Author: Megan Davies

5 signs you’re having cashflow problems!

Whether it’s for personal use or for your business, cash flow is important. The movement of money in and out keeps everything running smoothly, and you have to know where you stand.

But what if it seems that your cash flow isn’t really, well, flowing? If it seems that you’ve tightened your belt in every area and still coming up short, you might have cash flow issues.

Here are some telltale signs that your cash flow is actually at a standstill.

1. You’re using your credit card every month

Lots of people use their credit card for all purchases these days, and that’s okay – as long as you’re also paying it off. There are definite advantages to using your card, like points or rewards, but these perks are irrelevant if you’re spending money that you don’t actually have. If you can’t pay what you’re spending on your card with cash every month, it’s time to reevaluate how you’re using that card. Think of the real pounds you’re spending every time you tap at the till, and if you don’t have real money to pay off your purchase, reconsider it.

2. You can’t cover your bills

This is a major red flag, and a sign that your budget doesn’t add up. All of your bills need to be accounted for every month, and that includes setting money aside for large future expenses, like taxes. Bills should really be accounted for first, right up there with money for food and shelter. If you find that it’s a challenge to pay all of your bills, it’s likely that you don’t have enough cash coming in; or you’re spending it on things that shouldn’t be as high on the priority list.

3. You’re running out of money at the beginning of the month

If all of your payments come out and you find that you’re already tapped at the start of the month, you’re likely not bringing in enough money. When we add up our living expenses and plan for all of our payments to come out, it’s important to have some wiggle room to carry you through to the next month. Unexpected expenses can pop up, and nothing is as stressful as finding out you don’t have enough money. Make sure you’re earning enough to carry you through the entire month, and not just the typically bill-heavy first week.

4. There are no other costs to cut

So you’ve gone through your subscriptions, pared down your grocery bill, cut back on your nights out, and you’re still not bridging the gap. If you’re planning for your business, maybe you’re just barely scraping by with no profits, or you aren’t left with enough money to pay yourself. When every penny you make is going toward only the necessities, you definitely have cash flow issues. If you’ve cut back in every imaginable area and are still struggling, you need to find a way to bring in more money. It’s as simple as that.

5. You don’t have an emergency fund or cash chest for difficult times

This sign goes largely ignored by many people these days, with the cost of living being so high. It’s very difficult to save any money under these circumstances, and the reality is that most people just don’t. But don’t ignore this telltale sign that your cash flow isn’t healthy. It’s crucial to have something saved for a rainy day, and putting some money in your savings each month must be done, just like any other bill. Otherwise, you’re likely to lean on credit when these surprise expenses inevitably occur.

Final thoughts

It’s easy to ignore cash flow issues when we have the safety net of credit and if we’re managing to scrape by. But, managing your cash flow is a critical practice that alleviates stress and prepares you for the future. Pay it the attention it deserves and reap the rewards down the road.

What is lifestyle planning and how does it affect my finances?

When you think of financial planning, you probably imagine ways to increase your wealth, such as making a budget, reviewing what’s coming in and going out, and creating a plan for how to make the most of your money.

You may think of investing in stocks or bonds, or of starting a retirement fund. Perhaps you think of saving for a major expense, like a home or education for your children.

And that all counts as financial planning. But lately, the concept of lifestyle planning is giving financial planning a run for its money.

What is lifestyle planning?

Lifestyle planning is the idea of using your money to get the most enjoyment out of your life.

It means maybe foregoing the maximum financial return in exchange for something you value more. You choose to budget your money in a way that makes you truly happy. In other words…

You plan to use your money in the ways that bring you the most joy.

If the idea seems scary to you, you’re not alone. Most of us were raised with the idea that you should always save for a rainy day, put away as much money as you can, and invest instead of spend.

But lifestyle planning doesn’t mean that you frivolously blow through your life savings.

It means taking the time to consider how you want to live the one life you get. And then, working off of that vision by creating a financial plan that makes those dreams come true.

Get started with your lifestyle plan

Sit down and do some soul searching. Write down exactly what you want your life to look like.

Where do you want to live? Who do you want to live with, if anyone? What kind of car do you want to drive? Where do you want to go to school? What clothes do you want to wear? How do you want to eat? Do you want to travel? If so, how often?

Get as specific and as detailed as possible. Sketch out your perfect life in your mind.

Think about the things that are most important to you.

Once you’re satisfied with your vision, take stock of where you stand today.

How much money do you earn now? What’s your future earning potential? Are you spending money on things that aren’t actually important to you?

When you start matching up your reality with the way that you want to live your life, the gaps will become obvious. You will then be able to make adjustments. Maybe it’s not as important to drive a luxury car or any car at all. Maybe a change in career is necessary.

It’s okay if expensive items actually are more important to you than you initially thought. You can now plan for that. Or maybe it has become clear that you actually need more freedom of mobility in your career if travel is a priority.
Whatever it is that you come up with, you can start making a roadmap for how to get there.

And that’s how lifestyle planning affects your financial planning. You can’t reach your goals if you don’t give yourself the means to do it.

