If you want to improve your cash balance in the year ahead it’s a good idea to start by looking at your tax arrangements.  You may well be able to reduce the amount of tax you pay personally or for your business.

Let’s look at some areas that may be relevant for you in the year ahead.

It is good to start by getting your business structure right. Structuring your business for tax optimisation goes well beyond choosing between a limited company or a sole trader. You need to get this basic area right; have you thought of an LLP (limited liability partnership) or a group structure? There are many tax benefits with these two structures, and they are not just for professional firms or big corporates. Speak to a tax adviser or your accountant about these.

Then:

Have a Tax plan

Unless you plan to save tax this year, it’s unlikely to happen and you’re likely to pay more tax than necessary. Avoid retrospective tax planning and aggressive tax schemes – go through this article to see if there are areas you or your accountant have neglected. Despite what you may have heard, there are still plenty of legitimate ways to save tax and sleep well at night. Also, avoid leaving all your taxes till the last minute.

Claim this generous corporate tax relief

Normally when you incur a legitimate business expenses wholly and exclusively for the purpose of your trade, you get to claim 100% of these expenses against your business income to reduce your tax bill. But what if the tax rules allow you to claim a lot more than 100%? Say you get to claim £230 even though you’ve only physically spent £100?

Well that’s exactly what the Research and Development (R&D) tax relief allows you to do. So if you have a company in the creative, engineering, software or any innovative industry where you’re solving difficult problems for customers and raising the bar in your industry, please speak to your accountant or a specialist tax adviser about R&D tax relief before 31 March.

Many companies miss out of this valuable relief due to lack of awareness as well as the misconception that R&D is only available to big Laboratories and pharmaceutical industries.

Reward staff tax efficiently

When it comes to rewarding staff, consider approved share schemes and staff suggestion awards to encourage your staff to get involved and to reward them tax efficiently.

There are two kinds of staff awards:

• encouragement awards – for good suggestions, or to reward your employees for special effort
• financial benefit awards – for suggestions that will save or make your business money

Encouragement awards are tax free up to £25. But financial benefit awards are exempt up to £5,000. That’s right £5,000.

But before you go ahead and pay your staff tax free income, please note that as with all tax reliefs and tax exemptions, there are conditions to meet. Speak to your tax adviser first.

The other tax efficient reward schemes are the various share option schemes including EMI (Enterprise Management Incentive). Why is this tax efficient? Because when staff sell their shares, they pay 10% tax instead of 20, 30 or 40% if they meet the strict conditions. But again, please beware that these rules come with strings attached and always seek advice.

Save Income Tax by Using A Property Company

If you’re a landlord with a portfolio of properties in your name, you’re likely to be paying more tax via the self-assessment system because of the recent changes in property tax and, notably, the mortgage interest restriction. Companies are not affected by the mortgage interest restriction and they do pay lower rates of tax. However please do seek specialist tax advice because there are some tax traps to beware of before of proceed. 

Use £78,000 tax allowances first

At the heart of every sensible tax planning is the use and leverage of the tax-free allowances HMRC give us. Make the most of these allowances first as they get wasted if not used. And don’t forget about the allowances of your spouse and children. Did you know that if you add up the income tax allowance, capital gains tax allowance, savings allowance and dividends allowance, you get a whopping £26,000 plus allowances in the year? That’s just for starters. And if you have a spouse or a child who are not using their allowances, then that’s a potential tax-free income of £78,000 (26,000 x 3).

Claim This £4,800 Tax Savings

No one likes to talk about death. But it’s a reality. And very often people pay unnecessary inheritance tax by not claiming the right reliefs.

Gifts of up to £3,000 per year can be made free of Inheritance Tax. Unlike most of the tax allowances, the limit increases to £6,000 if the previous year’s annual exemption was not used. So you get to use last year’s allowance of £3,000. A married couple can therefore make Inheritance Tax exempt gifts including cash totalling £12,000 per tax year.

This simple planning can save a possible tax bill of £4,800 in the event of your demise.

Engage specialist tax advisers

Most business owners naturally turn to their accountants for all things tax. Accountancy and tax are two different professions, although there are many similarities.

However savvy entrepreneurs normally have both an accountant and a tax adviser. Because they know that accountants are like your GP, who is good and knows all the general rules, but tax advisers are like your surgeons, who are specialists in their field and know the exceptions to the rules. So whilst an accountant will rightly tell you that entertainment is not tax deductible, a tax adviser will usually lift the rocks and find you some exceptions to the general rule that allows you to claim the entertainment.

