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.

Pricing Your Restaurant Menu

Opening a new restaurant is definitely not child’s play. There is so much that needs to be done; developing a business plan, arranging the finance, acquiring a suitable location, setting up the kitchen, furnishing the premises, obtaining licenses, hiring and training the staff and so on. When all the founding steps have been taken, here comes the fun part of putting together the menu.

Compiling a menu is not just about what items your restaurant offers to the customers but at what price. Your pricing strategy has a long-term impact on your restaurant’s brand image as well as the sales revenue. A price is more than just a number. The same goes for existing restaurants as well. No matter how many years your restaurant has been in business, you need to evaluate the product pricing and the factors associated with it from time to time.
In this article, we aim to tell you about the factors that you should consider while you price your products.

Calculating the Food Cost

It is obvious that before you price any item on the menu, you need to know how much money went into preparing it. In general, it is widely acceptable for the restaurants to charge three or four times the food cost. Let’s take an example of the steak dinner.

A steak dinner typically comprises of a steak, a sauce, some bread, vegetables on the side like sautéed mushrooms, peas, and French beans or a side of fries and some salad.

The steak costs you £6 and the other items that come along with it account for £2, then the total meal costs you £8. The food cost should preferably be within the limit of 35% of the menu price. So, divide the food cost by 35% to arrive at the menu price of the steak meal.

Food cost * 100 = Menu Price
35
£8 * 100 = £22.86
35

You can price the steak meal at the minimum £22.86. As we mentioned earlier, the menu price is a little under three times the cost, which is acceptable. Furthermore, you could employ a psychological pricing tactic. Instead of pricing the steak meal at £23, you could go for £22.50 or £22.99. The customers perceive £22.50 and £22.99 as £22 and not £23, making it look like a good deal. You end up making almost a pound more on each steak meal without making the customer unhappy.

£22.99 for a steak meal sounds like a lot to you because you know it actually cost you only £8. But we are yet to consider the cost of labour involved, such as the chef, the servers, the bus boy and the cleaning staff. You need to pay these folks as well and it all needs to be covered through the menu price. You also need to take into account the overheads like gas, electricity, water etc. Besides, £22.99 for a steak dinner is just the minimum that you should charge. The pricing will vary with the following factors.

  • What model do you follow; table service or self-service?
  • How is the ambiance of the restaurant and if it is a casual dining or fine dining establishment?
  • Are your food offerings market-driven or demand-driven?
  • What is the location of your restaurant, downtown or uptown?
  • Who are your target customers? Are they residents, office goers, students, travelers, shoppers etc?
  • Do you have a medium of entertainment such as a live band?

These are some of the major factors to consider before assigning a price to the menu item. Also, involve the staff responsible for purchasing and inventory management in the process of determining the food cost.

Exercise Portion Control Measures

For your food cost to be the same for every order, you need to implement strict portion control. If you calculated the cost at £6 for a 6 oz. steak, all the other steaks that you prepare should weigh the same. Similarly, the quantity of accompaniments like sauce, salad, vegetables and bread should be the same as well. Instruct your chefs to measure each ingredient they use with the help of the measuring cups and scales.

Lastly, involve them in the exercise of portion control. They know the best because they are the ones who actually prepare the food and know precisely how much of what ingredient goes into making a particular dish.

Have an Extensive Menu

Along with the pricey items like steak and seafood, you could offer other less costly items like chicken preparations and pizzas. This will help balance your overall menu in case the cost of ingredients for the expensive dishes rises for a while. The sale of the less expensive items would offset the burden of the increased cost.

We hope this write-up gave you an insight into how important it is to put more thought into pricing the menu items. The price should not only cover the costs but also justify the quality of the food and the entire dining experience of the customers. We will be back with some more, interesting articles about restaurant operations. Stay tuned!

Restaurant Variance Analysis

Do you find your restaurant’s operating results unsatisfactory? Do the profits turn out to be diminished compared to what you had anticipated? It’s time you took a closer look at the operations scenario and figure out what’s making those numbers shrink. Variance analysis is one of the most powerful and practical tools at your disposal to investigate the deviations between the budgeted and actual results.

