Fab5 Feature – November

Fab5 Feature – November

In times like these, it is vitally important that we focus on the things we really care about and that’s exactly what we intend to do with the Fab5.

At the Fabulous Group, we really care about supporting small and medium-sized businesses and finding new ways to help them. We hope that by imparting some of our knowledge we can provide you with some useful insights and inspire some light-bulb moments.

For this month’s Fab5 we want to share with you five items that have caught our attention recently.

Here’s what we’ll cover:

  1. Covid Fatigue
  2. Cashflow Forecasting
  3. CIMA Annual Conference
  4. Business Performance
  5. IR35 Off-Payroll Working Rule

1. Covid fatigue

Cue the groans. A predictable subject we know, however, it’s a topic that couldn’t go unmentioned. Covid fatigue is affecting us all.

Our entire year has been turned on its head, not only our personal lives but professionally too and we’re fed up of it. Just when we felt things were reaching a ‘new normal’, we were derailed by another lockdown.

We are tired due to the turmoil and uncertainty of the past nine months and most importantly because a lot of us haven’t been able to escape for a couple of weeks in the sun.

Holidays have always been labeled a luxury and this needs to change. Holidays are a necessity. They enable us to reset and without them, we get fatigued, this year is evidence in itself.

Luckily the Christmas holiday is approaching, regardless of how much time you take off, it is one time of the year we can all stop and be (almost) certain that we won’t be interrupted by work emails. Maybe one option this year is to think about extending the Christmas break, if possible, to give everyone that little longer to recharge.

Does the business or office really need keeping open those 3 days?!

Use this milestone as your motivation over the next few weeks, we will get there. We did it before and will do it again. Keep talking, remain visible, and together let’s shake off covid fatigue.

Hopefully, this week’s news of a vaccine has provided light at the end of the tunnel and as a result some improved confidence about prospects for 2021. Let’s hope those new year’s resolutions might take on greater meaning this year! Maybe it’s time to make some resolutions about your business based on what you’ve learnt about it and yourself over the last 8 months?

Let’s end this point with a nod to the financial support that remains in place.

  • An extension to the Coronavirus Job Retention Scheme (CJRS) until March 2021
  • Improved support for the self-employed
  • Cash grants of up to £3,000 per month for businesses which are forced to close
  • An extension to the existing Loan Schemes to the end of January and an ability to top up Bounce Back Loans

For more detailed information, take a look at our article all about Coronavirus Business Support.

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2. Cashflow forecasting

As a business owner, it is critical to have clear insight as to what the cash profile of your business is expected to look like in the short to medium-term in order to accurately plan and provide the basis for well-informed decision making.

As we have already touched upon, Covid has presented many challenges to small business in recent months, not least the uncertainty of what future trading looks like, in particular, the ever-changing trading landscape that consumer businesses are facing.

Cash flow forecasting is a more critical element than ever in ensuring your business has the required resources and funds to meet daily working capital requirements and for future investment and strategic decisions. Even in the short term, it’s vital that you plan accordingly for payments that have been deferred (VAT) and loans that may start needing repayment.

With that in mind, we would like to take this as an opportunity to shine a spotlight on one of our selected partners, Futrli.

To enable efficient and accurate forecasting for the short to medium term Futrli Predict is a tool that can be used. By linking to your business’s cloud accounting program it will look at a variety of assumptions to form a view of the business’s cash flow profile over the coming months by creating an integrated profit and loss, balance sheet, and cash flow.

So, how does Futrli assist in forecasting:

  • Provides an explanation for how figures have been predicted
  • Creates separate predictions for invoices, cash transactions, and journal entries for true accuracy
  • Works out how many days it takes for invoices to be paid for every account to make sure cash flow is realistic
  • Creates a blended VAT rate to predict VAT payments due
  • Accounts for Covid-19 where it sees a potential impact so that next year is as accurate as this year
  • Creates staff payroll predictions

This is a tool that has been created with business owners in mind – business owners can use Futrli Predict themselves, to generate short term cash flow forecasts in real-time as and when they are required for business needs.

If you would like to know more about Futrli Predict and understand how it can increase the transparency of your business’s cashflow, we’d be happy to talk it through with you in more detail, alternatively visit the Futrli Predict website.

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3. Has that Customer or Client gone for good?

As you’ll be aware we are a Chartered Institute of Management Accountants (CIMA) practice and a highlight of the calendar year is always the CIMA Annual Conference, packed full of useful talks and plenty of networking opportunities. Unsurprisingly, this year was different to normal, it was taken online, and I must say I was really impressed with the platform. If anyone is planning a virtual conference I would recommend taking a look at Floor.

Over the two days I virtually attended an array of seminars, I caught up with some familiar faces and met some new ones too. I could tell you everything I learned over the two days but that wouldn’t help with your covid fatigue!

