Money, money, money

Most small businesses fail because they run out of cash. It caught out a lot of people who couldn’t cope while they waited for covid funding came through. Hopefully we’ll never have to manage a global crisis of that magnitude again but there are many things that might go wrong for individuals. I’ll talk about business continuity planning separately as I just want to consider your bank balance today.

I recommend reading the first half of Profit First by Mike Michalowicz and I think I’ve written about it before. There are some good principles and the remaining chapters just go into more detail

I have a Starling account which comes with savings spaces and I do monthly management accounts on Xero so I try to ensure that I have the following saved:

  • VAT per Xero
  • Corporation Tax per Xero management accounts (or you can save 19% of your profit)
  • 3 months of overheads in case of illness or crisis which can also be used to buffer any large or unexpected bills
  • Dividends to pay myself later in the year
  • Spare cash to pay into my pension later in the year to minimise my tax

I usually pay my suppliers immediately because, as a small business, it reduces my admin to only deal with each transaction once. You should ensure that you have enough funds to pay your suppliers on or before the due date. A business is insolvent if it can not pay its debts on time.

I also use a Starling account for my personal finances and I use my savings spaces for:

  • 3 months of household costs in case of illness or crisis which buys me enough time to sort out alternatives
  • Savings to replace my car every three years
  • Savings for holidays each year and fun experiences such as watching musicals with my kids
  • Income tax due on my dividends and other income not on PAYE.

It’s taken a long time to build up this financial security so don’t worry if you’re not there yet but, if you’d like a hand with making your business run more profitably, please give me a shout.

Stop! Don’t buy that book!

Like most authors I’m delighted when people buy my books (list and links below) but less pleased when they sit on the buyer’s shelf gathering dust.

I’m as guilty of this as the next person with over 100 unread books (fiction as well as business) on my bookshelves and Kindle. Or perhaps I’m worse than most?

Unread books are just a waste of money. Better to read one book a year and implement any useful actions than to spend on unread books that can not possible generate any benefit. It’s why we make it a condition of all our coaching and courses that the client spends at least half a day per week working through any agreed actions.

It’s not even a time thing as I read pretty quickly and can finish a 200 page book in a couple of hours. So, my resolution is to stop wasting time on Netflix and to read AND IMPLEMENT at least one book a month. Will you join me? And what will be the first book on your list?

If it’s one of mine the links are here:

For accountants and bookkeepers:
The Numbers Business: how to grow a successful cloud accountancy practice

Changing the Numbers: how to deliver advisory services for maximum success

For any type of business:
Growing by Numbers: how to scale up your small business with confidence

Making Tax Digital for landlords

Landlords with rental income over £10,000pa, ie charging rent of just £834 per month, will have to join MTD ITSA (Making Tax Digital Income Tax Self Assessment). This means that they will need to keep digital records and submit quarterly reports to HMRC from April 2024.

Speaking to friends on both the accountant and HMRC side of the project there is no sense that this date will move so I’ve been looking for some software to help landlord clients to comply with these new requirements without costing a fortune. I have a couple of possibilities that I will be reporting on over the next couple of months. I’ll be sharing the articles on social media but, if you miss them, then please do get in touch for the links.

How to increase your prices

Last week I talked about WHY you need to increase your prices but, less talked about is HOW you go about doing it.

It’s a lot easier to talk about in theory than it is to do in practice.

  1. Work out what your prices should be. If you need to provide quotes then work out what your method of calculations will be.
  2. Recalculate up to date prices for all your clients.
  3. Consider using pricing software which provides confidence to both buyer and seller that this is the right price.
  4. Start by increasing prices for new clients
  5. Email/write to all clients with the new price. If you have not done regular price increases before then you may need to explain that this is due to catching up an several years and reassure them that you will not leave it so long in future. Keep your explanations brief.
  6. Telephone any clients who need extra TLC or if a change in scope means that the increase needs further explanation
  7. Resist discounting. You worked out your prices in (1) above.
  8. Practice telling client your new prices. If you’re an introvert who hates role play then just rehearse in front of a mirror:

“Our new prices are …”

“We do not offer discounts”

Also prepare responses to any other potential objections so that you don’t need to think on your feet quite so much.

