Accounting Archives - Sanay Ltd
VAT Moss and E-Commerce Business

Disclaimer: Policies discussed are as of the January 8 2016 changes to the HM Revenue and Customs VAT MOSS guidelines for E-Commerce businesses in the United Kingdom. All UK VAT and VAT MOSS guidelines can be found here.

In 2015, as an answer to large companies driving sales through countries with low VAT rates, the European Commission issued changes to VAT laws forcing E-Commerce businesses to apply VAT rates to their digital services based on the consumer’s location in the European Union, as opposed to the business’.

In essence, the same £100 service would now be £120 if sold to a customer in the UK (20% VAT rate), £121 if sold to a customer in Spain (21% VAT rate), and £124 if sold to a customer in Finland (24% VAT rate). This proposed an immediate problem for every E-Commerce business across the EU- there were 28 different countries with 81 different VAT rates, the prospect of accomplishing the admin work alone seemed insurmountable. As opposed to registering for VAT in every country your business sold a product in, the EC offered the highly attractive option of registering instead for a VAT Mini One Stop Shop (VAT MOSS) to E-Commerce businesses. While VAT MOSS did solve a huge problem for e-commerce businesses across the EU, much confusion arose and remains about its exact operation and regulations.

What to Know & When to Register

The main goal of VAT MOSS is to simplify things for the business, and it only applies to business to consumer sales of digital services. If you aren’t sure if your product qualifies as a digital service, HMRC defines them in extensive detail here.

VAT MOSS was introduced as a platform to distribute quarterly VAT returns directly to each country digital services are sold in, as opposed to you submitting VAT reports individually to each country. VAT MOSS requires you to submit one return quarterly that identifies your business’ total VAT accumulation in each country digital services were sold.

In order to register, your business must already be VAT registered in each country you have a fixed establishment. There are no thresholds for the new VAT laws, so even if your business falls under the £82,000 UK VAT threshold, you must still pay VAT on digital services sold in other countries. This means if you own a micro e-commerce business under the threshold, then you must voluntarily register for VAT (don’t worry, you won’t have to pay VAT on services sold in the UK) in order to use VAT MOSS.

Remember, you only need to register for business to consumer sales of digital services. A consumer is any person or business that is not VAT registered, so if you are selling services to a business that is not VAT registered, you must treat it as a business to consumer sale. There are also exemptions if your sales fall under non-business activities, which are explained here.

VAT MOSS Returns

HMRC requests when using the VAT MOSS scheme that your business keeps records of each sale for up to 10 years. These records must include the member state of sale or the member state of consumption, the date, the taxable amount and currency, the VAT rate applied, the VAT due and currency, the payments received, the invoice issued, and the information used to determine the customer’s location. The list seems extensive, but most of the information is required on your service invoice. Apart from the data on your invoice, documentation of the customer’s location is the primary record that must be kept. Most businesses must keep two sources of information, but businesses under the UK VAT threshold only need to keep one. This may be information provided by the payment service provider, an IP address, billing information, etc. Almost any documentation that confirms your customer’s location will suffice.

When filing your VAT MOSS return each quarter, you will require, for each member state services were sold in, the VAT rate type (standard or reduced), the VAT rate percentage, and the total of all taxable digital services sold. You must also submit a separate VAT return for services sold in the UK (micro-businesses who had to voluntarily register for VAT may submit nil returns). If you are leery about filing your first return, the HMRC provides a detailed walkthrough for first-timers using the VAT MOSS scheme.

While VAT MOSS remains imperfect, as evidenced by continual EC gatherings and amendments to the laws, learning to use it has become essential to reporting and paying VAT returns across the EU. It is our hope that some of the trepidation regarding VAT MOSS has been alleviated, and that you now possess an understanding of the benefits VAT MOSS can have for your e-commerce business.

Top 3 Ways to Optimise Your Recruitment Business Profit

Are you looking for tips to augment your income and increase your recruitment business profit? Do you feel your business’ income is high enough yet stagnant and unprogressive? Well, it could be because you have followed every conventional method in the book but not yet tried any novel ideas to make your business grow. Having your own website, a regularly updated blog, marketing your services to target businesses are certainly important to acquire new clients. However, it’s the inventive ideas that could add value to your business operations and bring in more money.

There are some people that hopped on the recruitment bandwagon with a hope to grow their venture into a successful recruitment firm. Some of them made it, some of them didn’t. It’s the way they set their priorities that separated them. Today in this article, we are going to give you some great pointers on how to increase the profitability of your recruitment business and have it aiming for the stars.

Get Someone to Guide You

Recruitment agencies involve a lot of people on all sides. In order to sustain and grow in an industry that deals primarily with so many people, it is necessary that you have both solid knowledge and experience in the industry and also that you consider taking on the services of a non-executive director.

