We live in an ever changing world, and never is that more the case than when you are in business. So what challenges do we see as being faced by small businesses over the coming months? There are plenty to choose from, but I will focus on just two.
Digitisation of accounting records
You may have heard of the “Making Tax Digital” (MTD) initiative that will commence roll out from April 2019 onwards. The name is a little of a misnomer – the implications for business owners go beyond just tax issues, but impact fundamentally on the way they maintain their underlying accounting records.
The timetable for implementation has changed from the initial announcements, but from April 2019 VAT registered businesses above the £85,000 turnover VAT threshold will be required to maintain their accounting records in a digital format (ie using appropriate software) and to submit their VAT returns directly from that software.
What changes does this mean for businesses? They will generally fall into two camps:
1. They already maintain their accounting records using accounting software – existing accounting software is currently not MTD compliant, so the ability of the current software provider to provide a suitable solution needs to be considered. This may well mean there is a need to transition to a new product, with the time and cost implications that arise from this.
2. Many smaller businesses currently maintain their accounting and VAT records manually or using spreadsheets. These will no longer meet the requirement for keeping digital accounting records. There are low-cost, cloud-based accounting solutions available that probably are the best option for these businesses. There will, however, be a steep learning curve in the transition from a system that people are comfortable with to software based accounting records.
“But this won’t affect me for over 12 months”, I hear you say. That may be true, but it isn’t the wisest course of action to look to implement a totally new way of maintaining these records just from the date you are required to be compliant. At Thomas Westcott we are already working with our clients to identify the best solution for them, and to provide initial training where required.
Are you facing the challenge of increasing costs in your business? I think we all are. Inflation is at its highest level for 6 years at 3%, but this average figure masks much larger increases in say insurance premiums, or for those businesses reliant to some degree on imported products in their supply chain, the impact of the fall in the value of sterling over the last 18 months has been 10% or more on the cost of some products.
In coming months, we also have the impact of increases in employer pension contributions under Auto Enrolment, doubling from 1% to 2%, and the 4.5% increase in the National Living Wage, both effective from April 2018.
What can small businesses do to deal with the impact of rising prices?
1. When was the last time you reviewed your prices for the goods or services that you supply? These should be monitored regularly and a price increase really should be implemented at least every 12 months. Small businesses in particular sometimes don’t feel confident about initiating a price increase, but you need to be bold to give your business a chance of longer term survival.
2. Undertake a review your current suppliers - negotiate on prices wherever possible.
3. Are your business affairs structured as tax effectively as they could be? Tax is a cost of running a business, and this should not be overlooked when reviewing the cost base of that business.
Having a conversation with a trusted advisor around these issues, one who will challenge you in a constructive manner, will help you in making these sometimes difficult but necessary decisions.
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