Does Your Accountant Really Care About Your Business’s Profit?

Having a commercial accountant is essential for your business’s financial success.  To provide relevant advice it is essential they take an active interest in your business.  As a minimum a commercial accountant should

    • Know business owners as people – what are their personal and business goals, pressures and stresses – both financial and non financial.

    • Know the business – have they visited your premises, met key employees, understand the business structure, market and your key products and services?

    • Offer pro-active advice – a commercial accountant should ask questions you have not thought of – for example.  Do they bring to your attention future risks and methods to avoid them? Do they offer practical business advice which in the past has been put into practice with positive results?  Our industry experience enables us to quickly grasp any root issues and to provide viable solutions leading to savings and efficiencies.

    • Go the extra mile when you need extra help and support?

All of which are part of the core service offered by the commercial accountants at FD Solutions and Accounting.  Using our industry experience our aim is to identify any root issues to then solve problems. We never forget that you the client come first, offering you support in the way you require it.  

Here are 10 warning signs to look out for –

  1. Lack of availability – if your accountant is either difficult to get hold of and/or takes a long time to respond it could be a sign you are not considered a priority. Good communication is essential.
  2. Lack of expertise – to provide specific financial advice a truly commercial accountant should have experience relevant to your industry  
  3. Little proactive advice – in addition to compliance a good commercial accountant should be looking for opportunities to provide advice to further improve your business performance.
  4. Errors in your financial statements – this could be an indication your accountant is not paying enough attention to detail. Mistakes could cost you money in the long run – its important finding an accountant which is meticulous.
  5. Ethical concerns – if you have any concerns about questionable tax strategies you should distance yourself. If HMRC decide an accountant is doing something dishonest then all their clients could potentially get drawn into the same investigation at significant cost both financially and emotionally to you.
  6. Lack of transparency – your accountant should be transparent about their fees, services and any issues that arise. If you discover any of these not be the case this could be a sign they are not acting in your best interests.
  7. Unresolved issues – if you have raised concerns and these have not been resolved to your satisfaction and/or you do not feel confident in your accountant’s ability to handle your financial needs it’s probably time to look elsewhere.
  8. Lack of innovation – your accountant should be using latest accounting tools and practices, if this is not the case possibly you will be paying for their inefficiencies. An accountant who is not consistently learning and improving their skills may not be able to provide the best service possible.
  9. Incompatibility – if your accountant’s values. work ethic or communication style does not align with yours it could prove difficult to work together effectively.
  10. Business growth – as your business grows your financial requirement will become more complex possibly requiring a higher level of service. It could be that you will need to find a more specialist commercial accountant to support you take your business to the next level.

Changing accountants may be a difficult decision but once made it is fairly quick and easy to do.  Remember your financial success depends on having the right professionals defending your corner, someone like FD Solutions and Accounting Limited. We never forget your success is our business!

Employee morale opportunities which are also tax deductible for the employer

Employee morale after a holiday season is over is usually low, when your now cash strapped employees return to work with New Year resolutions of asking for a pay rise or worse – ideas of looking for another better paid job!  This employee morale focussed tax planning blog explores ways to provide meaningful employee morale boosting rewards that do not result in extra tax liabilities and are fully tax deductible for your company.

Here are some suggestions of tax-friendly methods which equally show appreciation to your team boosting their employee morale –

Idea 1 – £50 gifts – You can give your employees gifts or vouchers up to this amount without their incurring additional tax. Vouchers are convenient and can include those accepted by major online retailers such as Amazon or for food delivery services to treat your team.  For non directors there is no annual limit to how much or how many times these are given provided the reason is not performance related, open to all and each time no more than £50.

Idea 2 – Equip their home office – This is a valuable option as you can help create a conducive work environment leading to improved performance and employee morale. Your company will own the equipment, and if they leave, you can reclaim it or sell it to them.   Flexible hybrid home working options are now becoming a major factor employees consider when accepting an employment position.