It goes without saying that restaurant owners prepare budgets from time to time for both the fixed costs and variable costs. The budgeted cost is then topped with a percentage markup to arrive at the selling price of the items on the menu. It is when the actual costs deviate from the budgeted that there is a variation between the budgeted and the actual profits. The variation could be either positive or negative. Let’s take a look at the following example.

Let us consider that your restaurant had expected to serve 1400 meals this week with an average bill of £30. That makes your budgeted sales £42,000. However, you ended up serving 1450 meals with an average bill of £32. Hence, you made an actual sale of £46,400. The difference between the actual sales and budgeted sales is called the variance. In this case, there is a positive revenue variance of £4,400 because the actual sales exceed the budgeted, which is a good sign.

The sales variance of £4,400 can be split into two parts; £1500 and £2,900 based on the idea of volume variance and price variance. The positive sales variance of £1500 is the result of the rise in volume by 50 meals at the rate of £30. On the other hand, the £2 increment in the anticipated average bill of £30 for all the 1450 meals resulted in the positive sales variance of £2900.

Similarly, if the actual sales fall short, there would be a negative sales variance, which could be a cause for concern if there is a major and consistent decline or stagnancy over a longer period. This is when you would need to analyze the variance. By that we mean, finding out what went wrong and why?

There could be several reasons the actual outcomes diverge from the anticipated ones. Particularly in the restaurant industry, one or more of the following factors are commonly responsible for the sales variance.
– Unforeseen fluctuations in the occupancy rate
– Varying bill sizes
– Deviation in the actual cost of labour from the budgeted affects both the cost variance and profit variance.
– Deviation in the actual procurement cost of ingredients from that budgeted affects both the cost variance and profit variance etc.

Whenever there is a negative sales variance, any increased costs can take up a major proportion of the sales revenue, thereby eating into the profits.

When do you analyze the variances?

The one very intriguing characteristic of variances is that not all of them are subject to examination. It depends on how significant or abnormal a variance is. For example, you accounted for cost of a specific quantity of the ingredients for the week to be £12,000. However, there was a rise in the prices of certain ingredients and you had to pay £13,000. The additions £1,000 spent on ingredients might not be as significant and hence, you might give it a pass.

However, if you continue to pay increased prices over the long run, you might need to analyze the variance in the cost of procurement. Renegotiating the prices of the commodities in question with your supplier would be the most sensible thing to do. If that doesn’t work out well, you could try looking for another supplier. However, make sure you do not compromise the quality of the ingredients. Some restaurateurs would also consider raising the prices of the specific items on the menu using the dearer ingredients.

Let’s not ignore the fact that the variance in the occupancy rate and cost of labour can occur alongside. The percentage aggregate variance could have a major impact on the profits. Therefore, it could be detrimental to your business to disregard a variance for analysis if you think its percentage is negligible.

So let’s face it, guesswork is risky. Conducting variance analysis on a regular basis is the practical and feasible method to prevent yourself from losing track of all the costs and deviations. We hope this write up helped you understand how vital the tool of variance analysis is when you want to establish the cause of discrepancies and implement corrective measures.

Previously we had shared an insightful write-up about efficient inventory management practices. In the upcoming article, we would discuss the winning strategies for pricing the items on your restaurant’s menu. Stay tuned!

Restaurant Inventory Management

In the current era of entrepreneurship, the food and beverage industry is making a lot of heads turn. Every so often we get to see a shiny, new restaurant opening its doors to the foodies in town. However, we all know that running a restaurant is not all unicorns and rainbows. It requires a strong business sense and consistent meticulousness to survive and grow.

Needless to say, the labour cost constitutes the major portion of the operating cost of a restaurant. The inventory cost sums up to be the second largest segment. The labour cost is a fixed cost. The cost of inventory is something that you can control to avoid wastages. Through this write-up, we aim to explain to you how crucial it is to have stringent inventory management policies in place, and how the implementation of these measures or the lack thereof can make or break your restaurant business.

Let’s take a look at some of the best restaurant inventory management practices that your business could embrace to minimize wastage and maximize profitability.