Embrace tax efficient pensions

Do think long term and make use of tax efficient retirement planning. So instead of merely contributing to a pension scheme (which you get tax relief for, by the way) and leaving the funds in there, why not consider vehicles like SSAS or SIPPS to help you leverage the funds and get a second bite of the tax cherry. These pension schemes, subject to certain rules, are then used to buy, say, a commercial property and the rental income gets additional tax benefits.

In summary

With some planning there are a wide range of ways in which you can lower your tax bills. Please note that as with all tax matters, always speak to a tax adviser first.  I hope your cash balance will improve in the year ahead.

ABOUT THE AUTHOR

Jonathan Amponsah CTA FCCA is an award winning chartered tax adviser and accountant who advises business owners on entrepreneurial tax reliefs. Jonathan is the founder and CEO of The Tax Guys.

www.thetaxguys.co.uk

New stricter rules around using contractors and consultants (known as IR35 come into effect from April 2020.  The aim is to stop consultants, contractors and freelancers being used as “disguised employees” to avoid paying tax and benefits.

Unlike employees on contracts, private sector businesses don’t currently have to use PAYE, pay National Insurance contributions, or offer any benefits, such as holiday or sick pay, to contractors.

However, some businesses have been accused of employing contractors in name only, essentially hiring an employee without paying the additional tax or benefits. Some contractors have also been accused of using their position as a sole trader or limited company to avoid income tax they would otherwise be liable to pay as an employee.

The IR35 rules would make employers directly responsible for their use of contractors as a tax-free way of staffing their business. If HMRC disagrees with their use of contractors, they could be liable for a hefty fine.

How to tell if consultants are IR35 compliant

A big issue for businesses is knowing whether a consultant can be classed as a contractor or whether they would be seen by HMRC as an employee. It can be incredibly useful to hire a consultant on a short-term basis to help with a particular challenge or project, but to hire someone as an employee for a short period is not very cost-effective.

When hiring consultants, it’s worth doing a check and preparing evidence just in case HMRC come knocking. Specifically:

• List ways in which consultants’ work differs from employees’ work. Employees are entitled to minimum hours, workplace pensions, and equipment provided. Note how many employee benefits consultants get and where they differ.

• Highlight working agreements and management arrangements. Consultants provide a service to a client; they aren’t directly managed by the client company. Keep a record of contractual agreements and make sure that correspondence doesn’t imply direct control of the consultant.

• Opt for limited companies with their own business presence. It can be very difficult to prove that a sole trader isn’t a disguised employee. A limited company that isn’t named after the individual consultant is a far safer option. If the limited company also has a website and other marketing material, it’s even easier to show that they are not a disguised employee.

• Check the consultant’s other clients. If a consultant receives work from a number of different companies and, therefore, has a diversified income, it will be far more obvious that they are a consultant and not an employee. Of course, it isn’t always easy for consultants to maintain a diverse client portfolio, with often irregular workloads from occasional clients. But, if a single company provides >90% of a consultant’s work, they are effectively their employer.

Even after completing all of these steps, there is still a risk when engaging a consultant. For larger, more visible companies, this can be a real concern and the stakes are high.

What can companies do to keep affordable consultants after the IR35 changes?

Three risk-free ways to engage consultants

The obvious risk-free way of engaging a consultant is to take them on as an employee on a fixed-term contract. However, this offers less flexibility for consultants and can be an incredibly expensive option.

Another option is to engage a large consultancy firm. These firms, however, tend to charge exorbitant rates for junior consultants who are managed by more experienced consultants.

If companies want to continue using affordable consultancy without the IR35 risk, there are broadly three avenues to explore:

1. Boutique consultancies

Perhaps in response to the IR35 rules, there has been a marked increase in the number of small, boutique consultancies opening up in the UK. These consultancies tend to focus on one specific area of business, directly employing their own consultants.

The main benefits of these small consultancies are that they are much cheaper than larger consultancies, often supply only experienced consultants, and are easier to hold to account than individual contractors. As such, they can represent good value for money.

Of course, all agencies will add their own fees to cover overheads and grow their profits, so they can never compete with the cost-effectiveness of an individual contractor. Since boutique agencies also tend to specialise, additional consultancies may be required to solve every challenge, which can be both time-consuming and expensive.