The one takeaway I have chosen to share with you is relevant to anyone who has a business and has had customers or clients that have left or stopped visiting.

Don’t be afraid to get back in touch with past customers/clients.

That’s right. People often leave due to the grass is greener effect and once there, realise it isn’t the case. They couldn’t possibly return to you though, could they? That would be far too embarrassing, where would they even begin with that conversation. Well, that’s where you come in and make the first move.

Of course, this isn’t relevant to all past clients but ones that left on good terms will be happy to hear from you. Give it a few months and drop them a line to see how they are getting on. This way you are offering them a way back into your business free of any guilt and with renewed respect.

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4. Business Performance

Having read that the IoD is urging the Government to reinstate a key insolvency protection for company directors, to prevent a sharp rise in insolvencies we wanted to know more.

According to corporate restructuring firm Begbies Traynor, more than half a million companies were in “significant distress” in the three months to September, based on data from court orders to pay off debts. This was an increase of about 6 per cent compared to the previous three months.

Begbies Traynor defines significant distress as those businesses with a minor county court judgement of less than £5,000 or who have been identified as such by their credit risk scoring system.

The number of companies in significant financial distress has risen at the fastest rate for three years as businesses face increasing difficulties.

Not only are debts increasing but turnover is being affected also.

The following graphic from the Office of National Statistics illustrates exactly- the impact on turnover for businesses that are currently trading, broken down by industry.

Office for National Statistics Graph

Across all industries, of businesses currently trading:

  • 45% experienced a decrease in turnover compared with what is normally expected for this time of year
  • 37% experienced no impact on turnover
  • 10% experienced an increase in turnover compared with what is normally expected for this time of year

There were three industries where more than 50% of businesses experienced a decrease in turnover, compared with 45% across all industries. These were the accommodation and food service activities industry, at 72%; the arts, entertainment, and recreation industry, at 69%; and the education industry (private sector and higher education businesses only), at 57%.

The statistics may appear gloomy but you do not need to be a part of them. Good visibility of your business health now and in the short, medium, and long term will allow for early recognition and action which could be critical in ensuring the best possible outcome for a business, its owners, employees, and stakeholders.

If you feel you need some help to see your business more clearly and /or some advice about the options you may have to recover, rebuild or exit then please get in touch with us. Through our own advisory support services and our network of recommended partners covering legal, financial advisory, tax planning, and business recovery we can help you get the expert advice you need.

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5. IR35 Off-Payroll Working Rules

Changes to IR35 continue to raise questions and calls for the changes to be scrapped all together remain.

Originally scheduled for April 2020 the implementation of the changes has been delayed until 6 April 2021 to allow businesses to focus on survival rather than increasing compliance workload during a time of uncertainty.

Businesses and contractors should start preparing for the 2021 IR35 changes as soon as possible.

Introduced in 2000, the off-payroll working rule, commonly known as IR35, is an anti-tax avoidance rule that applies to all contractors and freelancers who do not fall under HMRC’s definition of being self-employed.

The new rules currently apply to the public sector however the proposed changes will see every medium and large private sector business* in the UK responsible for setting the tax status of their contract workers.

Here’s a quick recap of the changes to IR35:

  • Responsibility for completing IR35 assessments will move away from the contractors and instead to the company using their services
  • The PAYE administration burden will move up the chain to the company using the contractor’s services
  • A dispute process will be able to be imposed should the tax status of the contractor determined by the end-user be disputed

There are widespread calls for the changes to be scrapped altogether. It is considered that the changes would put too great a burden on businesses and were unfair on contractors.

In HMRC’s October update it was reported that there is confusion surrounding what constitutes an ‘intermediary group’ and this will likely lead to a change in primary legislation. If this is the case it is unlikely to cause any further delays as this only a small part of IR35.

This will not be the last we hear about IR35 before April 2021, the changes are facing a lot of criticism whilst individuals continue to campaign against the changes.

*It’s important to note that small businesses are exempt from the changes. To be classed as a small business, you must meet two of the following criteria.

  • Have an annual turnover of no more than £10.2 million
  • Have a balance sheet total of no more than £5.1 million
  • Have no more than 50 employees

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Government must reinstate insolvency protection as restrictions return | Institute of Directors | IoD

557,000 UK businesses now in significant distress as numbers soar | Begbies Traynor – The UK

More than 500,000 UK companies in financial distress as support ends | Financial Times

Coronavirus and the economic impacts on the UK – Office for National Statistics

Coronavirus and the latest indicators for the UK economy and society – Office for National Statistics

IR35 rules expected to change over intermediary confusion

Mel Stride calls for abolition of ‘dreaded’ IR35 rule – FTAdviser.com

What impact has Covid-19 had on the IR35 off-payroll reform? – Business Insider