1. Prepare a Timetable

It is very important that you prepare a timetable for taking inventory and follow it consistently. For example, if you count your inventory on Mondays, stick to it. Fix a time for doing inventory to avoid any variations, like in the morning or at night. You cannot accomplish the task with precision if there is work in progress. Taking inventory before the restaurant opens or after it closes, are the best times to account for inventory. In addition, avoid doing the inventory when new stock is being delivered.

2. Set the Frequency

The frequency of doing inventory shall vary from one item to another, depending on their nature and frequency of ordering. The one thing that we can say with the utmost surety is that taking inventory only on a monthly basis is not good practice. In the restaurant industry, you often place orders on a weekly basis. Therefore, take weekly inventory of such items to keep a tab on their availability and rate of usage. Similarly, account for the items you order every day on a daily basis.

3. Follow the FIFO Method

FIFO stands for First In, First Out. It means using up the old stock before moving on to the new one. Most items in the restaurant storeroom are perishable. To avoid wastage, they must be used before they go bad. It also depends how well you forecast the demand of the items before you decide on the ordering quantity.

4. Systematic Arrangement

We cannot emphasize enough how crucial it is, the way you arrange items in your restaurant’s storeroom. The staff responsible for taking the inventory should be trained to follow the routine arrangement of the stock on the shelves to efficiently implement the FIFO technique. The older stock should occupy the front row on the shelves for being readily accessible. Once these items are used up, the next batch of inventory should be moved to the front, as we go. Do not forget to declutter your storeroom by taking the expired items off the shelves.

5. Make it a Two-Person Job

Assigning the responsibility of keeping track of the inventory to two employees is a great idea. The two in-charges could do the inventory separately and compare their results to see if there is any discrepancy. Having said that, it reduces the odds of you missing the inconsistencies, both current and probable.

6. Use Technology to Your Benefit

The market is flooded with a wide range of inventory management software. You could try them and find out which one fits your needs the best. Why we emphasize so much on accuracy is the fact that your inventory records have an impact on the Profit and Loss statement. Any incorrect details would skew the final picture of the profitability of your business, thereby jeopardizing it in the long run. The inventory count sheets you prepare using the program would not only help you track your stock levels but also reveal consumption trends of the various items across the timeline. The trend proves useful in forecasting the demand of such items to arrive at a precise ordering quantity.

7. Standardization is the Key

As highlighted earlier, the solution to a sound restaurant inventory management system is consistency, which comes from standardization. Standardize the units used for quantifying each item in stock, be it measure of weight or number of items. To reduce errors and increase the swiftness of the process, it is necessary that the same employees do the inventory every time.

We are sure that once you put these ideas into practice, a significant wave of positive change would come your way. You would notice reduced incidences of wastage, pilferage, and spoilage, which ultimately culminate into enhanced profitability. We hope you found this information practical and realistic. In our upcoming post about restaurant operations we would talk about variance analysis and product costing, stay tuned.

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.

Having good financial management is a must for any business. In addition to preparing and understanding your budget, it is also essential that you monitor your cash flow.  If you don’t manage it well, you can run out of cash to pay the bills.  Pan Am Airlines, for instance, was once a high-flying brand.  But it is now gone and whilst the underlying reasons are complex these led to cash flow problems and the company ultimately ran out of cash.

What Could Go Wrong and the Things You Can Do to Manage Cash Flow Better

1. Not Following GAAP

GAAP or the Generally Accepted Accounting Principles is an accounting methodology that, amongst other things, helps keep track of the “money in and money out.”  If you don’t follow this system, your company will be running blind.

What you can do: Implement these standards to ensure your company has reliable accounting information that you can use to base your financial decisions on.

2. Counting Profit Before Collecting Payments

You may have sent the invoice.  But did you receive the payment?  Sometimes, customers tend to stretch pay periods.  As a result, you may see the top line figure, without knowing if they’ve actually paid you and then find out you don’t have the cash you thought you had.

What you can do: Have a system in place that lets you collect payments on time as agreed. In this way, your receivables are in balance with your payments.

3. Disregarding Cash Obligations

One of the most common mistakes by business owners is that they don’t prioritise bills and other liabilities.  These can easily accumulate and become hard to manage, which may ruin your cash flow.

What you can do: Pay bills regularly, take advantage of agreed credit periods and make sure that you are monitoring the money that goes out and tracking the money coming in.  Use the accounts payable module of an accounting system to help track payables and schedule payments.