An ideal non-executive director is someone who is able to advise on both operational and strategic aspects of your recruitment business. Since the methods of job hunting are ever evolving, a tech-savvy person, possibly with some financial acumen would be a well-suited runner for the position. It goes without saying that having a non-executive director onboard would be another fee you have to pay. However, it is the returns they can bring your business that matter in the end.

Before you get started, make sure your non-executive director signs a confidentiality agreement. It will prevent them from associating themselves with your competitors while they are working with you.

Niche vs. Diversification

Up until now, owning a niche recruitment business has made sense. It’s simply not feasible to help your clients find potential employees to fill the positions that are out of your specialty. As a manager, you had to say ‘no’. Imagine you are a specialist marketing recruitment agency and your client asked you to find them a finance manager! It would be tough to decline their request, but you have to say no because you do not have a track record in finance. If at all you do oblige, you would have to commit your time and resources, engage in networking, go through a new set of applicants and get them interested in the opportunity etc for filling just one position. Once the position is filled, all your painstaking efforts wouldn’t reap any long term benefits whatsoever.

The current scenario has been changing and it’s only wise for a recruiting business to diversify. We know that diversification could mean a lot of work. It has become incredibly easy to operate across multiple specialties and be a jack of all trades with the advent of the dedicated professional services businesses. For example, you could entertain all kinds of clients and help them fill positions right from housekeeping and cafeteria to sales & marketing, finance and administration. You can simply associate with professional services businesses that specialize in housekeeping, accounting & bookkeeping, engineering, finance, etc. You could broker it out by recommending any of these professional services businesses to your clients depending on the kind of vacancy they want to fill. This strategy would not only help you diversify efficiently and cost-effectively but also earn you twice as much. Your clients will still pay you a recruitment fee and the professional services businesses pay you a referral fee depending on what you agree. a win-win situation for everyone. This concept is fairly new but we are sure it will catch on soon. We have a referral programme set up that can work excellently with recruitment agencies. If you want to know more about how our referral agreement could increase your income, please get in touch by emailing us at Info@sanaybpo.com. You could also call us on +44 1624 616620.

Identify and Eliminate Non-Profitable Clients

In the recruitment industry, the quality of clients matters way more than the number. As a manager of your business, there will be times when you have to deny service to certain clients, i.e., the businesses with a bleak prospect. The probability of filling all the available positions is usually very low. Your consultants would give their best to fill up 15-20 vacancies simultaneously. However, only 2-3 vacancies get filled in the end. You need to concentrate on quality rather than just the number of vacancies. Committing your staff to work on all the proposals would prove futile, that is why you need to sift through all the available live vacancies and pick those having the best change of actually being filled. It’s difficult to turn down customers, but with time, you would know how important it is to have a base of genuine with robust businesses.

Apart from all the other activities such as marketing your services to potential and existing clients, attracting the best talent and consistently training on your own staff to keep up with the changes, the above three ideas would certainly do a lot of good to your recruitment business. It will not only wider your market, but also reduce cost and enhance revenue and profitability to a considerable extent. We hope you found this article helpful. If you need to contact us with any queries please get in touch, we’d love to hear from you.

Cash Flow

Many business owners I talk to don’t have a problem growing their business, they have a problem managing that growth.

Often when a business grows rapidly without being prepared it can lead to strains on the owner’s time, stretched resources, unhappy and disengaged employees and pressure on the finances of the business.

Put simply, sometimes high growth businesses are too successful for their own good, or should I say that’s how they appear, when in all reality this can be managed before getting into cash flow difficulties.  Sometimes the peculiar situation arises whereby a successful business appears to really be struggling financially when they don’t need to be.

What follows is some practical guidance for businesses of all sizes and in all industries for managing their cash flow.

Cash Flow Fundamentals

First and foremost it’s crucially important to understand how the cash flow of a business works.  This is not the same as the profit a business makes.  It is absolutely possible for a profitable business to go bust if they don’t manage their cash properly.

At the most basic level, cash flow is the difference between cash coming in to the business and cash going out of the business. It’s that simple right?  Well, not exactly, some attention is required to maximise cash inflow and minimise cash outflow.

To ensure that cash flow is optimised we can concentrate on 3 key areas for maximum effect.  These being Inventory, Accounts Payable (or Creditors) and Accounts Receivable (or Debtors).  Let’s have a look at each in turn.

  1.    Inventory

The purchasing of stock which will be re-sold at some time in the future, possibly as it is or possibly after some adaptation, has the potential for tying up your cash.  If a business has its money invested in stock sitting in a warehouse then this can’t be spent on other things which may be of more immediate benefit to the business.  Not to mention that the longer that stock is held increases the risk of waste, theft or obsolescence.

