Getting better

I've just finished reading Atul Gawande's book, 'Better - surgeon's notes on performance'. Not much there that's relevant to running an accountancy business you might think...but you'd be wrong. Gawande looks at systems and how people work in systems - his specialism is healthcare but there are lessons for any business or organisation looking to improve.

There are some great stories in the book but the most compelling one for me describes the bell curve. We are all familiar with this curve from statistics and 'normal distributions' in school maths lessons. Gawande applies this to performance in the care of cystic fibrosis and concludes that the best performers are continuously striving to improve and small margins make a surprisingly big difference. The best, keep changing to stay at the right end of the bell curve.

He ends the book with 5 tips to help you improve - become a 'positive deviant' to use his terminology:

1. Ask a question

If you are a professional - doctor, accountant, lawyer - the tendency is to focus on the task at hand with a client. Time is short, you have your list to get through. Ask an unscripted question and make more of a personal connection

2. Don't complain

When mixing with fellow professionals, don't whinge. It's draining and not productive. Lighten up and focus on the positives

3. Count something

Accountants like this one. What gets measured, gets done. Try counting some aspect of performance in your area and see what you learn.

4. Write something

I'm following this tip. The process of writing makes you think about things more deeply. Helps you to have an opinion. Blog, letter, book. Whatever, just have a go.

5. Change

Be receptive to change and become and early adopter

So if you are currently 'good', this book can inspire you to be better and I will be taking some of that inspiration to work with me this week

www.base52.co.uk

10 reasons to come to our next Growth Club meeting

We started Base52 Growth Club a couple of years ago as a networking forum for our clients and other business contacts with an emphasis on learning. Learning from our brilliant guest speakers, from other visitors and from great books about business.

Here are 10 good reasons to come along to the next meeting:

1.      Make some new contacts

Meet some people involved in other local businesses. You never know who could be your next customer or help you grow your business

2.      Great speakers

We have a guest speaker who will share their business journey and lessons they have learned along the way. Pick up some tips to help grow your business

3.     Book review

One of our visitors will share an overview of one of their favourite business books and how it has influenced them and their business

4.      A great venue

We meet at Los Reyes in the centre of Hitchin. You are guaranteed a warm welcome

5.      Breakfast! 

A continental breakfast is included in your entry fee

6.      Prize draw

Your chance to win a copy of the book we review at the meeting

7.      Timing

The meeting is from 9.30 to 11.30. No need to set your alarm for a crack of dawn start and still time to get some things done on your list with the rest of the day

8.      Raise your profile

Our facilitated networking slot gives everyone an opportunity to promote their own business to all the other visitors. 

9.      No commitment

Come along once, twice or as often as you like. There is no requirement to attend regularly although we hope to see you again after your first visit.

10.      Great value

A modest entry fee gives you all of the above. Now that's great value!

To book your place at the next Growth Club meeting visit our events page www.base52.co.uk/events

We hope you can join us 

www.base52.co.uk

After the NIC reversal, a significant cut in the 'jobs tax' would help small business

The recent U turn by this government, reversing the proposed increase in Class 4 National Insurance Contributions for the self employed is very welcome. It followed a storm of protest from all political persuasions after the Chancellor's Budget announcement. The climbdown was due, not least, to the fact that it went back on the Tories manifesto commitment not to increase VAT, Income Tax or National Insurance. It was a change made reluctantly, with the Chancellor insisting that the increase was 'fair' but not in the spirit of their manifesto commitment.

So a small victory for beleaguered and hard-pressed small business owners but it did throw into focus this government's broader strategy for small business. They seem to be gradually removing any tax incentives for small business owners and creating more parity with employment. So entrepreneurial small business owners have received little help from this government in creating a more favourable trading environment.

There is more bad news on the horizon for the smallest of small businesses with the removal of Class 2 National Insurance Contributions. To maintain their entitlement to a State Pension many small business owners will need to make voluntary NI contributions which will be significantly more costly than in the previous system.