Can you change point number 2 to Umbrella/PAYE. Some companies will pay directly the contractor through PAYE. This is even worse than an Umbrella company for a contractor, because it offers even less flexibility for contractors to deduct some of their expenses or to use ‘salary sacrifice’ to contribute ‘pre-taxed’ income to a pension.

2. Umbrella companies/PAYE

The most common way that companies are using to dodge the IR35 risk is to use ‘umbrella companies’. These are separate companies that collect the contractor’s earnings and pay the contractor after deducting National Insurance and tax contributions. While this option is mitigating the IR35 risk for companies, contractors will have to pay more tax and National Insurance, but still keeps the same risks and additional tasks that come with contracting (find their own work, deal with clients, manage their own admin and accept insecure working arrangements).

But things can get even worse for a contractor if a company decides to pay them directly on the PAYE basis. This is an even less appealing option for contractors  than an Umbrella company, as it negates any expenses or the use of ‘salary sacrifice’ to contribute ‘pre-taxed’ income to a pension.

As a result, top consultants will move on to other “outside IR35” arrangements as soon as possible, making umbrella companies and PAYE contracts only a short-term stop-gap rather than a long-term solution.

3. Consultant expert networks

An alternative to engaging expensive consultant companies as middlemen is to use expert networks. These networks seek to attract top consultants as needed. Consultants still work on a contractual or freelance basis, thereby attracting top talent, yet the platform itself helps distinguish the consultant as a contractor and not an employee.

Expert network consultants will almost undoubtedly have several clients over the course of a tax year, demonstrating that they are, indeed, a consultant. And since most are paid on an hourly basis, they are even more clearly demarcated as a consultant rather than an employee.

As new technology has matured, expert networks are transforming into platforms, such as Consulthon, where companies can directly review and engage with consultants, improving results while remaining IR35 compliant. Companies can post their challenge on a consultancy platform, review responses from experienced consultants, and choose the expert advice that they feel works best.

If they need more information, they can liaise directly with the consultant over the phone or even in person, for a predictable hourly fee.

The only downside of this approach is that the company must take full responsibility for choosing the approach and implementing the solution. They are essentially paying for advice rather than hands-on work. While this helps demonstrate that the consultant is not, in fact, an employee, companies must have the in-house skills to implement the solution.

Consultants are an important and incredibly useful resource for many companies, especially young businesses with specific growth challenges. Tapping into an expert resource with potentially decades of experience saves time, money and resource in the long-run while helping to overcome specific, short-term challenges.

While IR35 does threaten the affordability and sustainability of using consultants, it does NOT mean a dramatic end to contractual work! Consultants can still be used on a contractual basis but companies will need to put more thought into the process of engaging consultants and contractors – whether it be via a boutique agency, through an umbrella company, or through a consultancy platform.

ABOUT THE AUTHOR

Mirel Baila is co-founder of Consulthon, a UK Management Consulting Expert Network. Businesses can raise a Business Challenge and the network’s experts will brainstorm solutions. After selecting the answer they like the most, the business can book a paid one-hour advisory call and deep-dive session with that consultant. All the consultants are vetted by Consulthon and the platform offers businesses access to a wide range of skills, in a variety of sectors and countries.

Web: https://consulthon.com/

LinkedIn: https://www.linkedin.com/company/consulthon/

Facebook: https://www.facebook.com/CONSULTHON.CO.UK/

Twitter:  https://twitter.com/CONSULTHON  @consulthon

Instagram: https://www.instagram.com/consulthon.co.uk/ @consulthon.co.uk

If you own a small business it’s easy to get caught up in doing bookkeeping yourself to try and save costs. However, when you have lot to do this can eat into your free time, and it’s probably not your favourite way to spend your weekends.

So how do you strike a balance and prepare your books correctly in order to reduce your accountancy bills, without it eating into your weekends?

Here some way to save time and money:

1. Talk to your accountant

Ask your accountant what you can do to lower your accountancy fees. The aim is not to take on more work at the expense of your weekends or family life. Most accountants do offer packages and it might be that you can get the year-end accounts and tax return work at half price. Or they could simply take over all your paperwork chores, produce regular management accounts and handle your VAT and payroll requirements. In return you get your end of year accounts done and filed for FREE. If the bulk of the work is completed and there are no additional complications or work at the year end, I see no reason why the accounts cannot be filed at no cost to you. 