Idea 3 – Provide a mobile phone – Initially, the cost of a phone can be high. This is crucial for employees who have client interactions to separate work and personal life, or for the marketing team to capture high-quality images. Additionally, the monthly contract can be managed through the business without incurring a benefit in kind charge.  By covering the cost through the company, you can recover the full expense and VAT. If the employee is expensing the cost, they can only claim for personal use.

Idea 4 – Reimburse home office expenses – Employees can claim certain costs for working from home. If an employee requires a specific broadband service for work, your company can contribute to the business portion. The employee’s work/personal split is 50:50, allowing them to claim 50% through a monthly expense report. In certain cases, flat rate expense claims may be available at £312 per year.

Idea 5 – Branded merchandise – Select an item and add your company’s logo. As long as it’s reasonable and aligns with business needs, it’s tax deductible. T-shirts and sweatshirts are a popular choices.

Idea 6 – Did you forego an office Christmas party?  Fear not the tax and national insurance free £150 per employee can be used for any annual event whether this is a late January party, summer event or 2024’s Christmas party – something for everyone to look forward to – boosting employee morale!  One other requirement to receive this allowance is that the party must be open to all employees.  For those of you with a business operating at multiple sites, HMRC says “If your business has more than one location, an annual event that’s open to all of your staff based at one location still counts as exempt provided it is open to all employees and/or separate parties are held for other locations or departments.

The £150 rule applies to both virtual and in person events.

You may wonder, why should I do this? Well your employees will perceive it as a thoughtful gesture. The VAT is recoverable on direct business purchases and you may also potentially receive up to 25% Corporation Tax relief.   Furthermore, branded merchandise offers great exposure for your company.  So a win/win for employee morale and your business!

These tax planning strategies not only promote a positive work environment but also address tax considerations.  For personalized advice tailored to your business, contact us today and make this a rewarding experience for both your staff and your business.

Research and Development in Manufacturing (food and drink sector)

Manufacturing is a highly innovative UK industry sector in the UK with numerous companies are engaged in activities which meet the criteria for research and development (R&D) tax credits.

However businesses often fail to take advantage of research and development tax relief because they assume that their work is not eligible. While certain forms of commercial product development may not qualify, the manufacturing sector is constantly involved in a wide range of activities and initiatives aimed at advancing knowledge.

Taking the food and drink production sector as an example innovation is necessary as a result of consumer demand, economic pressure (for example cost of living), supply chain or regulatory compliance.  Food and drink businesses respond by developing new products to fulfil their preserved market need for example

 

    • Improving nutritional benefits
      • Reduction in salt, sugar, additives
      • Free-from gluten or particular allergens
      • Tailored to dietary need (high in protein or fortified in vitamins)

       

        • Alcohol free alternatives

    • Extending shelf life

    • Addressing sustainability or environmental concerns –
      • For example eliminating palm oil to protect the Rain Forest

       

        • Vegan or organic ranges

    • Reducing unrecyclable or unnecessary packaging

All product development requires investment and carries a high level of risk.  The Research and Development tax credit scheme is a valuable means to help subsidise the cost of such innovation.

To quality a project needs to seek to achieve an advance in science or technology and for these activities to address scientific or technological uncertainty. 

When it comes to food and drink products, creating new recipes or formulations is highly likely to fall under Research and Development. The process of innovating and developing these products often involves scientific principles.

Formulating and combining ingredients can introduce uncertainties in their reactions. Even a small change in one ingredient can alter the properties of the mixture and their behaviour in subsequent production stages.

There are also uncertainties in the manufacturing process, such as scaling production, implementing machinery, and establishing processes to ensure a consistent end product.

While meeting consumer expectations for taste, appearance, and unique selling points is crucial, products also need to fulfil various requirements related to shelf life, transportation, compliance with regulations, and affordability.

Utilizing new materials, developing innovative solutions to safety challenges, and integrating new technology can all meet the eligibility criteria. It is crucial for manufacturing companies to monitor their projects and research and development expenses meticulously, as they are required to provide detailed records of the qualifying activities. Seeking professional guidance is essential for a successful tax credit application.

