Employing a new member of staff can be a scary thought for any employer even the most experienced ones. Will that person fit in with the team, can they do the job, what will they cost me.

It depends on what type of job you are trying to fill as to how strict you need to make the interview process.

A lower paid non responsible role might be at minimum wage whereas a manager or professionally experienced person might be at a much higher salary so you need to make changes as far as getting the right candidates to apply. Be clear from the outset what it is that you want. Do you need a full time or part time person, is the job permanent or casual.

Put together a job specification which will list all of the jobs and responsibilities the person has. Do they need specific qualifications to do the job.

A person specification this is where you are looking at the personality of the person, the experience that is required, what type of specific jobs are they essentially needed to be experienced in, to get a chance of an interview.

Grade every candidate with a score depending on how they fit with your specification above, it’s a little more time consuming but will quickly discard candidates who don’t fit your requirements.

The interview make a list of questions you need to ask and try and encourage the person in front of you to open up and talk about their experience. This will allow you a small insight into their personality.

If this is a role for an experienced or technical job, then give them a test as well as a person to person interview. I tend to do a test at the end of the interview when the candidate is all relaxed. They are more likely to be calm when you are in discussion with them.

Check references always, don’t take anyone on face value, and if you have other members of staff introduce the person at the interview. Other employees feedback is always helpful as at the end of the day they need to fit in with your already established team.

Give them a contract of employment this is required by law, even a casual member of staff is entitled to holiday pay.

An employee is controlled by the terms of their contract with you. You can allocate them any job that is within the remit of their employment.

They tend to be cheaper than a subcontractor but you are responsible for handing over their income tax and national insurance contributions. Plus Employers NI which is currently 13.8% above the lower rate earnings.

They are entitled to holiday pay

Entitled to pension under the new scheme automatic enrollment

There is more chance of loyalty from an employee as you are providing them with their main work

Outsourcing A Subcontractor

This can be useful if you only have a need for a small pocket of time for a particular project or contract. As you are not offering a permanent role.

They tend to be slightly more expensive than an employee as they are responsible for their own income tax and national insurance.

You can expect them to be able to do the task in hand as they are likely to be experienced in that particular field you are employing them for.

You do not control what they do, but should expect a reasonable level of professionalism and expertise.

They are not entitled to holiday pay or sick leave or pension.

They are likely to be working for other people so other than a commitment in a contract you might be waiting for work to be done.

Recruiting someone in this capacity should like employment be done on the basis that they will fit in with the team and that they can do the job effectively. They are not entitled to redundancy payment

This blog is intended for information purposes only, you may have your own suggestions.  Use this a guide only

Use your business plan to get funding

The essential elements of a business plan

Potential investors and lenders will look closely at your business plan to help them decide whether to risk their money.

There is no standard format but most plans include:

• An executive summary highlighting the main points - to catch people's attention.
• Details of key personnel with an organisational chart showing individual responsibilities.
• Market research - details of competitors and how your product or service fits into the market - eg who your potential customers are and why you think they will buy your product or service.
• Your marketing plan - how you are going to get your product or service in front of potential customers, together with any assumptions made when setting your targets.
• Financial information - eg key ratios. These can be used to compare your business' performance against industry benchmarks. It's also a good idea to give details of any major expenditure you have made on long-term assets and explain the reasons behind any changes in working capital items, such as stock, debtors and creditors. Remember to include balance sheet and profit and loss account details. Many lenders ask for three years' financial information. If this is not available, supply details about trading to date.
• How you will manage credit, expenditure, stock planning and control, and debtors and creditors.

When seeking funding, include:

• A cashflow forecast indicating the amount of funding you need and why. For a start-up, include estimates of how much finance you will require for two to three years or until you start to make a profit. Indicate contingency funds that might be needed for rough patches. This is usually between 10 and 20 per cent of the total funding requirement. See our guide on cashflow management: the basics.
• Financial forecasts for a three to five-year period. Try to present this information in the same way as historical financial information, so that straightforward comparisons can be made.
• How a loan will be repaid, how investors can get their money back, and when.

Sources of fund are available in the form of

Bank financing in the form of Invoice financing. This allows you to raise your sales invoice and use a bank or a finance company to get a large percentage of the income immediately. Which will allow you to ease your cashflow

Overdraft facility with the bank - this is normally short term and can be recalled on demand.

A secured long term loan funding equipment or property.

Car financing with your local bank or car retail store.

There is some financial assistance to companies based in deprived areas for equipment, websites and training needs for staff. These are very few and far between and strict rules apply.

There is business assistance and courses available for new start up businesses in the Cardiff and Wales areas.    www.businessinfocus.co.uk

Equity financing.  This is related to gaining finance from private investors, they take a percentage of your company. In return you get business advice and mentoring, along with funding.  This option is normally suitable to fund large expansion plans, or to take your business global.  There is normally a contract in place confirming payback terms, interest and purchase of your shares back.

