Business growth is an exciting progression which is more likely to be successful if your business is already running efficiently, so are you still troubled by administrative burdens like accounting, tax and PAYE?

Business growth is an exciting progression desired by small business owners. Once you are in the growth stage, you naturally enjoy increased output and greater sales. Accordingly, you are likely to expand your workforce and take steps to control costs. In this article, our one-stop outsourced accounting team shares the opportunities growth presents and how small business owners can benefit from having our team working alongside you to increase efficiency and control costs.

Organic and inorganic growth

Broadly speaking there are two types of business growth – organic and inorganic. Organic growth means your business achieves better output and enhanced sales through internal resources and processes. This takes time and effort, but it is sustainable and less risky. Inorganic growth, on the contrary, means you gain instant market share and revenue boost by acquiring or merging with another company.

It must be noted that they are no one-size-fits-all strategies when it comes to growing your business – how you grow your company depends largely upon your business model, financial figures, and business acumen. Having said that, once you are in the growth stage, you will instantly notice the followings:

• Your staff size will expand
• Your administration overhead will increase
• Your cash flow may get bigger but that may not mean you are making a profit
• You are in need of good reporting systems whereby you can compare projections versus business performance and make informed decisions
• Your growth is more likely to be successful if your business is already running efficiently

Temporary solutions

At this point in time, many business owners (particularly those who have been handling bookkeeping themselves) are faced with a stark choice: hire an account person who can also do payroll, or outsource the accounting and payroll functions to a company who can also act as your financial controller.

Quite often what happens is that the business owner brings in a part-time bookkeeper who comes in just a day a week, depending on the workload. This may be fine for some, but for those whose business is experiencing consistent growth, this is just a stop-gap rather than a scalable long-term solution.

The real challenge with a part-time bookkeeper is that they may not necessarily understand your business well enough to manage the accounting function in a scalable manner as the business expands. More often than not, part-time help leads the business owner to a situation where yet again, they are looking for a more permanent solution and the time and money invested in bringing the part-time help up-to-speed has been wasted.

Even if you have hired a full-time bookkeeper, there is no guarantee that the person has the expertise to review numbers like a chartered accountant does. So what are the options open to an established and growing business that needs help with its accounts and all that running a growing business entails? The answer – look for a one-stop outsourced accounting service firm like Berley.

The accounting challenges a growing business presents

Before we delve into the specific benefits outsourcing your accounting can bring, it is probably a good idea to understand what challenges a business faces with regard to its accounting needs as it grows.

One of the best ways to summarise where these challenges lie is to consider the primary aspects of running a business that will create increased accounting burden. Typically this relates to four main areas:

1. Tax
2. VAT
3. Employees
4. Costs

Tax

Most small business owners do not have the time to learn about tax returns, tax codes, tax allowances, year-end tax returns, National Insurance and Self Assessment. Things can also get out of hand quickly in the event that you don’t agree with a tax decision or can’t pay your tax bill on time.

For those using a cloud-based accounting package (such as Xero) and with turning over less than £85,000 per year, you may find it fairly straight forward to maintain the sales and purchase ledgers. Xero will produce the information you need to file a basic company tax return. However, the main challenge comes when you need to track sales and purchases, manage receipts, keep the books up-to-date and ensure that the company is actually profitable.

Among small business owners, using dividends to make up their income is a popular practice but your approach depends on your circumstances and it must also be legitimate. At Berley, we do not believe in ‘creative’ accounting practices that will put you in trouble with HMRC as it may jeopardise your business and your reputation, not to mention it may end up cost you more money.

So whenever you need advice on tax matters, give our team a call on 020 7636 9094.

VAT

Generally speaking, if your business turnover is below £85,000 a year, you do not need to register for VAT (although you can choose to do so voluntarily). However, once your business turnover passes £85,000 or when you expect your VAT taxable turnover to be more than £85,000 in the next 30-day period, you must register for VAT. If you register late, you must pay what you owe from when you should have registered. You may even get a penalty depending on how much you owe and how late your registration is.

Once you are VAT registered, you must complete VAT returns via software and keep your VAT records digitally to comply with Making Tax Digital which came into effect on 1 April 2019. Essentially, you will need to carefully maintain records for VAT on sales (to pay HMRC) and purchases (to claim back from HMRC) – this requires a knowledge of what you can claim and cannot claim for, which can be a little trickier than it might seem. A good cloud-based accounting package like Xero can help with this, but like any information system, it is only as good as the data it is fed with. This means small business owners may run into problems as their business grows and when the payments and claims become a significant accounting task that takes up much time and effort. Also, this accounting task requires good due diligence to avoid tax errors and VAT misfiling.

