There have always been two types of funding requirements that have historically been very difficult, if not impossible to find solutions for. The first was how do you raise finance against the value of signed contracts for products or services that are paid in monthly instalments, such as maintenance agreements, security agreements, subscription agreements, and most importantly Software as a service licence agreements. There is now a new type of finance that solves this problem. The companies that are applying for this type of funding must have a turnover of at least £300,000 and been trading for at least two years. They must have been trading with their client for at least 1 year OR they have sold the same type of service to different clients for at least 2 years. The downside is that their customer must have a turnover of at least £15m if based in the UK or £50m if based abroad. This type of finance will fund up front 80% of the client’s next 12 months worth of regular … [Read more...]
Using the right VAT number when invoicing EU customers?
Since the rules on charging and reporting VAT changed in 2010, HMRC has taken a lenient approach to errors in EC Sales Lists. But there are signs that it is now toughening its stance. When you send an invoice without VAT to a customer in another EU territory, you have to display the customer's EU VAT number and report the transaction on an EC Sales List. It is all too easy to obtain their VAT number, set up the customer account and use that number for all future invoices. If the VAT number is no longer valid, you should NOT zero-rate your sale of goods to that customer. HMRC are checking customer VAT numbers for the sale of goods to customers in other EU countries. It is looking at zero-rated cross-border sales and is raising VAT assessments if the numbers are no longer valid. It is also asking for evidence that goods have been sent out of the UK. So far it has only focused on goods, but we are expecting a similar change with regard to the supply of services. Regardless of whether … [Read more...]
A quick guide to Credit Control
'Credit control' is the system used by a business to make certain that it gives credit only to customers who are able to pay, and that customers pay on time. Credit control is part of the Financial Controls that are employed by businesses to ensure that once sales are made they are realised as cash or liquid resources. Crisis Credit control is usually an afterthought when an invoice has gone unpaid or a customer’s account exceeds a set credit limit. Follow your bad debt procedure: Gather your evidence, invoice, proof of delivery, contract terms. Send a Statement to your customer with a letter asking for the money (Letter 1) If you get no response in the time frame set out in the letter, send Letter 2, send by post and email attachment. Call the customer to check they received the letter. If they still do not pay you, then send Letter 3 detailing the Interest and costs they will incur if the debt is not settled. Two days later file the claim on the Government … [Read more...]
Financing the Retirement of the MD, or a Major Shareholder in a Family Business
Planning the retirement of the MD or another major shareholder in a family business is often an emotional, complex and time consuming affair. It is normally, but not always in the case of death, a long term project spanning a number of years. The challenges and risks are often more intense in a family business than in a non family one and these have already been discussed in previous blogs in this series. One challenge that has not been discussed is how does the family business plan for this important liquidity event, without seriously damaging the company’s cash flow and profitability? The MD or major shareholder will need to finance his or her retirement and the company needs to carry on trading with the possibility of a major capital withdrawal damaging prospects. The best solution for the business is for the incoming or promoted family member to purchase the shareholding plus potentially a portion of goodwill of the exiting member, with new capital from his/her own outside … [Read more...]
Personal Guarantee Insurance
Are you or your clients worried about the Personal Guarantees that you have given? Then think about PG Insurance. Personal Guarantees are the bane of most business owners’ lives and something that they continually ‘moan’ about. Invariably any form of borrowing above say £5-10,000 from a bank or other financial entity will require further security in the form of a personal guarantee from the business owners and directors. This is on top of any security that they may also take over the assets of your company. As has been seen over the recent past, it doesn’t take a lot for an excellent business to be hit by unforeseen factors that may result in adverse trading and the lender may demand repayment of its money. You may well be faced with a call on the guarantee that you have given. At that point your personal assets are at risk. Personal Guarantee Insurance is there to meet that claim up to the amount for which you are insured. Personal Guarantee Insurance … [Read more...]
What do the new accounting standards mean for you?
In the next year your accountant will start talking to you about the changes in accounting standards in FRS 102. This new standard is about moving the UK Accounting standards closer to the International Accounting Standards. The main difference will be an increase in costs and these will come in two parts. In the year that you convert to the new standards there will be extra costs because your previous year’s accounts will have to be converted to the new standards. There will then be higher costs because there are extra reporting requirements. Here are some of the new requirements: There will be new accruals for items such as Holiday pay. You will have to declare any foreign currency transactions you have set up but not actioned. You will need to make declarations about Fixed Assets, Intangible Assets such as intellectual property and Goodwill. What can you do to minimise these costs. Be prepared. Find out from your accountant which of these changes affect you … [Read more...]
