation into your previous years’ tax returns as well. After all you've just given them a good excuse to doubt the accuracy of your records.

Over the years we have seen several investigations, all on small businesses. In one case this resulted in the client owing HMRC £10k. I didn't handle this investigation for this particular client as he had other insurance. However after reviewing the case myself I think I would have got a better result.

These investigations can drag on for years and can result in hefty fees for the work your accountant does for you, even if no tax is due. Another client had 3 investigations over 3 years. However none of these resulted in extra tax due but they still had to pay our fees to argue and negotiate with HMRC on their behalf.



The vast majority of successful businesses keep in close touch with the numbers in their business and revisit them regularly. This means that they not only remain compliant but are able to act on things very quickly to keep their business in good health.

However, you don't have to do it all yourself, ask your accountant or get a good book-keeper. Just make sure you can access your information quickly and easily or have regular meetings with your accountant to look through your management accounts and discuss how the business is doing. There are other things you could measure that will tell you how your business is doing and how it will do in the future. I'll talk about that in my next blog.

So please make sure you’re keeping accurate records. I'm so committed to helping you keep on track that I want to offer you a free health check on your record keeping - normal cost £185 + VAT. Want to find out more? Ask carolann@murrayassoc.co.uk or give her a call on 0141 889 4247 or 01224 432184.

I'm running my regular Business Growth Clubs specifically on Knowing Your Numbers in Glasgow on 21st April and then in Aberdeen on 19^th May and I'd love to see you at one of the events. 

The first one is free. To book a place email carolann@murrayassoc.co.uk or via our website http://www.murrayassociates.co.uk/events.htm

Can you save some tax?

January is a great month for planning. Hopefully you came back from holiday suitably refreshed and with grand ideas on what you want to achieve in 2011. In the last blog we looked at setting personal and business goals. This time I want to talk about tax planning.

No matter how big or small your business it’s a great idea to have a look at this well before the end of the tax year on 5 April 2011 and at your accounting year end, if they're not the same. The very nature of tax means it is almost impossible to rearrange your tax affairs retrospectively.

So what can you do instead? Start planning now! If you’re a client we’ll be sending you out a Tax questionnaire so we can have a look at your options for you.

Generally there is something that can be done for a lot of sole traders, partnerships or directors to save them some tax. Sometimes it’s just looking at the timing of things you were planning on doing anyway to ensure you get the relief as quickly as possible eg a new van or bit of equipment, employee bonus etc.

It’s also possible to do some of this tax planning in conjunction with other things like tax credits. To give a simple example -  if you are a sole trader and normally you have a profit of £30k. You need a new van costing £10k and because of the Annual Investment Allowance the £10k would drop your taxable profit to £20k. You may then find that you’re eligible for tax credits due to your drop in normal income. You would also save on tax. The van could be paid for by loan and you would still get all the tax advantages upfront.

Here are a few more ideas:

1. If you are considering significant capital or revenue expenditure during April 2011 or later in 2011 you may want to see if you can bring the payments forward and claim tax relief in the accounts to March 2011. This may involve you funding the payments earlier but you may possibly benefit from reduced tax bills a year earlier.

2. Following on from point 1, there are still generous capital allowances for purchases of equipment that qualify for the Annual Investment Allowance. The annual limit is set at £100,000 until April 2012 when it will be reduced to just £25,000.

3. If you are carrying stock on your balance sheet at cost and it is now worth less than cost, you should revalue, reducing the stock to its current realisable value. This will reduce your trading profit in the current year or increase your losses; it will also reduce your tax bill or increase any loss relief carry backs.

4. If you are considering the sale of a business or business property that will create a chargeable gain for capital gains tax purposes, you might be advised to delay contracts until after the 5 April 2011. For individuals, any tax payable on gains made on or after the 6 April 2011 will not be due for payment until 31 January 2013. Tax payable on gains on or before 5 April 2011 will be due for payment a year earlier, 31 January 2012. At present CGT rates are still 18% or 28%. Also if your gain qualifies for Entrepreneurs' Relief your CGT liability will be reduced to 10% of gains - up to a lifetime maximum of £5m chargeable gains (for disposals after 23 June 2010). Of course it is always possible that capital gains tax rates will be increased in the 2011 Budget.

5. Consider your pension options. Could you make additional contributions before the 6 April 2011 to reduce your higher rate tax this year? But beware of the anti-forestalling provisions if your income is more than £130,000.

These examples are only given as guidelines and shouldn't be taken as advice. I have no way of knowing individual circumstances.

There are several other ways of planning for individuals and directors too. However tax is very complicated and there is a lot to take into consideration when doing any planning. In fact if you are not a tax expert it’s often a case of  ‘its not what you know you don’t know, but rather what you don’t know you don’t know’

If you’re not a client and you would like me to carry out a review for you then please email me at gloria@murrayassoc.co.uk and I’ll send you out a Taxability questionnaire. We normally charge £350 + VAT for this but I will waive this fee for the first 10 completed questionnaires I get back. Get planning and save yourself some tax!

Have you got your holidays planned?

Do you spend more time planning where you're going on holiday than you do on where you want your business to be in the next 1 year, 3 years or 5 years? If so you're not alone! However most successful businesses, big or small, all have a plan of where they would like to be in the future.

It just takes time, outwith your day to day running of your business, to sit down and ask yourself some key questions:
how do you see your business in the future?
what does it sound like?
what does it feel like?

It doesn't matter what your timescale is but it is important to have one, be it a year or longer. You can then break it down into more manageable chunks and look at how you're going to achieve it.

Not only that but you can check that your personal and business goals are congruent - they compliment each other and don't fight each other. If you have business partners then it's a good idea to check you have complimentary business goals. I have come across directors or business partners with completely different goals many times and none of them have survived without a radical rethink of their goals and roles.

None of this is rocket science and you will have heard it all before. Use some time during the holidays to examine what you want from your business and your personal life and start planning. What have you got to lose? If you haven't a clue where to start drop me an email and I'll send you a goal setting pack. Check out my contact page to email me.