Cloud accounting – the future of your business

Cloud seminar

On Thursday 25 May, the PM+M Run My Business Team were joined by Cloud Software providers Xero and ReceiptBank to deliver our first Cloud Accounting Seminar.

This first seminar was an introduction for our clients to our cloud team and the services we carry out.  The cloud team has one objective: to make life easier for our clients.

With the arrival of Making Tax Digital for Businesses (MTDfB) scheduled to start in 2018, the need for businesses to hold their records digitally has never been more important. The new rules will force all businesses to submit quarterly accounting information to HMRC in an electronic format.  Under current proposals, the first wave of sole trader and partnership businesses will come into the new regime in April 2018, with more joining in 2019 and all businesses and companies scheduled to be within the regime by April 2020.

Cloud accounting offers a platform for individuals and businesses to record transactions digitally to help with the MTDfB process but, more importantly, to benefit from being able to view business finances in real time for better decision making and save time by automating processing.

The dedicated cloud teamwork with several different Cloud Accounting Software packages and work with clients to implement and train on the systems but also to look at specific add-ons that will help to streamline the business.

At the seminar, Xero demonstrated some of its most useful features for automating processes such as the direct bank feeds, auto-matching and customised online invoicing.  The add-on ReceiptBank demonstrated their integration into Xero. This add-on allows users to scan or email purchase invoices into the software which then extracts all the key information and posts it into your accounts system “hands-free”. Both systems have apps which can be downloaded to mobile phones, tablets etc. making them completely mobile.

If you would like to discuss any Cloud Accounting requirements or find out about how Making Tax Digital will affect your business, please contact Jill Morris (jill.morris@pmm.co.uk)

After the election…

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After what has seemed a long election campaign, we finally have a result. And rather than the anticipated increase in seats for the Conservative Party, the UK woke up to find Theresa May’s party no longer enjoyed a parliamentary majority, and would seek to govern in coalition with the Democratic Unionist Party.

Uncertainty resulting from the vote has seen the value of Sterling drift downwards, and it may require a stabilisation of the political situation before the Pound recovers. Shares haven’t been adversely affected so far, with the FTSE index trading at higher levels than the previous day’s close.

What was seen as an opportunity to strengthen Theresa May’s hand, ahead of Brexit negotiations appears to have backfired, and adds doubt to the process and the timescales involved. The government will also to seek to ensure that any political uncertainty does not carry over into the wider economy. Multinational businesses usually prefer to operate and invest in a stable political environment.

For investors, don’t panic. Make sure you are invested in a sufficiently diversified portfolio. And if you are a little unsure, take advice.

The sooner the better

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It’s always struck me that there is often a disconnect or lack of understanding with fee earners between the time they charge on their timesheets and the funding of a law firm. In the majority of firms, time recording systems continue to be used and I’m not going to get into a discussion now about whether that’s out of touch, appropriate or useful – that can be covered another time. Fee earners, from day one, are taught to record time and quite often are driven to do this merely by a chargeable hours target.

The concept of meeting your annual budgeted chargeable hours to be paid a bonus at the end of the year is still quite common and it’s clear what kind of behaviour that will drive. Until a fee earner assumes billing responsibilities, it is unlikely that they will be aware of the impact of their recording of time either on the firm’s financial results, the consideration to the level of fees to be charged, the timing of that billing and, ultimately, of when the bill is paid. Further, it may even be that when a fee earner assumes such responsibilities, they are still not aware of the effect on all of those areas. The sooner they are made aware of all relevant factors and implications, the better.

  • Do they understand that 80% recoverability effectively means that for each week worked, one day is just not worth anything in cash or profit? In fact, it has a negative impact since the team are still paid for that fifth day but there is no income generated.
  • Do they understand that it’s impossible to tell what level a fee should be set at if chargeable hours aren’t accurately recorded?
  • Do they understand that it is difficult to gauge whether the team or firm is under (or over) resourced if chargeable hours aren’t reliably recorded?
  • Do they appreciate the time lag between time costs and indeed disbursements being recorded, the team and disbursements being paid until the bill is actually settled and therefore do they understand the impact on the firm’s funding position?

