Business Support

A new King, the possibility of a change of government next year, and signs that we may, at last, be emerging from the disruptions created by Brexit and COVID.

Meanwhile, back at helms of our small business sector firms, entrepreneurs are obliged to deal with the challenges that have arisen in recent years. Including:

• Inflation
• Crippling energy cost rises
• Supply chain difficulties, and
• The lack of qualified staff – affecting service industries, farming and manufacturing.

It’s as if the UK economy is becalmed, in the doldrums, waiting for the winds of change.

What do we need?

• Price stability, inflation reduced to 2% not 10%.
• A reduction in the cost of energy.
• Less red tape when trading (importing and exporting) in the EU post Brexit.
• Access to European and other global labour markets.

Readers who are suffering from these and other issues would do well to keep revisiting their business plans for the coming year to head-off cash-flow and solvency concerns. Please call if you would like to discuss your options.

Some businesses could see their bills slashed by as much as 20% off predicted wholesale prices, thanks to further government support launched on 26 April 2023 for sectors using high amounts of energy.

Applications have now opened for energy and trade intensive sectors that are most affected by the unprecedented rise in global energy prices to claim further discounts on their bills between 1 April 2023 and 31 March 2024 – helping deliver on the government’s priority to halve inflation.

Ceramics and textiles are among the wide range of sectors potentially in line to benefit. These companies use high amounts of energy to deliver their goods, but also are exposed to strong international competition, meaning they cannot raise their prices to cover the increase in costs they have faced.

Ministers are today urging companies to check their eligibility and submit their applications at the earliest opportunity, as the government continues its unprecedented support package that has protected businesses and as of April has saved them £5.9 billion on energy costs – over £30 million a day.

Is there mileage in the old adage that it is unwise to keep all your eggs in one basket?

Most businesses build an expanding customer list; each customer a separate income stream for their business.

Compare this with being employed; one employer, one income stream.

The other business dynamic that requires attention is what you sell to your customers. Would it pay dividends to explore what your customers need rather than what it is you want to sell them?

The idea being that it is your customers who ultimately chose to buy what you sell, and therefore checking out ideas for products with customers is not a bad idea.

But how many products or service plates can you keep spinning on sticks and still have time to manage your business effectively? There is mileage in the idea that by reducing your focus to fewer items you may achieve a bigger impact; more sales, more profits.

This process may also help to improve efficiency. For example, with fewer projects on the go you will have fewer key performance indicators to create and monitor.

Perhaps, after all, less could be more…

One of the issues you will need to consider if you are starting a new business is the business structure. There are three commonly used forms to choose from, each with advantages and disadvantages.

• A sole trader – this is the simplest way of starting and running a business. However, you are personally responsible for your business’s debts.
• A limited company – this means that the business is a distinct legal entity in its own right; quite separate from you as a person, but there are more reporting and management responsibilities. It also means that you cannot simply draw money from the business without considering tax and legal implications.
• Partnership – There are two main types of partnership, a conventional version where you work with one or more partners in the business. This is the simplest way to run a business for two or more people, however, partners can be personally liable for partnership debts. There is also a limited liability partnership or LLP, this is a more complex structure that provides you and your partners with the protection of limited liability, just as with a company.

Which business structure is best suited to you will depend on a host of factors. This could include your cashflow projections, your longer-term plans for the business, whether or not you need the protection of limited liability, your willingness to comply with legal and administrative obligations and the nature of any inward investment you are seeking.

If you are contemplating a new business venture, please call so we can help you choose the right structure for your business.

When accountants or other interested parties refer to business profits, they are likely to mean the difference between sales and costs, and more concisely, that sales exceed costs.

However, the word “profits” can prove to be a moveable feast as HMRC, banks and traders will likely have a different interpretation.

For example, do costs include:

• intangible overheads like depreciation;
• the write-off of goodwill; or
• taxation.

The distinctions can prove to be important especially if comparisons are being made between business profit centres or different businesses.

Company accounts display sales, costs, intangible write-offs and Corporation Tax charges, but any dividends taken by directors as part of their remuneration package – most directors of small companies take low salaries and high dividends to save NIC costs – are not deducted as a cost in the Profit & Loss account. And so reported profits after tax are not the complete story; any dividends taken by working directors need to be considered.

The question, what is profit, is therefore dependent for its usefulness as an indicator of a businesses’ health, only if its definition is fully appreciated.

As we have moved into the new tax year, since 6 April 2023, the March hares have had their opportunity for madness and there is just a glimmer of warmer weather ahead. And perhaps, we may even witness a growing measure of control over rising prices.

There were a few good tidings for business owners in the recent Budget, for example, the unlimited expensing (100% write-off) of qualifying capital expenditure for companies, and the abolition of the lifetime limit on pension pots.