Only enough inventory should, therefore, be kept to fulfil firm orders unless the item is something which can be used in many product lines as this could increase response time to customer orders.  The management of stock will require an effective supply chain but only that which is required imminently should be kept on hand.  Keeping large amounts of inventory can mean increased costs associated with storing, managing and securing that inventory.

  1.    Accounts Payable

As a general rule of thumb, paying suppliers as late as reasonably possible will positively impact cash flow.  Businesses large and small can take advantage of maintaining an effective and lean accounts payable function.

Where suppliers invoice on credit try to pay as close to the due date as possible, if you have a good reputation for paying on time you may also be able to negotiate extended credit terms meaning that your money stays with you for longer. Occasionally suppliers offer discount incentives for early payment, you should weigh up the benefit of the reduced cost against the benefit of extended payment terms at a higher amount.  It very much depends on each individual situation and would need to be balanced against how much cash you have and whether your cash receives any interest invested anywhere else.  If you’re short on cash you would probably be better not paying earlier than necessary.

A cautionary note, however, would be that not paying suppliers on time regularly can lead to reputation damage, supply chain interruption and withdrawal of credit facilities.  This is not a position you want to find yourself in if you already have cash flow worries and will certainly make managing growth harder than it should be.

  1.    Accounts Receivable

If selling to a customer on credit the first step before anything would be to determine the risk of selling to them by checking their credit history, whilst no guarantee it should reduce the risk of default on invoice payments.  If a prospective customer has a history of non-payment then you need to determine whether you want the sale more than you want the money in the bank…the two are not the same thing.

Quite the opposite of accounts payable, the aim in accounts receivable is getting paid as quickly as possible.  One way of doing this would be to reduce payment terms for as long as your customers will accept this.  Another very effective way of getting paid on time is making it as easy as possible for customers to do so. There are a variety of ways that this can be done from electronic invoicing to accepting other payment methods or offering incentives.

In addition to all of the above, consideration should also be given to the selling price of products based on how complex they may be to create and deliver, so that you charge commensurate with the complexity involved.

One of the larger costs that businesses often incur is staffing, it’s always important to review workload and determine up to date and realistic staffing requirements- perhaps hiring staff to work in support functions is not the best option, that’s where specialist professional services companies come in.

On a final note it’s important to realise that often the business owner’s time is not best spent managing the day-to-day cash flow, that’s where accounting and bookkeeping businesses such as Sanay can help.

Business Success

For many business owners who are trying to keep costs down, they try to do their accounting and bookkeeping themselves.  But these areas that can make or break your business success.  They are critical in managing your cash.

Here are some reasons you must not do it all on your own if you wish to be successful in your endeavour.

1.       Challenges in growing business

Starting up your own company will have several challenges.  You will need to come up with the right business plan, budget, and methods to manage cash flow, among other things.  But engaging with a professional bookkeeper or accountant can make life easier.

You may think that doing it on your own can help you save money.  But is it a good idea to use your time doing taxes or other accounting tasks?  Or are you better off spending your time focussed on growing your business?

How much is 10 hours of your time worth? During this time, you could already be driving new sales, winning a lucrative contract or developing your business in other areas.  It probably doesn’t pay off doing it yourself when you think in these terms.

And what if you make errors?  You are likely to do your accounts all over again, which can double the cost.

Getting an accountant to take care of your finances will actually cost less in the long run.  You will not only have the extra time to think about how to generate revenue but you will also have peace of mind knowing that an dedicated professional is already looking after your accounting needs.

2.       Getting back on track

It is easy to lose track as your business grows.  Outsourcing all accounting jobs can help you avoid losing control of how much is owed and from which customers.

Outsourcing accounting jobs will also help you with measuring key business metrics.

They can also help you manage your payroll and produce great reporting that lets you see periodic comparisons.

If you outsource your accounting jobs to a company that utilises cloud-based accounting software, you can easily and quickly look at your business accounts to better understand your current financial situation at any given time.

Overall, these can help you in monitoring your business and keeping track of your cash flow.

3.       Delegating tasks

It is natural to feel reluctant in allowing others to handle any part of your business.  But your inability, however well intentioned, to handle everything can ultimately damage your business.

Therefore, you have to let go of some responsibilities and allow others to handle some of the support functions of your business.  In that way, you’ll have more time to look after the core functions, support your customers and concentrate on what you do best.

Delegating accounting and financial affairs to others is a good start.  Successful business owners are delegating their work to the right people.

Getting the help of an accountant can help your business every step of the way.  Your job is to run your business.  Leaving the financial details to someone more qualified is a positive step in the right direction to helping your business grow.

Cloud Accounting

Cloud accounting is fast becoming a necessary tool for small businesses. With the help of mobile phones and tablets, accessing your financial documents on the go can be achieved with cloud technology.