Why you need to increase your prices

A lot of business owners avoid increasing their prices, either because they’re worried about losing clients or because they don’t know how to go about it. Even when they know that they need to increase their prices it is too easy to procrastinate (I’m the queen of procrastination, I have all the excuses)

I’ll cover the ‘how’ in separate tips but today I want to talk about why.

We all started our business for a reason which broadly come into one of three areas:
• Profitability
• Build something valuable to sell at retirement
• Better work – life balance

All of these will benefit from having better prices allowing you to earn more money, increase the value of your business, or to earn more in limited time.

But the real benefit to our clients is that we will have time to provide a quality service. To do things properly and not cut corners. And to run a business that will still be around to help them in future years.

When we provide a quality service our clients benefit, they stay with us, and they refer other people to us. It’s a virtuous circle because everybody wins.

To create the business you want you need to charge the right prices.

Do you set boundaries?

I work with a lot of people who are overwhelmed in their business as they have bitten off more than they can chew. When we start working together it soon becomes clear that they need to improve how they set boundaries.

Here are a few ideas I often use:


• Practise saying “no” in front of a mirror. It makes it easier to say to a real person.
• Practise saying “no” without feeling the need to offer an explanation.
• Practise saying “no” with a polite smile
• Be clear on what you are willing to do for your clients. Your engagement letter should act as a reminder to you as well as to them of what you are contracted to do.
• When a client asks for something extra tell them “yes we’d love to help you with that and it will cost £X” (fixed fee or per hour)
• Do not discount your fees. You are not a charity. If people are struggling then reduce the scope so they do more for themselves eg we provide basic bookkeeping training videos if the owner is capable of doing this themselves
• Do not provide extended credit. You are not a bank.
• Set appointments in your diary to make time to do something for yourself
• Ring up an old friend and arrange to meet for lunch or an enjoyable activity. It will get you out of the office. If you’d prefer to be alone then book a facial or a massage or plan a bike ride with a nice cake stop.
• Set an alarm for when you intend to finish your working day and then leave your laptop on your desk when you close your office door
• Stop reading this and practise saying “no”

Are timesheets useful?

Anyone who had to do timesheets in an accountancy firm probably remembers how much time they spent/wasted recording their time to the nearest 6 minutes. Then trying to make sure that the hours balanced. What did you do with the extra hour you worked but didn’t get paid for? And what about the 7 hours on the job that was already over budget? And then being beaten with a big stick (not literally) for dumping everything to admin.

Most businesses, with the notable exception of lawyers, now charge fixed fees rather than hourly rates so timesheets are rarely used for billing. So, what purpose do they serve?

They are a mine of management information.

That over budget client was undercharged for years because nobody was honest about how long the job actually took. One staff member took twice as long to do jobs as another because they hadn’t been trained properly. And the amount of time genuinely spent on admin justified investment in some automated systems to speed things up.

So, what is the compromise?

We keep timesheets to the nearest 15 mins with the exceptions of phones calls and ‘quick’ emails which are recorded as a minimum of 10 minutes because of the disruption to other work. If I do some work on the train to a meeting, then I may double record the time as part of the meeting time AND the job I worked on on the journey as otherwise it would have had to be done in the office.

This means that I know roughly how much time (our most expensive resource) is spent on each job so I can ensure that our fixed fees cover this as well as a share of the automation and overheads. What I really need is reporting by exception. What jobs are taking significantly longer than expected so that I can see what the holdup is and how to improve. This doesn’t need 6-minute reporting. And it doesn’t need a timesheet balanced to the official working day.

Before implementing timesheets think about WHY you want them and make sure that they will give you the information that you need. You may find that the recording process doesn’t need to be too onerous. I use the Xero project app on my phone, but Toggl is another free resource.

How can tech help a small business?