In my view, there is a significant training opportunity for fee earners to assist with the firm’s financial reporting and the firm’s profitability and funding position.  This training can be provided for more senior fee earners, sometimes even partners, where there has been a lack of financial training through their career or where a fee earner is just starting out. If you think that there is an opportunity for improvement in your firm or that a refresh would be helpful, please contact me at helen.clayton@pmm.co.uk or call 0161 641 8684.

Asset based lending and your MBO

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One of the key objectives of any management buy-out (MBO) team is usually to minimise the level of equity funding required to complete the deal. A greater proportion of funding derived from debt means a greater proportion of equity in the hands of the MBO team, and what is not to like about that?

So, what is asset based lending (“ABL”)? An ABL facility is provided against a wider pool of assets than mere factoring or invoice discounting and so, in theory, a greater amount of funding should be possible. The debtors will, of course, be included via invoice finance, but a lender will also include stock, plant and equipment and possibly property, although property lending is not necessarily everybody’s cup of tea. You could also securitise forward income streams assuming they are sufficiently robust.

Historically, smaller SMEs have found it difficult to secure ABL facilities but in recent years the number of providers lending to this sector has increased markedly. Invoices will normally attract an advance rate of somewhere between 70% and 90% with stock and plant possibly up to 75% of net orderly liquidation value. What does that mean I can hear you say? Basically, because assets such as stock and plant usually carry a higher realisation risk than debtors, the lender will independently assess what they might be able to sell those assets for in the open market on a reasonably quick but controlled basis, knock off some costs and then lend up to 75% of the net figure. Hence their back is covered but you get more borrowing.

For companies with very strong cash flow, an ABL may also consider a top up cash flow term loan to increase liquidity and headroom.

There are some key benefits to ABL. As your business grows, so can the borrowing when you need additional working capital. Security is very specific and because additional assets can be included and assessed separately, more funding can be unlocked than through a traditional bank loan or overdraft. ABL is often much quicker to deliver, with additional funding as the business grows being speedily provided. For larger companies, pricing ought to be competitive with more traditional lines of funding.

There can be some things to watch out for though. For smaller companies, the pricing may well be more expensive as small often equates to greater risk in the eyes of a lender. But hey, you got your money, didn’t you? If your business is cyclical, your funding line can reduce quickly as your debtors fall in the off season. In this case, it is critical that you have quality forecasts available so that you understand the working capital requirements at all stages of your business cycle. You really don’t want to over-borrow against debtors at a high point to get the deal done but then find you run out of cash subsequently.

If you are contemplating an MBO or perhaps an acquisition, get in touch. We know the market and have the experience to help you.

Jim Akrill
Jim Akrill
Corporate Finance Partner
Email: jim.akrill@pmm.co.uk
Tel: 01254 679131

 

 

 

Quarterly Economic Review

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The East Lancashire Chamber of Commerce are giving you the opportunity, once again, to tell the Government what it’s like doing business in East Lancashire in 2017.

The survey is carried out quarterly and is taken very seriously by central Government as it provides an economic snapshot of the area. It’s important that as many businesses as possible complete the survey so that the results provide a true reflection across all sectors and that the Government has the best information on which to make important decisions that may impact our area over the next few months.

To complete the survey, please click the button below.

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A spotlight on our new partners

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I am delighted to announce that Antony Keen and Helen Binns have been promoted to partner in PM+M.

Antony has been with PM+M for 29 years, man and boy.  He is a director of PM+M Wealth Management and continues with that role, giving financial planning, investment and pension advice to a wide range of clients.  Alongside that, his partnership role will see him playing a wider role across the firm and its future development.