Despite the availability of these tools, only relatively few small business owners are using them.  If you’re one of those owners who are resistant to the concept of this technology, it’s probably the right time for you to overcome your fears.

Here are the most important reasons your small business should embrace cloud accounting technology:

1.   Easy collaboration with staff

With the advent of cloud accounting, accessing your financial data in a fixed location is becoming a thing of the past.  Cloud accounting lets you and other authorised users delve into the financial data of your company regardless of their location.

Since it’s not in a centralised location anymore, viewing your financial data is no longer restricted to the office.  If there are things that require your attention, you don’t have to go to your office to update them. You can take your business wherever you go.

2.   Better Cash Flow

It has been suggested that business owners who embrace cloud accounting and accept online payments get paid faster. The reason for this is that automating invoicing can improve cash flow; thereby, saving time in following up overdue invoices.  Some cloud accounting providers also offer simple financial management tools to reach customers wherever they are.  By doing this, payments are easily received.

3.   More accurate picture of overall financial

With cloud accounting you can easily review your numbers whenever and wherever you want to, you can quickly respond to any type of challenge.  With easy access to all the information, you have better decision-making capabilities.  As a result, you can conveniently keep track of your bottom line.

4.   More flexible

As the business evolves and grows, cloud accounting can grow along with it. This type of technology also allows you to utilise other relevant apps so that you can efficiently compete with other companies.

5.   Better backup

With cloud accounting, backing up your financial data is easy.  In case of a system crash, you can retrieve the data from the cloud storage client.  This ensures that you will not lose all your important financial info.

Since you can upload your financial documents, you can share them with your employees and co-workers, so they can have appropriate access to these relevant files.

6.   Better compete

Cloud accounting is cheap but efficient.  You can start to keep up with some big corporations. It gives you a voice in your niche allowing you to take your business to the next level. By using a remote bookkeeper, it can lower your business’ overall costs and it makes accounting and bookkeeping a lot simpler.

Cloud accounting gives any type of small business an effective way of competing with larger companies.  It is true that there is still a lot to learn about cloud technology, however, once you use it, you will realise the benefits in simplifying and securing your accounting processes.  Not only that, it allows you to remain competitive without having to pay more.

One challenging aspect of business is keeping the books up to date and getting it right.  A simple accounting mistake can seriously damage your business.

Many business owners rely on their accountants in helping their business comply with taxes, payroll, bookkeeping and other accounting issues.

Listed below are some of the accounting mistakes that you must avoid, if you do the accounts yourself, to prevent significant damage to your business.

1.       Not prioritising receivables

Undoubtedly, cash flow is the lifeblood of any business.  If you are not enough money coming in, you will find yourself going backwards or worse going under.

When an invoice is issued, a receivable is recorded, when the customer pays, the payment is applied and the invoice marked as paid.

Not monitoring who has paid will leave you in a situation where you’re unsure who truly owes you money.  After all, making the sale means nothing if you’re not being paid for it.

You need to regularly and systematically monitor who has debts and how old they are.  You also then need to regularly request payment when payment is late.

As a result of not properly managing receivables, you may ultimately suffer from high bad debts.

To help avoid this, you may consider investing in a cloud accounting and online payment system. They can automate processing receivables to help you get paid faster.

2.       Not keeping track of expenses

Expenses are a necessary part of any business, be it small, medium or large.  Unfortunately, many business owners find themselves overwhelmed when it comes to tracking down receipts and other accounting documents.

If you don’t keep supporting expense receipts properly, it can result in cash flow problems, accounting and tax issues.

But saving a receipt for every expense can be cumbersome.  This is one of the reasons many business owners today are using cloud accounting and remote bookkeeping organisations to help them in organising business expenses and recording them properly.

3.       Not keeping personal and business finances separate

Combining the two can put your business at extraordinary risk.  It’s a common mistake that can be easily avoided but there are many small business owners who are still using one account for both their personal and business finances.

This problem can easily get out of hand.  Plus, this issue can cause problems with the tax authorities.  To avoid it, you should unquestionably have separate bank accounts for your business and personal needs.  Keeping things separate ensures that you don’t confuse what belongs to the business and what belongs to you.

4.       Not seeking help from a professional

At first, it’s tempting to handle all accounting tasks on your own to try to save money.  But, when your business starts growing, not hiring a professional can be a very bad idea.

You may think that you’re saving money by doing your taxes on your own, but, the truth is that this mistake can cost you a lot, further down the road. You might be overpaying tax, which is as good as throwing money away or underpaying your tax bill, which can lead to penalties.

Having a qualified professional taking care of your accounts can save time and money. You can concentrate on your core business and it will take the stress out of accounting.

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