Once you know what you want, you can make a specific plan for how to make it a reality. When you’re ready, enlisting the help of a professional accountant will allow you to make the best financial decisions.

Get in touch if you would like to learn more about how we can help you get started with a personal lifestyle plan. With a bit of strategy, you can start living the way you envision sooner.

e: office@londonaccountants.co   t: 0203 137 9791

Kind Regards,
The Team at London Accountants

4 questions you should ask your accountant!

Ideally, you and your accountant are more than just “adviser” and “client”.

With your combined skills, expertise, and shared mission to support a thriving business, you’re more like strategic partners.

The key to achieving success in any partnership is, of course, strong communication. At your next meeting, be sure to ask your accountant these four important questions.

1. What’s my best strategy for increasing revenue?

Every business owner strives to improve profit margins – but the best way to quickly and/or sustainably grow revenue will vary from business to business.

When reviewing your financials, ask your accountant to pinpoint and suggest smart strategies for driving greater revenue. For your unique company that might mean focusing on new leads, encouraging customers to buy more frequently, incorporating cross-selling or up-selling, and/or rethinking your pricing strategy.

2. How would you assess our financial performance this quarter/year?

It’s part of your accountant’s job to stay current with your company’s financial statements and reports (i.e. your balance sheet, income statement, profit and loss statement, and cash flow reports).

Some small business owners – especially those who lack confidence in their financial literacy skills – may only want to know the basics, in simplest terms. Let your accountant know you’d like a more thorough analysis of your finances when you next meet, and help understanding what the numbers mean.

Ask for key ratios, like your gross profit percentage, and an assessment of the big picture, drawing comparisons with past performance as well as trends in your industry.

Also ask for any insights your accountant might have into the reasons for new or surprising developments, and what you can do to correct areas where your business is falling short – as well as what actions you can take to continue any positive trends.

3. How can you help me grow my business?

Your accountant should be prepared to offer professional advice to help your business expand and grow over time. Scaling a business can be tricky as it requires a company to do everything it must to keep their customers happy while adapting to change – such as new staff and new systems to accommodate a greater volume of customers.

Financial systems may need to change as your business expands; likewise, your company’s financial management may need additional support as you transition to a larger company.

Ask your accountant how you can best work together to facilitate smooth, sustainable growth with minimal disruption to operations, and for tips on how to successfully scale based on past experience with other small business clients.

4. What are your most successful clients doing?

Chances are your accountant serves as a trusted advisor to a number of clients – and therefore, will be privy to the inner workings of companies who are struggling and others who are thriving.

Neglecting to ask your accountant about their clients’ success stories is a missed learning opportunity. Even if a business has little in common with yours – operating in a different industry, or as a seller or products versus services – there’s value in learning what yielded impressive results for another company.

Alternately, you might ask your accountant how their clients overcame challenges similar to yours to help you brainstorm possible solutions.

Final thoughts

Your accountant is an incredibly valuable resource for your business – and not just at tax time. Be sure to check in every quarter so you have the up to date financial info you need, and your accountant’s professional advice when it comes to making key business decisions.

How to Build an Effective Financial Plan for your Business!

Every business needs a financial plan. 

Your financial plan gives you a way to monitor and review your cash flow, make adjustments to your spending, and anticipate any upcoming financial issues. It can also make you more prepared to request funding or find investors so you can bring more money into your business.

Although many business owners are aware that financial planning is important, it is often overlooked. Without a financial plan, however, you could find your business doesn’t make the money you expected it to; or you could wind up with unanticipated expenses and no way of paying for them.

Here are some steps to take to build an effective financial plan for your business.

1. Set your goals

You need to know where your business is now and where you want it to be so you can develop a financial strategy to move forward. At least once a year, ask yourself important questions so you can plan for what’s to come. Among the questions to ask:

Do I need to expand or grow my business (in terms of staff, locations, or goods and services)?

Do I need to make any large equipment purchases?

What resources might I need to buy this year?

How will any purchases or expansions affect my cash flow?

What adjustments might be needed to address these expenses?

2. Understand your cash flow

To build an effective financial plan for your business, you must understand your cash flow. 

Your cash flow is the movement of cash into and out of your business. If you have more money coming in than going out, you have a positive cash flow situation and are able to pay your expenses. If more money is going out than coming in, you are in a negative cash flow situation and need to bring in more money.

Understanding cash flow (including sales cycles) will help you build a plan for your business. If your business is seasonal, for example, it helps to know when sales drop and for how long, so you can plan for those periods. You can also anticipate when sales will be higher and you’ll have extra money to set aside for emergency expenses.

Remember that cash flow and profitability aren’t the same thing. Your business can be profitable, but if none of your clients are paying you on time you won’t have necessary cash flow to stay afloat.

3. Create a sales projection

An important part of your plan is your sales projection. This is related to your cash flow forecast, but focuses on your sales. It gives you insight into every segment of your business so you can better understand which of your offerings brings in the highest sales. For example, if you run a gym you might break down your sales forecasts into the different membership types.