Helen Binns heads up our Burnley office, having been with PM+M for 11 years.   She works with various charities and companies with turnovers from £50,000 all the way up to £50m in various sectors with all aspects of accounting, auditing and financial management.  She will continue to head up our Burnley team and will also take on a wider role in the leadership team of the firm.

I firmly believe that Antony and Helen’s promotions are hugely deserved as they are both incredibly talented in their respective fields. They embody what PM+M stands for with their unwavering commitment to both their clients and the success and culture of the firm. To keep PM+M thriving in the future, it’s key that we have a strong succession plan in place. As part of that, it is fantastic to reward and promote talent from within our own ranks.

This is just a small taste of why PM+M placed 3rd in the UK for best accountancy employer at the Accountancy Age awards back in December 2016.

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Jane Parry
Managing Partner
jane.parry@pmm.co.uk
If you are interested in joining the PM+M team, click below.

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Tax confusion due to Finance Bill changes

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The original Finance Bill 2017 published in March amounted to 762 pages and contained draft legislation on a whole range of tax changes which were due to take effect from 1 April this year for companies and 6 April this year for individuals.  However, the imminent general election has caused all that to change.

Vast swathes of legislation have been dropped from the Bill –  72 out of 135 clauses and 18 out of 29 schedules have been dropped.  The volume of the bill has effectively decreased by over 80%. This is to allow time for the Bill to be debated and passed before parliament shuts down in the run-up to the General Election.

This has caused confusion and uncertainty for many taxpayers who were expecting to be affected by tax changes taking effect from 1 or 6 April or who were hoping to use the new legislation to carry out tax planning transactions.

Some of the key pieces of legislation removed from the Bill were:

  • Making tax digital – the Government has reaffirmed its commitment to making tax digital but it is not known whether the intended start date of 1 April 2018 will be delayed.  This is an enormous project and uncertainty for taxpayers is increasing as we get nearer to 1 April 2018 with no clear idea of what the requirements of the new system will be.
  • Changes to corporate loss relief – new rules were due to take effect bringing increased flexibility for brought forward tax losses and restrictions on the use of losses for large companies.  It is not now clear when those rules will take effect and this is causing uncertainty for many companies as to their tax position.
  • Restrictions to corporate interest deductibility – due to commence on 1 April 2017 but now uncertain.
  • The relaxation of the Substantial Shareholdings Exemption which allows the tax-free sale of qualifying shareholdings by companies – a major widening of these rules was due to commence on 1 April 2017 and a number of groups of companies were planning to restructure their holdings utilising the new rules.
  • The reduction of the dividend allowance from £5,000 to £2,000 due in 2018/19 – as yet there is no indication that this will change.
  • The £1,000 tax-free allowance for property and sundry income which was due to come into effect on 6 April 2017.
  • First year allowances on electric vehicle charging points – due from 1 April 2017.

Assuming no major surprises in the election result, it is expected that the government will legislate at their earliest opportunity at the start of the new parliament.  However, it is unlikely that such legislation will be retrospective in respect of the proposals due to start on 1 April 2017 but this has not been confirmed.  In the meantime, our advice is to hold fire on any planning under the new rules and keep a close eye on developments.

For further advice on any of the above issues contact Claire Astley on Claire.astley@pmm.co.uk or Jonathan Cunningham on jonathan.cunningham@pmm.co.uk

Companies House

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Companies House is the vehicle through which businesses, accountants and other professional advisors file various information, which is then made publicly available.  It’s an organisation that deals with volume and there are various performance metrics in place.

Its most recent business plan encompasses objectives similar to those that you might expect to see in your own business:

  • Providing excellence in company registration and search
  • Helping companies to ensure their recorded information is current, complete and correct
  • Building a high-performance culture by adapting to and embracing change.

I’m not sure I’ve ever considered Companies House to be a business. It’s just been a place where certain documents must be filed, where I can access publicly available information and where I can do some research on businesses that I would like to work with.  The above certainly changes my view on this and the business plan certainly supports a move into current times.  We need an efficient delivery model that is easy to engage with and reduces the administrative burden, wherever possible, for businesses.