4. Having Unnecessary Expenses

Many businesses spend money on unnecessary things, such as certain staffing costs.  They often miscalculate their true personnel costs, how many people they need and how much they should pay them.

What you can do: Before you go through hiring an employee for a certain job, look into outsourcing.  For instance, instead of hiring a bookkeeper, why not outsource it to a dedicated provider of these services.  This can significantly reduce your overall expenses.

5. Undercharging for your Products and Services

It’s easy to think that you can charge less to beat your competitors to the sale. But it’s not necessarily realistic, unless you are guaranteed to receive a significantly higher volume of sales.

What you can do: Perform competitive analysis to explore how much you can charge your customer for a particular service/product while still being competitive.

6. Ignoring Where your Money is Going

It’s easy to be blind as to where your money is going if you don’t have a budget or an investment plan.  If you don’t have a clear plan it’s easy to lose sight of what your income is being spent on.

What you can do: Create a solid plan to help you spend more wisely. In this way, you will be better prepared for unexpected expenses and big future purchases.

There are other things that can go wrong that may leave you with no operating cash.  You can enhance your cash flow in a number of ways, like improving debt collections, managing inventory, controlling interest and bank charges etc.  It is critical to ask for help from a business adviser or your accountant as early as possible.  Remember that issues with cash flow can indicate operational problems that require your attention.

Do you want to learn more about how Sanay can help you manage your cash flow to facilitate growth in your business? Schedule a free consultation today!

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.

Sometimes it can feel like you spend more time keeping the business going than actually developing it, improving it or adding any value.  The points below will highlight that while some form-filling and record keeping is necessary, much of the rest of it is either needless or can be outsourced.  Lightening the burden of bureaucracy can bring a host of benefits.

Necessity

Some of the more mundane aspects of business are necessary, in every industry, at every level, no matter who you are.  You can’t avoid it.  The truth is that some things just have to be done in order to maintain the status quo of the business or to fulfil important legal requirements.

Shift focus

There are, however, a multitude of tasks that many businesses (typically the owner, in small businesses) are taking care of themselves that don’t add value, but they still need to be done and take time to do.

This is where it’s important to shift focus, concentrate on the things that are core to the business and outsource the rest.  Activities like Marketing, Recruitment, IT and Accounting are considered support functions for many businesses (unless you happen to have a business specialising in any of these areas).  Maintaining these functions in-house, particularly for a small business, detracts from what the real focus should be, namely delighting customers and growing the business.  Outsourcing will help you focus your attention in the areas you know best.

Take control

So, you know where your skills lie, you know which things you need to be done (even if you don’t always like doing them) and you know the areas of support that a professional could help you with.  Outsourcing enables you to take control of the direction of the business by ensuring that you give less to the time sapping activities that, frankly, you might not be that good at.  It allows you to focus on setting the strategic directions and choices of the business without the administration or unwelcome distraction of your support functions.

Take bookkeeping for example, if it takes you 10 hours a week you could be using this time doing something else more ‘value adding’, not to mention that a professional will do it more efficiently.  Moving these duties to a specialist provider ultimately gives you greater control over the success of your business.

Enjoy the benefits

Rather than sitting back and enjoying the benefits you can now enjoy the benefits by working more smartly.  Being in business is not about sitting back, it probably will, however, eventually afford you the time for the lifestyle you’re working hard towards.

Outsourcing to a professional, skilled and passionate bookkeeping and accounting provider will bring with a number of benefits.  To name just a few…it will be cheaper than employing someone directly, it will give you more time to focus on your business and it will lighten the burden of responsibility.  You will have someone else doing the work that you once found a disturbance but it’s what they do; it’s their core business.  They will provide a simple process for you that will keep everything up to date and all of the information you require available whenever you need it and from wherever you are, particularly if they use cloud accounting software as we do.

Of course these are not free services but they are great value and it’s a very effective way of freeing up time to grow your business, especially if you’re a small business or a start-up.  We all know that things can be tight financially in the beginning but don’t ask yourself how much it will cost to outsource, rather how much it will finally cost you not to outsource.

Small Business Bookkeeping UK

No doubt that as a small business owner you will want to know the headline figures but you may also have to do the bulk of the bookkeeping to keep costs down.