When you forecast your sales, make sure you include the cost of goods sold so you can determine your forecasted growth margin. This information will help you determine which of your offerings are most profitable and which should be revised to increase your profits.

4. Talk to an expert

It’s not important for you to have all the answers for your business, but you have to be willing to talk to people who have the information you need. Once you know your current situation and what your goals are, talk to an accountant or financial expert to figure out your next steps.

Experts can help you make sense of your financial situation and how to move forward, whether that’s the best use of your profits or getting yourself out of a negative cash flow situation. They can offer you effective solutions you may not have considered, or help you revise your plan so it’s more realistic.

5. Monitor your progress

Throughout the year, take a look at your plan and your projections to ensure you’re still on track. If things are progressing as you expected, great. If not, explore how you can address the situation before financial problems become unmanageable.

Final thoughts

Creating a financial plan may feel overwhelming, but by having a clear picture of your goals, your current situation, and your progress, you can write an effective financial plan that increases your chances of success.

If you are looking for Fulham accountants or a tax advisor in London, get in touch!

e: office@londonaccountants.co   t: 0203 137 9791

Kind Regards,
The Team at London Accountants

Don’t forget to declare coronavirus grants on your tax returns!

There’s not long  to go until the deadline for the 2021/22 tax return.

You may have received messages from HMRC reminding you as a self-employed taxpayer to ensure coronavirus payments are included.

So…what do you need to declare?

Times flies, and it’s been just over a year since the final tranche of payments under the self-employment income support scheme (SEISS) closed for application. As a result, it’s easy to overlook them when completing your tax return!

You must declare the payments received in the tax year, as was the case for the 2020/21 returns.

Which payments should you include?

The grants paid during 2021/22 were the fourth and fifth grants. The SEISS rules for these grants took account of profit figures from 2019/20, whereas the first three tranches didn’t. That means that those who were new to self-employment (including partnerships) in 2019/20 may have received the fourth tranche as their first payment under the SEISS. If that applies to you, you won’t have reported SEISS payments on your return previously, so make sure you read the guidance carefully!

If you are looking for Fulham accountants or a tax advisor in London, get in touch! We are currently running a promotion until 1st December 2022.

£225 + VAT for a basic Self-Assessment Tax Return (usually £299 + VAT)

Offer is valid until 01.12.2022.

e: office@londonaccountants.co   t: 0203 137 9791

Kind Regards,
The Team at London Accountants

Further increase to HMRC late payment interest!

Late payment interest rates will increase again in November because of a further hike in the Bank of England base rate. Will you be affected?

As HMRC’s late payment and repayment interest rates are linked to the base rate, they are also set to increase. From 14 November 2022 the following rates will apply:

• Late corporation tax paid quarterly – 4%
• Interest on overpaid corporation tax instalments – 2.75%

From 22 November, the rates for other taxes will apply:

• Late payment interest – 5.5%
• Interest on overpaid tax – 2%

If your 2021/22 tax return is outstanding you should calculate your tax liability as soon as possible to ensure you can meet the payment deadline, to avoid (or minimise) interest charges.

If you are looking for Fulham accountants or a tax advisor in London, get in touch! We are currently running a promotion until 1st December 2022.

£225 + VAT for a basic Self-Assessment Tax Return (usually £299 + VAT)

Offer is valid until 01.12.2022.

e: office@londonaccountants.co   t: 0203 137 9791

Kind Regards,
The Team at London Accountants

What key changes did Chancellor Jeremy Hunt announce in his Autumn Statement?

Income tax:
There are no increases to the headline rates of tax. However, this does not mean that individuals won’t pay more income tax – in fact, quite the opposite.

The threshold at which the 45% rate of income tax kicks in will be reduced from £150,000 to £125,140 from 6 April 2023.

The personal allowance will remain at the current level until April 2028. As wages are increasing,  this means that some low earners will start to pay income tax.

The freeze on the threshold at which the 40% rate of tax is paid has also been extended by two years to 2028.

The tax-free dividend allowance will be cut to £1,000 from April 2023 then to £500 the following year.

National Insurance:
The employment allowance will remain at the current level of £5,000.

The main NI thresholds will also be held at the current level until April 2028.

Capital gains tax:
There is no change to the CGT rates, but the annual exempt amount will be cut from £12,300 to £6,000 from 6 April 2023, and then to £3,000 the following year.

Other announcements:

The increase in stamp duty land tax allowances announced at the mini-Budget will be retained, but only until 31 March 2025.

The nil rate band which is the amount an individual can leave tax free on death, will be frozen at £325,000 for a further two years until 2028.

Electric vehicles will no longer be exempt from vehicle excise duty from April 2025.

The energy profits levy will increase to 35% from 25% and extended from four to six years.

National living wage to increase to £10.42 per hour from 1 April 2023.

If you are looking for Fulham accountants or a tax advisor in London, get in touch!

e: office@londonaccountants.co   t: 0203 137 9791

Kind Regards,
The Team at London Accountants