But whilst we may draw deeper breaths and enjoy the sun on our faces in the coming weeks there are still challenges ahead and we would do well to be mindful…

Is now a good time to take stock? To quantify any damage to balance sheets and to reappraise our trading prospects in the coming year? We would say yes, it is.

And whilst we can undertake this “planning” while we soak up the spring sun, it is more productive to give yourself half-a-day away from your desk and create a formal business plan that you can use to measure performance in the coming months.

Every business and business owner will have a unique set of circumstances to deal with during 2023. If you are keen to make the most of any upturn in trade, now is the perfect time to consider your options.

We can help.

The new Energy Bills Discount Scheme replaces the Energy Bill Relief Scheme which came to an end on 31 March 2023. The new scheme will offer support to eligible non-domestic energy customers, including UK businesses, the voluntary sector, for example charities, and the public sector such as schools and hospitals from 1 April 2023 – 31 March 2024.

The new scheme has been designed to help support businesses over the next 12 months whilst at the same time limiting the taxpayer’s exposure to volatile energy markets, with a cap set at £5.5 billion based on estimated volumes.

Under the new scheme, eligible non-domestic customers who have a contract with a licensed energy supplier will see a unit discount of up to £6.97/MWh automatically applied to their gas bill with a price threshold of £107 per MWh and a unit discount of up to £19.61/MWh applied to their electricity bill with a price threshold of £302 per MWh. The relative discount will only be applied if wholesale prices are above the stated price thresholds.

The government has also confirmed that a substantially higher level of support will be provided to businesses in sectors identified as being the most energy and trade intensive – predominately manufacturing industries. These businesses will receive a gas and electricity bill discount based on a supported price which will be capped by a maximum unit discount of £40/MWh for gas with a price threshold of £99 per MWh and £89/MWh for electricity with a price threshold of £185 per MWh. This discount will only apply to 70% of energy volumes.

As with the original scheme, suppliers will automatically apply reductions to the bills of all eligible non-domestic customers.

Britain’s rollout of clean, affordable, home-grown energy is moving full speed ahead, with the UK government offering £205 million in its latest renewables auction, boosting energy security, growing our economy and powering more of Britain from Britain.

The Contracts for Difference (CfD) scheme is the government’s flagship mechanism for supporting new British low-carbon electricity generation projects, so far awarding contracts to projects totalling nearly 27GW of low carbon capacity. This has helped accelerate plans to diversify, decarbonise and domesticate our energy supplies, with the last round (AR4) securing almost 11GW of low carbon capacity – enough to generate sufficient electricity to power 12 million British homes.

A recent announcement confirmed a budget of £205 million for the fifth CfD allocation round – which is the first CfD auction to run annually – confirms another year of significant financial backing by government for green industries and jobs. This will bolster investment into the sector every year, helping to support green energy and jobs of tomorrow, level up Britain, and replace expensive fossil fuels with cheaper, cleaner, domestic sources of energy.

The recent rise in inflation and interest rates underlines the fact that the UK and world economies are still suffering from the effects of the continuing war in Ukraine.

Accordingly, if you have managed to retain profits in your business this buffer will help to see you through difficult trading periods as we endeavour to emerge from current challenges.

How long these reserves will last depends on how effectively you manage the process.

Planning is absolutely vital.

You need to figure-out what your short-term prospects for trading are likely to be and then quantify the minimum level of costs that you will need to carry in order to meet:

• existing fixed commitments, rent for example, and
• other variable costs to deliver any future trade.

If these calculations reveal that you will be trading at a loss for an extended period, the only way your business can survive is if:

• your retained profits and personal capital introduced cover these losses; and
• if reserves are exhausted, you are prepared to borrow to fund any shortfall.

Having real-time data at your fingertips will help, as will creating a forecast or budget for at least the coming year to see how expected trading will affect cash flow and solvency.

Please call, we can help you consider your options.

During recent disruptions to trade, ascribed to Brexit, COVID, the war in Ukraine or other global economic challenges, we have become used to online meetings and facetime calls to keep in touch with business associates, staff and friends.

Now that restrictions are easing it is worth reconsidering the value of face-to-face conversations.

Experts agree that communication is more engaging when employees meet in person and that virtual meetings are less effective at building trust.

Psychologists would point to the non-verbal cues that are lost when we are distanced from those with whom we communicate.

Perhaps we should keep talking and re-establish face-to-face contact with our business contacts?

Keeping in touch, face-to-face, may help us relax and sharing problems, common experiences and figuring out how those problems can be solved may lead to more productive outcomes than those afforded by15-minute conversations online.

For example, in a business context, if you can call on customers to discover their challenges this may reveal opportunities for you to step in and offer a solution.

On the flip side of these arguments, virtual meetings can afford significant cost savings. And many jobs are now advertised where working at home is permitted for part of the week. Perhaps what we need is a sensible combination of the two processes. Key meetings where expected outcomes are required may benefit from sitting at a common table. Follow-up clarifications being settled online.