Have you read the small print?

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The Bank wants to withdraw my Company’s overdraft what should I do?

At present it is a common call to receive from a client saying the bank has requested a meeting to review the business’s overdraft facility. Sometimes this is because the facility is coming up to its renewal date or, what is happening more recently, is that the bank is asking for the meeting because it believes the customer has breached terms of the overdraft facility called covenants. Does anyone really read the terms of the facility letter that a bank sends you? The answer is mostly no. But contained in this facility letter should be details of specific covenants, these normally are:

  • a) Maximum available overdraft available to you is based upon your monthly debtor book value, which is discounted by 50% so this can fluctuate monthly and without you realising can reduce your facility.
  • b) The company has to make a certain net profit after tax and dividends if it does not the facility can be reduce or withdrawn.
  • c) The company must provide monthly management accounts and annual accounts within a specified period of time again failure to do this can lead to problems maintaining your facility.

 

Read any facility letters, and also, recently the facility letters refer to banks standard terms and conditions which are enclosed or on their website so ensure you read these or get your professional adviser to. If as a business owner you are faced with your facility being withdrawn or reduced look at the other alternatives:

  • a) Refinancing an asset. At present there are grants available from the regional growth fund that can make this attractive.
  • b) Factoring or invoice discounting which can release cash from your Debtor book and help a business grow.

But above everything else plan ahead and anticipate a problem and do not let your business be at risk due to uncertainty over its required finance. If you need any assistance regarding any matters above contact Chris Duggan here. Don’t forget to explore the website, and join us on Facebook and Twitter too!

TAX INSPECTION ADVICE FOR BUSINESSES IN READING

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In the last nine months HM Revenue & Customs (HMRC) have been undertaking more compliance visits to local businesses in Reading, normally for VAT compliance or PAYE compliance and in some cases both.

 

The process starts with a letter or phone call requesting a certain date for a visit. If the date is not convenient, or you need more time to prepare, phone HMRC and request that the visit is delayed to a suitable time for you.

 

Once the date is set you will receive a letter outlining the records they want to inspect and what years they require. Only give them what they request – nothing else.

 

When the date of the visit has been confirmed and you know what records are required, consider if you are insured for professional fees in relation to the visit. Most Accountants offer their clients this service; others may be insured under certain Federations or Third Party policies. If you are insured, inform your insurer as soon as possible and then involve your Accountant in preparing for and attending the visit.

 

On the day of the visit

 

The HMRC Officer will normally want to talk to a Director of the Company to understand how the business works and he will also ask for explanations on what records you keep. Only answer the questions asked do not volunteer any additional information, and no matter how friendly they appear do not forget they are there to find extra revenue for HMRC.

 

The main faults found on visits are:

 

VAT

 

  1. Turnover in the accounts not agreeing to you VAT returns;
  2. Missing purchase invoices;
  3. Incorrectly addressed purchase invoices;
  4. Submitted VAT Returns not agreeing to the accounting records for that quarter;
  5. VAT not being accounted for correctly, or at all, on the sale of Fixed Assets.
  6. Importing of goods from EU and Non EU countries incorrectly treated for VAT;
  7. VAT wrongly claimed on Entertainment or staff meals etc;
  8. No VAT scale fuel charges being applied.

 

PAYE

 

  1. Directors NIC incorrectly calculated when bonuses are paid;
  2. Insufficient receipts to justify some business expenses;
  3. Not declaring the provision of benefits to employees;
  4. Entertainment expenses for customers and staff not being treated correctly;
  5. Lack of receipts for employee and directors expenses;
  6. Incorrect treatment of Employees with regard to Statutory Maternity Pay and Statutory Sick Pay;
  7. Status queries with regard to whether any self-employed individuals should really be treated as employees.
  8. Using out of date payroll software so the correct parameters have not been used.

 

 

At the end of the visit, the Officer will hold a meeting with you to discuss their findings and they will normally ask you questions at this stage. You are not legally obliged to answer and you can ask them to put it all in a letter to you so your Accountant or Advisor can reply to their queries after due consideration. Do not let them pressurise you into saying or doing anything you do not have to. If your Accountant is present at the meeting let him deal with it.

 

A business should expect a compliance visit at least every six years – more so if they are in an industry in a risky sector ie. cash businesses.

 

If you are due to have such a visit, contact your Accountant or Business Advisor immediately. Otherwise you can contact me for advice at:

 

Griffins Business Advisers

1 Commerce Park

Brunel Road

Theale

Reading

RG7 4AB

 

0118 923 020

 

c.duggan@griffins.co.uk, and don’t forget, we are on Twitter and Facebook too!

The rules of startup

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Starting up a business is no easy ride. You might have the best idea or the most amazing product, but thats just the first hurdle.

 

It’s common knowledge that you need to have enough money in the bank to last you two years, as in the first year you are likely to make a loss, break even in the second year and only become a profitable business in the third. Of course, although this is common knowledge, it still equates to a long and hard process. Not only this but you must have a clear vision and direction for your business if you want it to progress past this point, be successful and grow in profitability.

 

However before you start-up your own business, it is always valuable to remember why you are doing so. While it can be one of the most rewarding leaps to success, it can also be very risky and stressful. Simple things can make a big difference:

 

  • Know the direction you are going in.
  • Know your target customer base.
  • Understand why people need or buy your services in the first place!
  • Know your competition, your market and your field.

 

If you lose sight of why your business is profitable, others will too.

 

Griffins Business Advisers can help with business start-ups, guiding and helping you to envisage the future of your business and manage those funds in the first years as well as in the more mature years of business.

 

Here are some of the important business processes that our business advisors in our Reading office can help you with:

 

  • Payroll
  • Tax advice
  • Compliance
  • Wealth management

 

For further information on how we can help guide your business to success,  please contact us at www.griffins.co.uk and don’t forget to join us on Facebook and Twitter for more advice and news!