With MTD on its way for sole traders and then limited companies it is essential to get everybody keeping digital records sooner rather than later. But, while MTD are wielding the big MTD stick, what are the benefits to small business owners of using modern cloud software for their bookkeeping?

  1. Multiple users can log in at the same time so accountants can help clients more proactively with queries or business issues
  2. Gone are the days of manually typing everything. Software can link to data entry apps to do your bookkeeping from a photograph or PDF thanks to OCR (Optical Character Recognition) or can link directly to electronic tills or online shops as well as automatically uploading your bank statements.
  3. Invoices can be raised from the app on a phone and card payments taken before leaving site. Saving Friday nights for relaxing rather than paperwork
  4. All this automation means that business owners can do some of the work themselves to reduce their bookkeeping bills.
  5. With remote access to the business numbers accountants can finally be more proactive
  6. Management information is available at the touch of a button. Of course, more complex businesses may need proper management accounts but even that is quicker with up to date bookkeeping.
  7. We run monthly bookkeeping health checks* for all our clients so that, even when they do it themselves, we can ensure that their record are up to date and in a good state each month.
  8. With up to date bookkeeping year end accounts can be produced much faster.
  9. Accounting software can be attached to hundreds of apps to help project management, staff scheduling, stock control, and all sorts of other parts of the business.
  10. It is easier to have regular contact between business owner, bookkeeper and accountant and to provide the best service possible.

*At Minerva Accountants we use Dext Precision, formerly Xavier, for most of our health check reports.

What is business advisory?

As you know I’ve spent the last year writing ‘Changing the Numbers: how to deliver advisory services for success’ to help accountants to provide real help for their business clients. And I’m the first to agree that, whilst all businesses need this service, not everybody can afford to pay for it. (This is why we have free products such as our Better Business webinars for accountants and our Money Matter ones for general business.)

But for those clients that can afford to invest in growing their business then we can do much better than a bit of tax advice at the year end or help completing a loan application. As accountants we have financial training but we also have exposure to hundreds, if not thousands, of businesses as well as running our own.

Accountants who, like me, have worked as Finance Directors or similar will know that their role at the board room table includes much more than ‘just’ accountancy. The topics that I’ve identified include:

1. Vision and values
2. Cash flow
3. Pricing
4. Staffing
5. Efficiency of operation
6. Funding
7. Tax
8. Mergers and acquisitions
9. Marketing
10. Sales
11. Customer services and quality
12. Cost control

Different accountants may offer advice on some or all of these areas depending on knowledge and experience so we need to be clear on those areas.

What do accountants and dentists have in common?

We’re both viewed as necessary evils.

I was quite shocked when, a few years ago, an old friend told me that she would rather see her dentist than her accountant. As somebody who is terrified of going to the dentist (he’s lovely really) this really made me view myself as an accountant in a different light.

I see myself as an expert who loves to help business owners. Sometimes that’s keeping them out of trouble and other times it can put an enormous smile on their faces. And my dentist probably sees himself the same way.

So I started to think about why I had chosen my dentist and what I could learn as an accountant:
• I choose to pay a little more in the hope of a better service than mere competence. I want somebody to take a little more time to reassure me should I ever need any work done.
• They have a dedicated car park (although I walk as they are opposite my office)
• The receptionist, Belinda, is probably their biggest asset. She always calls 48 hours beforehand to confirm the appointment so there’s never any confusion.
• Belinda is very reassuring with her calm, competent manner. She explains all Covid restrictions clearly as they are constantly changing
• The waiting room is calm and has free Wi-Fi so I can distract myself by checking my emails or messaging a friend while I wait.
• There are calming videos of fish and wildlife, including on the ceiling of each surgery. (I’m not sure what the accountants’ equivalent would be)
• The dentist and hygienist themselves are always friendly and ask about my kids or work; something personal to relax me.
• They take payment as I leave and book in the next appointment.

How much more enjoyable would clients find it if we spent time on creating a welcoming environment in our business? Take a few moments to think about how you interact with clients at every stage.