The introduction of the confirmation statement last year, which replaced the annual return, is one way in which filings have changed.  Online filing has evolved considerably in recent years, resulting in less paperwork and postage costs. The aim for 2017 is to achieve a take-up of 87% of digital filing services.  There is also a focus now on increasing the number of accounts to be filed digitally – the aim being 99% to be filed online.  This is a far cry from arranging a courier at the last minute to get down to Cardiff in order to meet a filing deadline. It will still need some planning to ensure deadlines are met (hopefully not at the last minute to save everyone the unnecessary stress) but hopefully the push towards digital will be a positive move for all users.

Pauline Rigby, a partner in Corporate and Restructuring at Forbes Solicitors, commented “Companies House has since 2014 been working on its strategy. At that time they prepared a 5 year plan. Very similar to other businesses, 3 years into that plan and Companies House have taken time to reflect on what they’ve achieved and how their strategy needs to be amended to move them further forwards to ensure that their strategy reflects wider changes in society. Online filing and accessibility has to be key as well as retaining a fluid strategy just like any other business.”

If you have any queries on changes in what should be filed and when and how, then please do get in touch with Anne Ramsden by email at anne.ramsden@pmm.co.uk or by calling 01254 679131.

Making Tax Digital (MTD) removed from Finance Bill 2017

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Following the Prime Minister’s announcement of a general election, legislation to implement the Making Tax Digital (‘MTD’) initiative has been removed from the Finance Bill 2017.  MTD is the plan for businesses to submit quarterly uploads of accounting information to HMRC, with the first wave of businesses due to be affected from 1 April 2018.

Although postponed for the short term, there has been no change to the MTD proposal, and it is likely that the initiative will return following the general election as part of the Government’s commitment to a fully digital tax system.

As a result of the deferment, it is not known whether HMRC will push back the implementation date of 1 April 2018 for unincorporated businesses with a turnover above £85,000.

We will continue to follow the progress of MTD and keep you up to date with any changes. As always if you have any queries please do not hesitate to contact one of our dedicated MTD advisers.

Andrew Cowking - New Website


Andrew Cowking

Partner
Email: andrew.cowking@pmm.co.uk
Telephone: 01254 679131

 

Julie Walsh - New website
Julie Walsh
Tax Manager
Email: julie.walsh@pmm.co.uk
Telephone: 01254 679131

 

Jill Morris - New Website
Jill Morris
Run My Business Director
Email: jill.morris@pmm.co.uk
Telephone: 01254 679131

 

Lucy O Gorman - New wesbite
Lucy O’Gorman
Run My Business Manager
Email: lucy.ogorman@pmm.co.uk
Telephone: 01254 679131

 

 

 

PM+M Two-Wheeled Professionals Networking Ride

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The afternoon of Wednesday 19 April saw the third 2017 gathering of PM+M’s two-wheeled professionals cycle-networking ride. The weather, yet again, was kind and the group met at The Green Jersey in Clitheroe to head out for 25 miles of pleasant riding and business-related conversations. Thanks to modern technology and GPS tracking the route can be viewed using the following link https://www.relive.cc/view/949367024  but took in Bashall Eaves, Cow Ark, Whitewell, Chipping and Chaigley.

The turnout, as ever, was excellent and we certainly weren’t short of representation from many different disciplines including lawyers, bankers, estate agents, marketing specialists andmore!

As ever the conversation flowed as well as the route and I am aware of at least a couple of follow-up meetings in the diary. Post-ride feedback was as positive as ever and the format universally praised. Collaborative communication within the group is so good that the route was planned to allow one of our riders to swing off home on our return to Clitheroe in time to successfully sell a car without missing the ride!

If you are interested in an invite to the next event then please get in touch.

Neil Welsh - Navy
Neil Welsh
Independent Financial Advisor
Email: neil.welsh@pmm.co.uk
Tel: 01254 679131