Some new year’s resolutions are made to be broken, but managing your business cash flow and personal tax planning situation shouldn’t be condemned to the attic like that exercise bike or musical instrument.
Menzies Partner Peter Noyce outlines some proactive steps you and your business can take in 2017.
Tax planning: managing upcoming payments
Managing your business cash flow
Practices will be searching (or perhaps even borrowing) to pay balancing tax payments at 31 January 2017 on (generally) improved results in the basis period 2015/2016 and with increased payments on account adding to the pain. So the question we start with is why don’t you have the cash already available for you to be making your own tax payments?
It is perhaps because other people still have money you are owed? If this is the case then it’s time to focus on the following business tax planning areas:
Improve your credit control
Ensure your credit control department is adequately resourced, empowered and supported by all fee earners. Monitor your collection procedures to speed up collection of fees and thereby reduce the potential impact of bad debts. Remember (your) cash is king!
Work in progress (WIP)
Ensure all fee earners are fully recording their time and not making billing decisions when posting time. Agree in advance with your clients to interim bill and always bill at the height of client’s satisfaction, at the completion of a good job. You are more likely to be able to bill your full costs and you will collect your cash quicker. Fee earners should be regularly reviewing the WIP on their portfolios for billing opportunities and looking to hit billing and WIP day’s targets. If you do not bill it, you do not get paid!!
Monitor your combined WIP and debtor exposure to clients in sectors that are particularly struggling in this present economic environment. Although it’s impossible to predict the future, being prepared for different outcomes and situations can make your exposure that bit easier to manage.
Set limits for exception reporting where combined WIP and debtors on individual clients is too high.
Communicate with your clients
This may seem obvious to some, but regularly communicate with your clients is really important to ensure you (and they) are kept fully informed of all matters and aspects of their cases and assignments, whilst ensuring agreements to any additional fees before they are incurred.
Monitor your expenditure
Keep close control on expenditure and consider where savings could be made. Carefully consider any capital expenditure that is not vital. Review and negotiate existing supplier contracts and where possible look for efficiency savings that won’t impact on quality.
Returning to Tax Payments
As many firms continue to find the present economic climate challenging, it is worth forecasting likely results during the basis period 2016/2017 as payments on account to HMRC may be able to be reduced or payment plans negotiated. This can be a useful cash flow saving appreciated by individuals and the business.
It may not be the easiest of discussions to have, but addressing the sustainability of the level of Partners’ drawings may become more necessary if the funds are not there. This can often act as an encouragement to improve lock-up control.
For many, the above will be common sense but for others these items could be a great opportunity to ensure your finances flourish in 2017. So this new year make sure your business tax planning resolutions do not come down with the decorations.
For further information on the above, please contact Menzies Partner Peter Noyce by email at firstname.lastname@example.org or by phone on 01483 758915. Alternatively, please contact your regular Menzies LLP Relationship Partner.
Please note: this publication has been prepared only as a guide and is not intended as advice. No responsibility can be accepted by Menzies LLP for any loss from acting or refraining from acting as a result of any material in this publication.