Research and Development opportunities for Restaurants and Other Hospitality Sectors

Restaurants and hospitality businesses often overlook the opportunity to claim research and development (R&D) tax credits. Despite ongoing innovation in the form of new processes, services, and recipes, many are unaware of Research and Development tax relief and the activities that could qualify them.

For establishments like restaurants, bars and hotels, investments in delivering better service and advancing methods may be eligible for such credits.  This encompasses activities such as creating gluten-free recipes and developing new technology for hotel guests.

Qualifying expenditure includes materials, ingredients, and employee wages related to Research and Development efforts, making expert advice essential in this often disregarded area.

Examples of eligible activities include

 

    • The development of vegan and gluten-free alternatives,

    • Recipe experimentation – including different cooking or food preparation methods

    • Innovative customer booking apps,

    • New eco-friendly hotel laundry techniques.

For example, a restaurant successfully improved a signature dish with reduced sugar content after the head chef spent time experimenting with alternative ingredients and preparation methods.

Transforming a finance department into a business partner at a £20m education membership organisation – case study

Virtual Finance Directors moving the Finance Department out of the back office shadows to become a true business partner

Used correctly finance business partners are an expensive but valuable resource however in reality very often end up spending much of their time in data manipulation, reconciliations and reports which are of no direct value to a business. 

Typically this is a symptom of poor systems and processes but often also due to a lack of understanding as to what activities will drive business value.

Over the last 50 years finance departments have been attempting to change their place in business from merely bean counters – paying the bills and reporting what was happened as a fait-accompli into using this information to become forward looking business decision makers and drivers of performance.  This transition continues being a challenging journey since many finance professionals are much happier just crunching numbers rather than becoming involved in commercial interpretation and performance improvement.  In recent years improvements to even the most basic of accounting software have both reduced the time finance teams need to spend in data entry whilst offering the ability to report the same information in a variety of different ways with little additional effort – that said as the quality of data improves so has the demand and expectation from other business areas.

I have been involved in rolling out varying aspects of finance department transformation in several businesses and which very often is borne out a necessity for financial information.  Typically this request originates from either a Managing Director or their Board of Directors and comes with unrealistic expectation that with additional information and their sudden new found commercial acumen, the quiet finance department will save the business!  The latter often being the biggest obstacle to overcome – whilst an effective finance business partner’s commercial acumen should be the number one competency (even above that of bean counting), none the less they are only a voice at the commercial table (albeit influential) but ultimately responsibility should rest with the commercial directors.

Several years ago I worked with a Kent based college group which had acute financial difficulties attributed to poor cost understanding and a lack of individual course profitability analysis based on actual figures.  A top level annual budget was being prepared and the finance team were posting invoices to cost centres but further analysis was limited. 

Working with each cost centre manager the budget was recalculated by each cost type and significant supplier then into which month the charge would occur.  A similar process was introduced for commercial income so turning the budget process onto its head.  Monthly meetings to discuss variances and changes to future months were introduced between budget holders and members of the finance team.

Course income was generally funded through central government grants with the amount based on varying student or course criteria.  A process for calculating the correct income allocation per course was introduced as an intense annual task.  When applied to the costs analysis above provided performance by cost centre and course.  In normal circumstances this should have provided the foundation for the finance department to become involved in discussions about curriculum development especially in respect of required course attendance numbers and trends.

Unfortunately in this situation such analysis was left too late.  The results just gave meaning to the bank balance that due to insufficient student numbers, courses themselves were either loss making or that this became the case after central management cost had been applied. 

Had the finance team become business partners sooner it might have been possible to save this organisation. However this serves to strengthen the potential valuable role finance business partnering can have to a business.

As a summary the key priorities finance heads require to develop a business partnering function are –

 

    • Strong and accurate data (which is input in a way that no further reconciliation or sub analysis is required before it can be used for performance reporting)

    • Finance employees require up skilling in negotiation and influence to underpin their likely analytic ability.

    • An understanding of Board priority as to where and what suitable analysis and general business support will add value – volume of financial reports is not a guarantee of accepted value.