What we have shared above is a simplified overview. In reality, VAT is a complex subject and we strongly encourage small business owners to talk to one of our one-stop outsourced accounting team members first as we can help in various areas including:

• Eligibility of Flat Rate VAT Scheme
• VAT advice
• VAT registration
• Completion of VAT returns
• Spector-specific VAT issues
• VAT issues if you trade with EU countries and internationally

Employees

A growing business needs to be adequately resourced and this equates to increasing headcount. Whether they are contractors or full-time staff, employees are another source of administrative overhead. Full-time employees require PAYE, National Insurance and a pension system. Other benefits may apply too, depending on their individual circumstances and what your company benefits are. This all adds up to more work and for many small business owners who haven’t yet solved this problem; it often means late nights or worked weekends just to keep on top of things.

Controlling costs

A common question we receive from small business owners is why they aren’t making a profit even when the cash flow seems substantial? The answer to this seemingly simple question lies in how much control you have over your costs (particularly hidden costs) and how well you manage your cash flow.

Like business growth, there isn’t a standard cost-control recipe that’s applicable to every business. Ideally, you’d have an accountant you can count on to:

• Review the financial figures
• Make realistic projections
• Help to compare results versus your goals and budgets
• Discuss options with you if your business growth plan is not working out as it should

Essentially, you need a financial controller but without paying big money and this is where our one-stop outsourced accounting team can help.

What are the benefits of outsourcing your accounting needs?

At the very beginning of your business cycle, you have probably tried to manage the growing accounting tasks and challenges yourself, or hire a part-time/ full-time bookkeeper to run this for you, especially if you use cloud-based accounting software like Xero. In the event that your bookkeeper possesses all the skills required to prepare VAT and Tax filings, you will still need to have a professional accountant look over the numbers to make sure they are correct.

As your business continues to grow, attention will fall on tax planning, something your bookkeeper probably isn’t qualified to provide. Additionally, depending on the type of business you run, there may be schemes available to help mitigate tax or provide tax-efficient financing options, particularly where product R&D is concerned.

It is no secret that the tax system in the UK is always changing, something that most bookkeepers find it tough to keep up, not to mention small business owners. There are many possible considerations to be made, including issues such as:

• Capitalisation of equipment
• Depreciation of company assets
• Directors salaries and dividend payments
• Company structure and shareholding
• Financing arrangements
• Offsetting business expenses
• Increased reporting requirements
• Brexit related changes

This is why early consideration should be given to outsourcing your bookkeeping and accounting functions because they are key management issues required by any business with a real drive for growth to think about. “To be fore warned is to be fore armed” is a phrase most appropriate here. An early adoption of an outsourced accounting model will save you time and money in the long run, as you will avoid the costly learning exercise associated with a string of temporary internal accounting assistants that you may find yourself looking over their shoulder because potential mistakes in your books could lead to VAT penalties or even an investigation by HMRC.

The typical reason why business owners initially reject this idea is simply down to cost. They believe enlisting the services of a professional accounting firm is going to be expensive and that it is cheaper to do it themselves or hiring an in-house person. This isn’t necessarily true of course, as the costs of outsourcing your accounting can be significantly less than employing a full-time bookkeeper or accounting assistant.

Ten reasons to outsource your accounting and bookkeeping

In summary, the principle benefits of outsourcing your accounting to a professional accounting firm like Berley are:

1. Consistency and reliability
2. Time saved and no mistakes
3. Up-to-date tax and VAT advice
4. Your accounts are fully managed and maintained
5. Full visibility of your accounts online (with Xero)
6. Your VAT and Corporation Tax calculated and filled for you
7. PAYE and pensions managed for you
8. Business growth and cash flow management advice
9. Tax-efficient planning
10. Peace of mind and free weekends

Perhaps the biggest single benefit of outsourcing your accounting to a professional accounting firm like Berley is that you will have a professional working for you, somebody who is impartial and experienced, an expert who takes time to understand your business and your goals, and is prepared to give advice based on a solid understanding of your business and the experience they have in working with many companies like yours. Give us a call today on 020 7636 9094.

We’re also Silver Champion Partners of Xero, one of the biggest online accounting software companies around. This means we know the ins and outs of Xero and freely share them with our clients to ensure you can get the most out of your online accounting software.

Berley’s one-stop outsourced accounting services

At Berley, we offer efficient and convenient accounting services including:

Outsourced accounting

• Bookkeeping
• Compilation of management accounts
• Accounts payable
• Accounts receivable
• Cash flow reporting
• Sales reporting
• Expenses and receipts management

Tax compliance

• VAT returns
• EC sales lists
• Corporate tax returns and advice

Payroll

• PAYE registration
• Payroll administration
• Pension processing
• Benefits processing

Company secretarial services

• Annual compliance with Companies House
• Maintenance of statutory books

Call us today on 020 7636 9094.

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This post is intended to provide information of general interest about current business/ accounting issues. It should not replace professional advice tailored to your specific circumstances.