The Business Link website has an article dedication to informing small businesses about financing available.

Business Link Website

Another link that might be useful is the European Social Fund.  There are trained experts in the field who can apply for funding on your behalf.

http://www.dwp.gov.uk/esf/funding-opportunities/

What banks look for in a business

All investors assess applications for loans or investments using different criteria, and you should ensure you are aware of any specific requirements before making your application to particular lenders or investors.

However, if you are applying for finance from a bank or just setting up a new business bank account, there are some general points that almost every investor will want to take into account:

• a good financial track record and credit history for you and your business – see the page in this guide about credit rating and scoring
• a good management team with the right skills and expertise – involve your senior team from the start
• a business plan that shows clear thinking on ideas and strategy – this is an essential tool for your business and should include up-to-date financial information
• commitment from management and (as appropriate) other shareholders - the investor will need to be assured that the investment is one that everyone at the top of the business is happy about
• security - most lenders will want their money to be secured against tangible assets, so they can be sure of getting their money back
• your understanding of your market - the investor will probably want to make their own investigations of the market, but will need to know that you understand it as well

Even if your proposition is good, there are some things which will weigh against an application for loans or other funding:

• unauthorised overdrafts
• missed loan repayments
• County Court judgements against the business or its directors
• adverse credit rating data, against the business or its directors

This blog is intended for information purposes only and is only advice from past experience, you may have other suggestions of your own. It is not intended to be used to make all of your business decisions but as a guide only.

Get Your Financial Check Up

Writing a will

60% of the UK population a staggering 29.5 million have not made a will.

Many of which assume that their money will automatically go to the relatives of their choice when they die.

If your money is left unclaimed and no blood relatives can be found, your money will go to the Treasury. A record breaking £10billion in 2010.

What happens to your business if you either cannot work or die. These are things that business owners need to look into.

Inheritance tax

Take a look at your overall assets, your business, your home, other property, other sources of income, valuable and movable chattels.

The current threshold is £325,000. This has not changed since 2009

There are a lot of tax reliefs available for this depending on how you have set up your estate. Could you be giving away 40% of your estate (the current inheritance tax rate), to the treasury over and above this threshold.

Most financial advisors do not charge for a first visit consultation.

Savings

Take advantage of the ISA limit. Rates have recently gone up to 3%.http://www.moneysupermarket.com/savings/ is a great website for finding out the best rates of return. Its tax free too.

Pension

The pension system has taken a knock over the last couple of years with the financial services industry being in turmoil. The government has a new scheme of automatic enrolment starting in 2012. Directors are exempt, but do you have an alternative plan. There are many schemes which still offer tax relief on income tax. Could you be an employer who is going to be affected by the scheme, have you included this cost in your budget.

Sickness and Disaster Recovery

How have you planned your business in the event of you or a key member of staff becoming long term sick. Set up your risk assessment and come up with a solution. Keyman insurance, sickness policies, protection of income policies.

What would happen if there was a fire or flood at your premises, or your computer system had a virus.

Loans and debt management

There are still many companies out there that offer assistance if you have got yourself into trouble with debt. Don't put off what could be causing you stress. Consult a professional who can not only help, but give you stress relief too.

Loans and mortgages

The banks are still lending and looking for your business. Yes the system has been tightened up, but there is still credit out there to have. We have access to private investors as well as the banks. So give us a call if this is something we can help you with.

The Grant System

There are still grants available to the small business, it does depend on your industry but they are still out there to be had. http://www.businesslink.gov.uk/bdotg/action/layer?r.s=tl&topicId=1073858790

Your business and its future

Could you benefit from a business review, do you use your business plan as a focus to plan ahead.

We look at your sales margin
Cost of Sales
Stock turnover
Your overheads
Comparison year on year
Give ideas on tax planning and working capital and liquidity ratios.

We can even help you with your marketing strategy by talking to our professional partners. Let us help you put a comprehensive business plan together. A tool that can be updated as you develop your business.

How is your business structured, if more than one director/partner is there a partnership/Directors agreement, setting out each partners job role, split of the profit etc.

The paperwork, do you have a good advisor that is keeping you up to date with all the current legislation. Putting your important dates in the diary and reminding you of them as they arise.

What is your exit strategy, do you plan on living off the income of the business into retirement, or is the business your pension plan. What is its value in the open market. You need to take into account Capital Gains Tax here.

Ive given you a lot to think about, but looking at all of these areas in turn, will set you up for the future, and will save you money, whether it be by looking at the cost of things, saving time and energy or saving you tax.

This blog is intended for information purposes only and is only advice from past experience, you may have other suggestions of your own. It is not intended to be used to make all of your business decisions but as a guide only.