“How hard can bookkeeping be? I’ll just do it myself.”

This isn’t an unusual thought for some small business owners but the reality can be quite different.  Bookkeeping is not something you can simply pick up and do without any knowledge or planning but it can be made easier.

While doing it yourself may draw your attention away from core business, in the beginning it may be necessary so let’s look at 5 steps to make your bookkeeping easier.

1.   Educate yourself

Learning the basics of bookkeeping, knowing your balance sheet from your P&L, understanding the differences between profit and cash or knowing how to account for assets, taxes and other costs could help you avoid some potentially expensive and reputation damaging pitfalls.

Investing some time in thorough research or attending a basic course could save you money in the long run.

If you want to do it yourself it will take time to learn but it needs to be done right.

2.   Select the right system

Once you’ve grasped enough to feel comfortable you should choose the right system to help organise your accounting and produce some useful reporting that you can use to help run the rest of the business.

One basic option is a spreadsheet, the main benefit of this is that it’s likely to be free but will probably take more time to maintain, opens the possibility of formula errors, often provides less useful reports from which to make decisions.

Dedicated accounting systems are typically the way to go.  There are many to choose from and the benefits of each should be weighed against one another.

The main decision is whether to buy an out of the box software that will be installed on your computer/server or to utilise one of the number of growing cloud-based solutions.  The latter is usually available on a subscription and can be accessible at any time and from anywhere.

Each cloud accounting system has different features; however, continuing developments have meant that they can save you time, make mistakes less likely, provide valuable reports and help to manage your creditors and debtors.  The use of cloud software is on an upward trend and adoption is forecast to continue in future years.

Bookkeeping Processes are a key part of a simpler remote bookkeeping system

3.   Put a process in place

Once you have the knowledge and you have chosen a system you need to put a standard process in place and stick to it.  It will minimise the chance of errors if you ensure that transactions are processed consistently.

Within the process include standard reports that you would find useful to run the business, determine standard formats for sales invoices as well as customer communication plans when working to recover overdue debts.

It goes without saying (although I will say it) that business and personal expenses should be kept completely separately. Ensure that you keep all accounting documentation, receipts, invoices etc. so that they can be input into the system.  Some cloud accounting systems will allow you to attach a digital image to each transaction making later review easier.

4.   Keep up to date

Running your own books requires a reasonable time commitment.  You will need to keep up to date with the processing of all accounting documents but you will also need to keep up to date with changes in certain regulations.

You should aim to process transactions regularly but how often should this be? This really depends on what you want to achieve and on how many transactions you have but it should be regular enough that you are always aware at any given time how much money is in the bank, how much is due to come in and how much you need to pay out.  Sometimes this will mean processing throughout the day, every day or sometimes less frequently.  It should never be less than once a week for any business.

5.   Ask for support

If you do all of the bookkeeping yourself there’s no easy solution, it will require some hard work, time and effort.

If you want to spend your time concentrating on your business or you find that you’re growing and simply can’t dedicate enough time to maintaining your accounts or that your focus is being taken away from your core business then you should look to a professional provider for assistance.

At Sanay we can support your business by taking part or all of the process of your accounting and bookkeeping leaving you more time to concentrate on growing your business.  Asking a dedicated provider for assistance is a positive step in managing your accounts; you can grow your business without experiencing the growth in number of accounting transactions.  You can simply provide the documents and the specialist provider will take care of the rest, they can manage the whole process, provide informative reports and ensure all deadlines are met without you having to worry about it.  You accounts will be updated in real time and available to view 24 hours a day, 7 days a week, 365 days a year in the cloud.

Do you want to learn more about outsourcing your finance function to facilitate growth in your business? Schedule a free consultation today!

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Virtual Bookkeeping

“Virtual bookkeeping services are scary. They will not work.”

It’s a common misconception of those who have not tried yet the various online accounting services. But as soon as they’ve signed up for a virtual small business accounting service, they soon realise the benefits of it.

How many times a day have you seen your staff bookkeeper spending his/her time at the water cooler or just chatting with co-workers?

When you opt for online accounting services, you can save money and time. And as a business owner, you know that time means money.

