amstrad

Do You Have An Exit Strategy For Your Business?

When you started your business, did you have a vision about where it would take you and how you would eventually exit the business?

If not, it is something you should consider and plan for so that you maximise the return on your years of investment; time and money!

There are a number of different options available for disposing of a business and some important considerations to make before you close the door of your business behind you.

Key Mistakes That Sellers Make

Business Head vs Human Heart

Business is all about figures and is widely acclaimed as the only language of business.  This is why Richard Branson can run an airline, a makeup company, a railway, a media company, Virgin Comics, a formula 1 racing team and the list goes on.  However there is always a human element. I’m not just talking the people involved but the heart of the business owner. If you are in business for yourself it’s because you are passionate about something.  Whether this is plastering, cabling, security, electrics or social media you started because you love it.  This is when the cold hard world of business and your heart start to do battle and sometimes in business this can be quiet often.  However, in life in general you can allow your heart to win more than not, but in business it has to be the head that triumphs more often.

Should I buy, lease or use HP to obtain that needed addition equipment?

Over the years I have often been asked what is the difference between buying, leasing or using HP to obtain that needed extra piece of equipment. The answer really is different from one company to the next, but here are the general guidelines concerning how they are treated for accounting, Tax and VAT purposes.

Outright Purchase:

From an accounting viewpoint the actual cost of the asset is capitalised in the balance sheet and an annual charge for depreciation is shown in the accounts as an expense in the profit and loss account. This therefore has the effect of showing the asset(s) in the balance sheet at cost, reduced by the cumulative charge for depreciation.

The annual depreciation charge is calculated in accordance with accounting standards, based on the useful economic life of the asset and the residual value.

image creator: Rob Wiltshire

The actual charge for depreciation is not allowed for tax purposes, as this is replaced by capital allowances, which is HM Revenue & Customs deduction regime for allowing capital expenditure against chargeable profits. The first £50,000 of expenditure each year on plant and equipment, excluding cars, qualifies for a 100% capital allowance deduction. Expenditure in excess of £50,000 enters either the 10% pool or the 20% pool, attracting a writing down allowance (WDA) at the appropriate rate.

A temporary first year allowance of 40% is available for expenditure on plant and machinery that exceeds the annual investment limit incurred in the year commencing on 1 April 2009 (corporation tax) or 6 April 2009 (income tax). This allowance applies to expenditure which would otherwise have been allocated to the main 20 % pool but excluding cars and assets for leasing.

Unless the asset is a car, the VAT shown on the supplier’s invoice will generally be recoverable by the purchaser.  VAT on cars is recoverable only in very rare circumstances.

Hire purchase

A HP agreement usually includes an option to purchase at the end of an initial period. Payment of this nominal fee transfers title of the asset and brings the legal agreement to an end.

The asset is treated as if it had been purchased. It is, therefore, capitalised in the balance sheet and depreciation is provided on an annual basis.

The obligation to pay future instalments is recorded as a liability in the balance sheet.

Does your business need funding? where do you find it?

Sources Of Funding

 

this post is by Paul Green

 

Once you have exhausted the 3 F’s (Friends, Family and Fools!) for funding your business – where else might you look? In the current climate, funding is still available, however the criteria for obtaining money into your business may be more stringent. Finance for business can be obtained through a number of different sources summarised below:

 

Loans

Loans are an excellent source of finance if you have suitable security to borrow against or a reliable earnings stream. This needs to be planned and presented well to obtain funds.

Do I have to buy expensive software?

The short answer is No, the long answer is that it depends. Before you spend hundreds of pounds on new software or upgrades look at how you use your software.

Make a list of all the features that you use or would like to use. Then google some of them. If it is an alternative to Microsoft Office there are several, one that is of note is Open Office. It is a free office package and does the basics.

This means that you can download Open Office and try it, see if it has all the features that you need. Give it a week or two because it is slightly different then Microsoft so you need to give yourself enough time to get used to it. Then see if you can use it to do everything that you need to do. Documents can be saved in Microsoft Office formats (Word, Excel and PowerPoint)

The Budget 2011- Budget Busting Top Ten Titbits

This is a guest post by Simon Thacker of Willis Cooper Chartered Accountants

 

Hi Folks Yes, it’s that time of year again; the days are getting longer, spring is in the air, Arsenal are wobbling and it’s budget time. I ask you, can life get any better? So let’s celebrate with our annual budget busting top ten tax titbits which, as usual, are designed to help guide you, dear reader, through all the flannel and filling to get to the heart of what you really need to know. And this of course comes with our usual guarantee, which it’ll all fit onto a side of A4.

1. First up; mileage. Did you know that mileage allowance has remained at 40p per mile (on the first 10k business miles) since 2002? At that time fuel was 70p per litre. Well finally, with fuel now approaching £1.40 per litre, the mileage rate is being raised to 45p per mile from the beginning of next month. Hallelujah to that, we say; but what about the old 25p rate for mileage beyond 10000 miles? Surely it makes sense for that to increase as well? As if.

I Hate Invoice Discounting and Factoring!

This was a cry that I used to hear frequently from managing directors of SMEs. When I asked them why, it became clear that some were speaking from past experience and others just repeating what they had been told.

Why has one of the best and most useful forms of funding got such a bad reputation in some quarters? The answers date back from a few years ago and certainly pre-recession.  In those days the providers could pick and chose who they would do business with and were inflexible with their terms and companies were growing so fast that they needed this type of finance to avoid over-trading and were not particular about whom they obtained it from.