I do get asked a lot of questions about going Limited and the timeframes that small companies should consider and the options available to them.

For Soletrader

• Your records are not public and your competition cannot see any financial information on you.
• The paperwork is fairly simple to upkeep and the Self Assessment online is straight forward, which is why a lot of soletraders do their own filing.
• Suits small companies with turnover of under £100,000 with not too many transactions and complications in their accounts.

Against Soletrader

• Your personal assets are at risk in the event of bankruptcy or liquidation.
• As your records are not public, your credit score is more likely to be lower than your Limited company counterparts.
• The fact that a lot of soletraders do their own filing, eventually costs them money, as they are not necessarily aware of the tax reliefs available to them.
• They may have a limited sales market, a lot of the larger firms will not deal with small companies under a certain size as they are more risky.
• More likely to pay a little more tax as you pay profit on everything you earn, whether the money has been spent by the soletrader or is sitting in the bank.

For Limited

I tend to start asking my soletrader clients to at least consider investigating into going Limited once they hit the £100,000 turnover threshold. They are probably VAT registered and have staff working for them so are already used to extra regulatory paperwork anyway.

• Increased credit score, as your records are now public record.
• Give the impression of a profession company of a certain size. Making you more desirable to gain larger sales contracts.
• Limited Liability, your personal assets are not at risk in a bankruptcy or liquidation, unless you have placed these assets as guarantees for the company.
• There are better tax reliefs available as the Directors/Shareholders are a separate entity to the Company.

Against Limited

• More regulatory paperwork, accounts need to be prepared in a certain statutory format to be accepted by Companies House. Including the preparation of a balance sheet, which a lot of soletraders do not have prepared for Self Assessment. The requirement of an annual return, corporation tax form along with the self assessment return still required for the individual director/directors.
• There can be an increased Accountants cost for the extra paperwork required.
• Your records public, which means anyone can see them competitors, customers and suppliers too. Small companies qualify for abbreviated accounts, which contains only limited information that is statutory, so you’re not giving away your trade secrets.
• There is a lot more financial jargon, contained within the wording required for statutory accounts, and you have increased risk of getting fined if you are late in submitting the accounts.

We keep a great diary system, which reminds clients, when their dates for particular submissions are due which has been greatly received.

I hope you find this blog helpful in deciding your future business focus for the company.

This blog is intended for information purposes only and is only advice from past experience, you may have other suggestions of your own. It is not intended to be used to make all of your business decisions but as a guide only.

Budgeting Success

A lot of small businesses are missing the importance of budgeting ahead.

The reason why businesses budget, is to set long term goals for themselves and to track the progress to ensure they are achieving what they set out at the beginning of the year.

Use it for anything, ie build up the business to make a decent living for the shareholders, improve the balance sheet position, take over a global market, the choices are yours.  Plan for them.

Here are some simple ways of budgeting and forecasting the year ahead.

There are two ways, a long term fixed budget, set out at the beginning of the year and then track when the actual figures come through, or a rolling budget which means once the month is up you roll ahead to the next month, so you are always looking at least a year ahead.

Set yourself some goals you would like to achieve over the next couple of years, and set out how you are going to achieve them.  This could be in note form or a more detailed report.

Sales

Set yourself realistic goals to achieve for your sales turnover.   A top down approach.  Use last year as a guide plus a percentage for growth or inflation.

This method is a great way of keeping the costs under control.

A bottom up approach, is more loose in that you put in your costs, and set the targets of sales that you have to achieve to pay for everything. It can make targeting sales more difficult as costs are not as controlled.

Cost of Sales

If you have been running your business a little while you might have these figures to hand as a percentage of turnover.   If not then a costing exercise can be done to work this out.

Overheads.

Put everything in to this and spread it over the next year. Ie rent, wages, advertising, heating, office costs, travel.  It all goes in here. Split it out by category so that you know what you’re spending on what.  

If you are doing a yearly one, spread these costs over the 12 months. 

If you are aware of seasonality fluctuations make sure they are apparent in your budget.

Starting off with the profit and loss budget is a good way to start, if you are feeling confident then set up a balance sheet forecast and a cashflow one too.   If they are all connected together, you will always know ahead of time what your financial position is going to be.  There is some great software in the market that can help you with this.

Now use this template to put in your long term goals.  If you are looking to purchase equipment, or taking on new staff for a project, a new sales contract.

You may have to increase sales to achieve these goals, but set targets.  You may have to increase your advertising spend, or take on more staff, take this into account.

Once your budget is done, then as the months pass and you know your actual income and costs.  Put them into the spreadsheet.

If you are not quite making the targets, look into the cause of the fluctuations, to get yourself back on track.

Happy budgeting. 

This blog is intended for information purposes only and is only advice from past experience, you may have other suggestions of your own.  It is not intended to be used to make all of your business decisions but as a guide only.