Many are still undecided about using it because it will mean outsourcing your accounting/financial statements.

But did you know that the most successful, profitable small businesses of today are using online outsourcing? Yes, they have embraced it so that they can spend their time differentiating their companies in the marketplace.

They are using online accounting as part of their long-standing sustainable business plan.  The owners of these businesses have more time improving the quality of their product/service and increasing their profits.

But how can virtual bookkeeping services save your small business?

Save overall cost

If you want to simplify your accounting, you should consider online accounting services.

How much are you paying your in-house bookkeeper? A virtual bookkeeper will cost less to hire.

How?

There is no need for you to run background checks, provide ongoing training, etc. The online small business accounting services will do that for you.

Generally, you will save in the region of 30-50 percent of the entire cost of hiring an in-house bookkeeper and using traditional accounting infrastructure. The savings will include the hours of time you and your partners spend on those activities.

Because online bookkeepers work remotely, you will not have to process their payroll taxes, pay holiday time or provide other benefits.

You will be surprised to know that most companies offering online accounting services have talented and experienced bookkeepers.

With that in mind, you are not only getting great value for your money but you will actually obtain a very experienced, talented, efficient team of bookkeepers that will help you with your small business. That is truly accounting simplified.

Flexible

In-house bookkeepers are talented. True. But they are not perfect individuals. They make mistakes in your financial reports.

And when they do, you will not see the inaccuracies right away. As soon as you notice the miscalculation, you would like them to amend the errors. But, what if they are on holiday? Sick leave?

Here is where an online small business accounting service comes into play. The virtual bookkeeping service provider have experienced, trained bookkeepers who can work, effortlessly, with your accounting reports.

Our accounting services at Sanay are flexible. You can contact our customer support any time you need support and your financial reports are available for viewing and editing 24/7 through the cloud.

Our virtual bookkeeping services fit easily work around your schedule.

You will have expertise on your side as the virtual bookkeepers have excellent knowledge in this industry. The nice thing is that you do not need to pay for them around the clock. When you start putting your books into the online accounting services with highly trained and skilled bookkeepers, your job as an owner will become a lot easier and more effective.

With that said, sick and holiday days will never be a problem to your small business.

Focus on improving your growing business

Hiring a virtual bookkeeper will boost your company’s productive time as you do not have to work on bookkeeping tasks all day. You can decide how much time a virtual bookkeeper will spend working with your financial reports.

This will lead to overall savings as online accounting services have fixed fees, dependent upon the transaction volume and the package you choose. This way, you will know the overall cost of the transaction before you even sign up, making it easier for you to stay on track with your budget.

As you let someone else handle the bookkeeping, you can more easily concentrate on running your business. Because you know that your bookkeeping is taken care of by a trusted service, like Sanay, you will focus your time on other important things to grow your business.

You will have the peace of mind that you need so you can gather resources in building your company, instead of looking into your accounting all day.

Outsourced accounting services will provide you with updated financial reports anytime you need to monitor your company’s financial health. Because they are up-to-date, you can stop spending money you don’t have or know when you can spend to take your company to the next level.

We understand the value of financial reports and statements in running a business. With the up-to-date financial reports that we send to you, you can effectively use them to know whether or not your business is running smoothly.

Through updated and accurate financial statements you can easily make key business decisions that can support your company’s growth.

Freeing up your time as the manager or owner of your business will give you the opportunity to handle other issues, other than problems related to bookkeeping. You can focus your attention on product development, marketing and selling.

Hire trained individuals

Again, this will mean savings.

With online accounting services, you won’t waste your time in hiring or interviewing individuals to perform the tasks.

As you hire traditional bookkeepers, you will have to spend time guiding them in the things that they must do. Most of the time, applicants don’t have all the qualifications or training that you want and need for your company.

When you consider virtual bookkeeping services, you are hiring someone with skills and years of experience. You will be working with people who are not limited by geography or skills. You can give them tasks that a regular bookkeeper may not be able to perform or accomplish.

When you do opt for trained traditional bookkeepers, their rates are expensive.

But with virtual bookkeeping services, you can have well-trained, skilled bookkeepers without additional cost. The rates are approximately 30 to 50 percent less than the rates you will have to pay for traditional bookkeepers.