• Get a format agreed

If you’re happy to do the books, then agree the format with your accountant. For example, should you to simply keep record of income and expenses on excel? Do they want you to use a particular software? Do they want you to reconcile the books by applying “Double Entry” bookkeeping? Unless you are a professional bookkeeper or a member of the Institute of Certified Bookkeepers, please do not attempt double entry bookkeeping. You may end up paying for the accountant to rectify errors. You may even end up with some tax issues.

• Use bookkeeping services

You can use a professional bookkeeper to prepare the books. Fees will be lower than an accountant’s. Shortlist a few and involve your accountant in the process if possible. You want to avoid a situation where you pay for the same work twice because the format and quality of the bookkeeping is not at a level to enable the accountant to produce the accounts at a cheaper rate. Or the bookkeeper and the accountants use different systems.

• Make records as simple and streamlined as you can

Whether you use an accountant, a bookkeeper or do it yourself, avoid complicated record keeping and streamline your transactions. Things you can do include having a dedicated business account, using the bank for most transactions, avoid using the business bank account for personal expenses, avoid multiple bank accounts or credit cards and have all your records in once place (preferably in a digital format).

• Use Receipt Capture System

There are some good apps including Auto Entry and Receipt Bank that allow you to capture these receipts on the go and send them directly to your accountant. You can even ask your suppliers to send their invoices to the app to free up your inbox a bit.

• Use Cloud Bookkeeping

FreeAgent, QuickBooks, Xero and the like, have transformed how bookkeeping is done. If you do it yourself use one of these platforms to save time and accountancy fees. Some accountancy firms may even cover the cost within their packaged services. Again, agree with your accountant where your bookkeeping duties would end.

• Use automation where you can

You can now authorise your bank to send bank transaction to a cloud bookkeeping platform. You can also set a rule to say that if a direct debit payment goes to, say Aviva, then this should be analysed as insurance. Imagine how much time and fees you can save by doing this.  However, don’t assume everything will be correct. It will need checking.

• Pick a good time to send in your records

Did you know you can ask for a lower accountancy fee if you prepare your books for your accountants at their quietest times? Accountants have peak times as many businesses have December & March year-ends, plus the Tax Return deadline in January. Avoid these times and ask your accountant if you’ll get a discount if you send in your books before the rush.

• EPOS integration

If you run a retail or restaurant business and you’re using a cloud bookkeeping platform, then why not go a step further and get an EPOS (Electronic Point of Sale) and inventory system that integrates with your chosen cloud platform and helps you keep track of stock? Platforms such us Vend, Izettle and others should be considered. A key area that often causes issues with the accounting process is the value of your stock. Where you or your accountant spends less time on this area, you can both save time and costs.

Conclusion

Make use of workshops from HMRC and the free videos from reputable accounting firms to enhance your knowledge. 

Always try to get the best deal from your accountants but also remember they can add value to your business so do your part well and get them to spend more time on business advice/tax planning.

ABOUT THE AUTHOR

Jonathan Amponsah CTA FCCA is an award-winning chartered tax adviser and accountant who has advises business owners on entrepreneurial tax reliefs. Jonathan is the founder and CEO of The Tax Guys.  www.thetaxguys.co.uk

The general rule that says you can claim all expenses incurred wholly and exclusively for the purpose of your business looks as if it should be simple apply, but the reality is more complicated.

Let me share a sample of the surprising things your business cannot tax deduct.

Sponsorship

Sponsoring an event is an area that might surprise you. HMRC will disallow the cost if they can show that perhaps the sporting field you are sponsoring is a director’s, partner’s or proprietor’s regular hobby or if the party being sponsored is a relative of the business owner, or if there is no proposed or actual return on investment from the sponsorship.

So, the trick here is to ensure that the sponsorship deal is structured correctly and there is a clear commercial benefit for your business.

Travel

Let’s assume that you operate as a self-employed doctor or sole trader rather than limited company. You have a home-based office. You travel to see different patients or clients on a regular basis. Your journey starts from your office (at home) and includes a few itinerant travels from one client to the other client. Can you claim the full travel expenses? Logic will tell us that yes. However, the rules deem the travel from your home office to patients / clients as ordinary commuting and therefore not tax deductible.

Client Entertainment

As part of your sales and marketing, you decide to take clients to a relaxed restaurant to discuss new business. The purpose is to negotiate and generate new business. The income will be taxed so the expenses should be ok to put through the business, right? Unfortunately, the rules specifically disallow these expenses to be claimed against tax. Part of the reason behind this is that you could have had the same conversation over a cup of tea in the office, plus there is an element of personal benefit in the entertainment.