So how can the government really help and show their business-friendly credentials? Well it is unlikely that they will reverse the regressive dividend tax or changes to the VAT flat rate scheme so we won't go there. We are also stuck with the increased burden and cost of pensions auto enrolment. The rates revaluation is underway and there will clearly be winners and losers and more uncertainty for many small businesses.

The best idea I have heard for a real 'leg up' for small business was proposed from an unlikely source in the run up to the last General Election. The Scottish National Party proposed an increase in the Employment Allowance, then £2,000 per annum, to £6,000 per annum. This so called 'jobs tax' costs employers 14% of an employee's wage cost above the NI threshold. Increasing the employment allowance significantly above the current level of £3,000 is a radical idea and in my view one with a great deal of merit. Unlike cuts in corporation tax which benefit larger businesses disproportionately, the SNP's own figures suggested that 95% of the employment allowance increase would go to small business. It would reduce the cost of taking on employees and increase competitiveness.

It would be nice to see a coherent strategy for small business which includes a fair tax system which encourages growth, investment and entrepreneurship. The most recent changes seem to be more about filling up the Chancellor's depleted coffers from small business owners who have been inclined to shrug, roll up their sleeves and get on with things. Maybe the NIC U turn will be the start of a small business fightback and show that we are not a soft touch any more. A significant increase in the employment allowance would be a step in the right direction for this government to show they really want to support growing small businesses.

www.base52.co.uk

Scam Alert for newly formed companies - beware of bogus letters

I was just nipping out to lunch and stumbled on 3 very similar envelopes in the post relating to companies we have recently formed.

All the letters are slightly different but purport to be from the 'Central Register of Companies and Businesses' or 'National Register...'. They are addressed from 'London, 15 March 2017

They all give a (different) website address and request a payment of roundabout £200 (they are all different amounts).

It looks to me like an elaborate scam so please be on the watch out for this and spread the word

The letters look quite plausible and I can see people being caught out by these and paying the fee

I hope this helps

www.base52.co.uk

Small business has become this government's 'cash cow'

The increase in National Insurance contributions announced in the Spring Budget is the latest in a number of tax increases introduced by this government which have a negative impact on small business. The government is in need of cash and it seems like squeezing small business is a relatively easy way of swelling their coffers.

Let's explore the evidence for this. Recent tax changes targeted at small business include:

• The introduction of a dividend tax effective from April 2016
• Changes to the VAT flat rate scheme effective from April 2017
• Increase in national insurance for the self employed from April 2018
• Reduction in the tax free dividend allowance from £5,000 to £2,000 per annum from April 2018

The case put forward by the government for making these changes is that they are 'Levelling the playing field' between 'self employment' and employment. I use the term 'self employment' in its broadest sense here to include those who trade via limited companies, usually as owners (shareholders) and directors (employees). So they have set about withdrawing all the relatively minor tax breaks which were in place to support risk-taking and entrepreneurship.

The issue here is that self employment and employment are not the same and in my opinion should not be taxed in the same way. Many of the smallest businesses are already struggling to make ends meet, particularly in the early stages of their business. Many entrepreneurs do not have a pension or if they do it is often inadequate. They don't get paid if they are absent or sick. All spare funds are often put into keeping their business going and paying their employees and other costs. An extra tax burden on top of this will be hard to bear and in some cases will have a significant effect on the businesses and their owners.

The dividend tax has been introduced without so much as a murmur of protest. For a basic rate tax payer the extra tax burden will be around £2,000 per annum. There were no marches on Downing Street, no petitions on Facebook and no outcry in the Press. The changes to the VAT flat rate scheme again have passed through with little opposition although the cost to a small businesses turning over say £50,000 will be around £2,000 annually along with an increased administration burden. The National Insurance increase has generated more resistance, not least as it went back on the Tories election manifesto pledge not to increase National Insurance, Income Tax or VAT. At the time of writing the government has said the change is 'fair' and it will go ahead.