This will lead to great savings for the entire cost of operating your small, medium or large business.

Obtain genuine opinion

How many times have you tried to ask your bookkeepers about the financial status of your business?

With a third-party involved, you get a genuine opinion of your business. Since the third-party does not engage in your company’s inner workings, it can give you better advice on how to improve your business. The recommendations it can offer will not be self-serving but for the benefit of your company as they are not influenced by a desire to improve their position within your organisation.

Because of that, you can now start to use your bookkeeping system to make key business decisions that can surely make a positive impact in your business.

Get hold of timely, updated financial reporting

As already mentioned, virtual bookkeeping services can provide updated financial reporting in real time.

Generally, bookkeeping or accounting is the first thing that usually takes a back seat. This is especially true when things start to pile up. The next thing you know, it’s tax season and you haven’t touched your books since the previous tax season.

Through online bookkeeping, accounting is simpler as you get financial reports virtually anytime.

So, what does this mean to your company?

Apart from the fact that an updated financial report can help in making key decisions, you can minimise your tax liability.

We all know that inaccurate books can result in various unpleasant results.

For instance, if your profit and loss report is erroneous, your company could end up paying more taxes. This would mean wasting your hard-earned money.

Then, on the other hand, if the report is understated, you would be underpaying in taxes and possibly inviting an investigation by the government.

If your company has accurate accounts that you can review before paying taxes then this will allow you to make important tax decisions before the tax season ends.

Better cash flow management

With an accurate bookkeeping system, you can easily look into your financials and evaluate whether or not you are making enough profits from your business. When you maintain a proper bookkeeping system, you can avoid a negative account balance and avoid fees adding up.

If this situation continues, bank fees and other charges can accrue, which may end up hurting your business financially.

Having a properly managed cash flow will also enable you to reduce your outstanding accounts receivable. With ineffective accounts receivable procedures, come shortages in cash flow. Even though you see excellent revenue figures, your cash could be all tied up in your accounts receivable, your bank balance may still suffer. You must convert receivables into cash.

You must also keep an eye on your accounts payable so that your company’s cash will not be paid to your suppliers before the required payment dates and so that you are taking advantage of any discounts available.

By closely monitoring both your payables and receivables, you can increase your cash flow making your operating activities easier.

Are they secure?

This is one of the issues raised by many managers/owners – how secure is a cloud accounting service?

Sanay partners with Xero to make sure that we can fulfil all of your accounting/bookkeeping needs. We are concerned about Internet security, too.

That is why we only use the highest level of security in protecting our clients’ financial reports. The cloud accounting software that we use implements the same security methods being utilised by popular, major UK banks. It is protected using 128-bit encryption, which is the highest level of Internet protection for all web browsers.

Yes, we are more secure than your physical office. Your in-house bookkeepers may lose their computer passwords. They may keep their records in an unlocked file, thereby, increasing the risk of unauthorised access to those records.

But through our secure environment, your financial records will be processed utilising the highest level of protection to make sure that they will not end up lying on other people’s desks.

Investing your money in the right place

As a business owner, it is essential that you put your money in the right place. This allows you to save more while you get the maximum value of your business.

One of the most tedious tasks in managing your business is bookkeeping. It can be time-consuming to manage and prepare your accounts. But it is an essential aspect in managing your business’ financial health.

You must not handle the bookkeeping tasks on your own, as it may only hamper the overall growth of your company. With virtual bookkeeping services, your company will become more financially organised.

Your small business will enjoy the monetary benefits of online bookkeeping services because you do not need to pay for the costly monthly salary of a traditional bookkeeper. The cost of appointing an online accounting service is cheaper than having an in-house bookkeeper.

The financial data of your company is essential in making financial forecasts and managing cash flow. As the owner of your small business, it will not be your job to look into and analyze balance sheets, profit and loss reports, etc. All you have to do is to know what they mean and how they can affect your business. From those pieces of information, you can, more easily, make financial decisions that can help you run your business smoothly.

When you use our accounting services at Sanay, you will spend less time analyzing your financial reports and more time making decisions that affect the growth of your company. With timely financial reporting, you can create forecasts and make financial plans. You will spend more time determining ways to increase your sales, instead of focusing on keeping track of your books.

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