Promotional Gifts

It’s true that nothing ever happens in business until a product or a service is promoted and sold. And when it’s sold at a profit, tax gets collected accordingly. However, if you promote your business by spending too much money on promotional gifts to customers and the gifts cost more than £50 per customer, you won’t be able to deduct these costs against your income. Even where the gift cost £50 or less, make sure it carries a conspicuous advert for your business.

Clothes for Work

Imagine you’re a barrister and you’ve purchase your gown to be worn in court. You don’t wear this gown in public. Can you go ahead and claim the cost of the gown against your tax? Not according to the famous tax case of Mallalieu v Drummond which established that “no deduction is available from trading profits for the costs of clothing which forms part of an ‘everyday’ wardrobe. This remains so even where the taxpayer can show that they only wear such clothing in the course of their profession.”

However, some protective and work clothing with logos and other business branding are claimable. If in doubt, speak with a tax accountant.

Staff Reward via Trust

Your staff are well engaged within your business and you want to reward them. You decide to make payment into a Trust to demonstrate that the money has been earmarked for them and waiting to be paid when they hit their targets.

As the money has been paid out of your bank account to the Trust, can you claim it as a legitimate business or staff expenses? Unfortunately, not. Because of a specific tax avoidance rule, this legitimate expense cannot be claimed. 

Parking Fines

Your business is delivering some items to a customer. The driver parks for a few minutes and get a parking ticket. Surely the reason for the fine is because of business activity so it should fall under the wholly and exclusive for the purpose of business rule? Not quite. Fines incurred for breaking the rules are disallowed.

Legal Expenses

Not all legal costs are tax deductible. For example, fees in connection with the purchase of a business premises or investing in shares are disallowed.

In addition, fees that have both personal and business elements may fail the wholly and exclusive test. And legal costs associated with breaking the law are also disallowed. For example, where you’ve got a parking fine and you decide to call your lawyer to defend the case and you lose, you won’t be able to claim the legal fees.

Wages to Spouse or Kids

A great way to keep more of your cash within the family is to employ your spouse and kids. And there is nothing wrong with this plan. However, where you pay family members over and above the market rate, where they don’t actually perform any task for the business or where you’ve structured this working arrangement incorrectly with no evidence or paperwork to back up your plan, HMRC will not allow their salaries to be put through the business. Do take care with this as it’s currently a hot spot for HMRC enquiries.

ABOUT THE AUTHOR

Jonathan Amponsah CTA FCCA is an award-winning chartered tax adviser and accountant who has advises business owners on entrepreneurial tax reliefs. Jonathan is the founder and CEO of The Tax Guys.  www.thetaxguys.co.uk

Everyone entrepreneur should be vigilant when it comes to managing profitability. However, many are not as clued up as they need to be when it comes to understanding profit and what factors impact profit both negatively and positively.

Let’s discuss some of the ways you may be unintentionally reducing your profit and how to avoid mistakes in future.

Bank balance accounting

As a business owner, you’ve heard the phrase “Cash Is King” so many times that it starts to feel like more cash means more profit. You then start to gauge the profitability of your business based on the bank balance. This is a common mistake I see so often. Here are 7 reasons why you might be making a loss in your business despite the cash in your bank account:

• You have not paid your suppliers or other creditors
• You have received advance cash from your customers
• Payroll expenses have not been reflected in the accounts
• You haven’t made adjustments for all expenses
•  You have not taken any reasonable drawings or dividends
• The cash is from last year’s profits
• You are not paying yourself a reasonable salary

The above list is not exhaustive but covers the common areas where your cash will go. So, the next time your accountant presents you with accounts with less than expected profit figure, have a conversation and go through the above list together with other factors specific to your business.

Cost cutting in the wrong place

You realise the cash at bank is not yours and that you are not making profits. So panic sets in and you’re determined to cut costs to make profits. Here’s the thing though: Not all expenses will have a greater impact on your profits. A study by McKinsey and Co (global consulting firm) revealed that whilst a 1% reduction in fixed costs can have around 2% increase in profits, the same reduction in variable costs has a bigger 7% increase in profits. So instead of going for cost cutting at all cost (no pun intended here) conduct a cost benefit analysis and focus on variable or direct costs first.