So what is the conclusion to be drawn from this? Well it seems clear to me that this government does not understand or value small business and sees it as an easy target to hoover up cash. It's an easy target as the Tories are attacking their natural constituency. There has been little protest from the opposition to these tax changes. Small businesses seem to bracketed in with 'big business' excess and tax avoidance scams and as such are seen as fair game to squeeze a bit harder. The danger with attacking your natural supporters is that when things start to bite as they will soon, you find that you cannot take your core support for granted any more.

The UK is still a good place to do business. It's relatively easy to start up and administration, although burdensome, is simpler than in many other countries. If we take away all the tax incentives for business owners we will see more businesses failing and more entrepreneurs thinking, 'What's the point'? if an increasing chunk of their endeavours goes straight into the Chancellor's purse.  Small businesses are the engine for job creation, they give our high streets their diversity and colour, they are the big businesses of the future. We need to nurture and encourage them rather than squeeze the life out of them.

www.base52.co.uk

The power of forecasting

One of my annual rituals at this time of year is to prepare a detailed financial forecast for the next financial year.

It's part of my training as a management accountant and I spent many years as a retail accountant compiling company budgets and forecasts so I guess it is in my DNA now.

I've developed a simple but accurate template for this and with a day or so's effort my first draft emerges from the magic of Excel and I can reflect on how it looks. Inevitably it's below my expectations. After allowing for clients who have stopped trading or their circumstances have changed and factoring in cost increases and new costs, I'm usually left with something of a gap between where I want to be and where my forecast is pointing. So although a bit disappointing, that's not necessarily such a bad thing. At least now I know there is a gap and I can think about what to do about it.

The two ways to close the gap are more sales and reduced costs. I will always give a lot of thought to how we can increase sales - attract more customers, look at the services and value we offer to our existing customers and what new services can we offer. As far as cost reduction goes, a proportion of our costs are fixed but some are discretionary. I will look at these and ensure they provide good value for money and are affordable. So with some tweaking and decision-making I will start the financial year with a forecast that shows a good improvement on the previous year and a plan to make it happen.

In some ways this is the easy bit. It's the month in, month out effort to deliver the plan  which is the bigger challenge. I find this annual forecasting process really valuable and an essential part of my business routine. It gives me comfort that we have a plan to move forward and something to measure against during the year.

So here is to another good year with more sales, satisfied customers, more customers and more profit. That's what the plan says so we now need to roll up our sleeves and do it.

www.base52.co.uk

How do you write a letter to a lord?

My mother-in-law is a bit of a raconteur. One of her many family stories is how her father started up a filter cloth business in the 1960s. As the story goes he was listening to the news on the radio and became very exercised about something he heard. He came running into another room and shouted to his wife, 'How do you write a letter to a lord'?

What had caused his excitement was listening to a lord (it would be a better story if we knew his name) bemoaning the fact that a local firm was having to import filter cloths for commercial vehicles from overseas despite the fact that (at the time) we had our own cotton industry. My wife's grandfather, who at the time was a bus driver, thought he could do something about this by supplying filter cloths from a local cotton mill in Lancashire. He knew people at the mill and felt sure he could use his contacts and knowledge to good effect. 

He wrote his letter to the lord who agreed to arrange an introduction to the firm looking to purchase the filter cloths. He managed to secure the contract and his business was launched. It became a thriving and respected small family business supplying filter cloths to firms in the U.K. and overseas. It improved the income and quality of life of my wife's grandparents in the latter years of their working life and the business was eventually sold giving them a comfortable retirement.

So that may be a good family story but what are the business lessons to be learned? Well the main one for me that my wife's grandfather didn't just have an idea, he acted on it. He wrote his letter to the lord, used his contacts at the mill and won the contract. Every business starts with a first step towards winning that initial order or making that first sale. Something needs to be done to follow up on that great idea or flash of inspiration. So what will your 'Letter to a lord' be this week?

www.base52.co.uk