Not understanding margins

This is an important indicator to profitability, but it’s vastly ignored or misunderstood among most entrepreneurs. The next time you get your accounts, take the direct costs of sales or direct expenses out from the revenue. Then divide that number by the revenue. That is your gross profit margin. Let’s say your revenue is £1,000 and your materials or direct labour or direct expenses cost you £700. The difference of £300 divided by £1,000 revenue gives you a margin of 30%. This means that for every £1 of sale, you are making 30p in gross profit. This tells you how profitable you are at the gross margin level. You can also compare this 30% to the industry average to gauge where you are at. If this margin is so low, then you’re unlikely to be making net profit because there won’t be enough to cover your overheads.

Losing profit margin

Having ascertained your profit margins of 30%, a common and huge mistake I see is as follows. You go to see a new project. You take your costs. Let’s say 1,000. What do you do next? You apply 30% to the costs. You then quote £1,300 for the job. Sounds familiar? And it makes sense, right? Well not quite. If you take your £1,000 costs from the £1300 revenue (price) you get £300. Now divide that by £1,300. You now get 23%. You’ve just lost 7% profit margin without even blinking.

And this mistake will make its way down to the net profit figure causing you to be less profitable year after year.

Fearing prices increases

Having realised that you’ve been under quoting for jobs or that your costs have gone up, another classic mistake is to put off price increases for fear of losing customers. Yes, you will lose some customers but let’s do some maths. Let’s say you have 20 customers and your price is £1,300 per customer. (£26,000 revenue) If you put prices up by 10%, your new revenue will £28,600. If you lose 10% of your customers (2 customers x 1,300 = £2,600), your revenue will revert to £26,000 but with two fewer customers and less resources needed to service the remaining 18 customers. And depending on how you approach the price increase and how you communicate it, you might be pleasantly surprised that less than 10% of your customers will leave.   

Avoiding even small increases

McKinsey studies also revealed that increasing pricing has a bigger influence over your profits than reducing costs or increasing sales volumes.

But here is what most entrepreneurs do not consider doing: Assessing the power of a mere 1% increase in price, 1% increase in sales, 1% decrease in variable costs and 1% decrease in fixed costs.

Next time you sit down with your accountant, ask him or her to run these numbers and show you the impact it will have on your profits. Would you lose a lot of customers due to a mere 1% increase in price?

Miscalculating the effect of discounting

You’ve quoted a price for the job. The customer says, “what can you do about the price” Do you get a knee jerk reaction and offer a price discounts to win the work? Let’s return to the above example (on margins) where you were making 30% margin on sales of 1000. Let’s then assume you offer a 10% discount. Your revenue drops to £900 but you’ve kept your costs the same. Your margins drop to 22% (£900 less £700 divided by £900) The 10% discount now means a 26.6% drop in your margins (the original 30% less the current 22% dividend by the original 30%. This is just the beginning because it gets worse if we look at the impact this will have on the bottom line (net profit margin), assuming you keep all your overheads the same. Were you intending to have a 26.6% drop in your margins by offering a 10% discount?

The point here is to be aware of the profit effect of price discounts and use it to negotiate a better win-win deal for all.

Lack of familiarity with key figures

One of the biggest mistakes is not knowing the profit numbers that matter in your business. Your gross profit margin, profit per staff, profit per client or project, net profit margin, breakeven number, your monthly costs and your prices are all important numbers to track and focus on. If you currently speak to your accountant once a year only to be told how much tax to pay with no access to your key numbers, then it is unlikely you will be able to improve on your results.

The good news is that with so many online accounting apps on the market, (FreeAgent, QuickBooks and Xero), entrepreneurs should no longer be flying blind in their businesses.

A final tip

In his book Profit First, Mike Michalowicz makes the case for opening another bank account and transferring your profits before you make payments to anyone. So, if you’ve worked out that your net profit on every sale is 10%, then a safe way to see and secure those profits is to transfer it straight away to your “profit bank account”. That way you are forced to make do with the remaining 90%.

To summarise

Profit is as essential to business as oxygen is to human being. Your business cannot hold its breath for long without it! Make sure you understand how profit is generated and impacted in your particular business. You can do what is needed to make your business as profitable as possible. 

ABOUT THE AUTHOR

Jonathan Amponsah CTA FCCA is an award winning chartered accountant and tax adviser who advises entrepreneurs on business and profit improvement. Jonathan is the founder and CEO of The Tax Guys.

www.thetaxguys.co.uk