Search Results

Talking about recession is scary and negative. But not talking about it is dangerous and a bit like the ostrich with it's head in the sand . We'll keep this write-up factual. An economic downturn is a great time for small and big businesses to look at itself hard. UK's inflation rate is currently double-digits (nearly 11.1% at the time of writing) - yet there are many small business owners that don't understand how a general recessionary economy will affect them personally and what can be done to mitigate some of the risk you will face. 1. Understanding recession, inflation and what it means for your business A recession affects everyone, irrespective of the type and size of business you run. However, the impact levels vary. So understanding what each of this is, specifically for your business is critical. Taking Stock There are companies that have cash balances kept aside to deal with a period of prolonged downturn. This is a great place to be; but maybe you're not there. There is no need to panic. The first thing we always advice is to "Take Stock". Dissect and understand your business from the inside out. - Are you in a type of industry that is seasonal? Perhaps your product falls into a "vanity category"? Or it's essential goods that people will prioritise on their buying lists? - What kind of credit do you operate on? 30-60-90 days? How does that work out in terms of your payment terms. Often people have 30-day terms for fixed costs (Rent, salaries) - How long can your business survive if your biggest customer leave suddenly? and so on... There is no easy way to do this. You should have your numbers to hand as most of these are driven financially. 2. Deciding money matters for your business If you don't have an Accountant or book-keeper, this gets tricky. If you're not numbers savvy, please get advice from a professional, many offer hourly rates. A lot of small business owners I've met are quite sensible in that department; they know enough to understand how their business is faring financially. A few points here for consideration, - Run some scenarios for your business: How long does the cash reserves you have sustain in different situations: Such as ~ If you keep the current growth trajectory OR the current loss-making situation? ~ Does cost-cutting make sense OR can you scale back things to take everyone along? - Often when you look to make a numbers-based decision other considerations fade away. In a recessionary situation, don't overlook your people. Everyone is struggling. People might be willing to work less hours rather than lose their jobs entirely. - Research sources of funds for your business: ~ Can you manage an overdraft facility from your bank? You may not need an overdraft right away but it's always easier to negotiate one when your cash balances are higher in the bank. ~ Are grants an option for your business? I can recommend Silicon South for Bournemouth or Dorset based businesses as they will help you through a grant-application process. 3. A cash flow forecast is your best friend Modelling a cash flow doesn't have to be super complex. There are many a software out there that will do it for you. But for quick turnaround, Excel /Google sheets are a trusty comrade. If you use Xero or a similar software, the easiest thing to do is to run a "Cash-based" profit and loss account for a year; month by month. You can work out actual incomings and outgoings from that report. Add in things like VAT paid, Director's loans and purchase of fixed assets into the same format. Once you get a format you understand and can comfortably work with, make sure to look at it consistently. It's a good idea to look through this weekly if cash is tight. It'll help you prioritise and plan payments as well as chase down receivables faster and more accurately. 4. Know what to do when a customer cannot or will not pay Most of us will have that odd customer who is a bad-payer. The likely reason for this is lack of funds. However, we've had scenarios where some customers wilfully don't pay or puts you as the lowest priority on their payment run. This is a hard place to be. You need to have an idea of what you'll do if you're in this situation. Firstly the customer might be a big one, well reputed perhaps and in every way your ideal customer. Think about this for a second though. How ideal can a customer be unless they are willing to part with money to buy your services? If you have a key contact there that is not a finance person, that's the first port of call. They can probably help you manoeuvre this. Once you've tried your usual avenues, have an escalation plan in place. That could be passing it to your own team members/Management higher in line than yourself to chase the debt down. If all else fails, you need to consider legal options. Perhaps start with a debt collection agency and from there escalate to a legal team. However this comes with a higher price tag. A recession is hard on everyone. But as the saying goes, tough times never last, but tough people do. While these are not the traditional measures to take when in a recession, we hope it gives you some actionable items. Would you like to talk? Please get in touch today. Notes All pictures are from pexels.com and are Creative Commons licensed Another well done article which we referenced to

As individuals and businesses diversify their portfolio, crypto assets have become more common. It's one of those high-risk, high-reward assets that people are starting to dabble in. In recent times this has been under much focus with governments around the world rushing to regulate stable and other tokens. It's therefore relevant to understand how taxation works for crypto transactions in the UK. At the outset, we want to point out that this article is only for purposes of information and should not be taken as personal tax advice. Each individual or corporate have unique circumstances. So please seek professional advice before decisions are made regarding your crypto assets or transactions. Here are some notes to get you started, 1) Income tax Income tax is usually applied to those buying, selling or receiving cryptocurrency through a trade. A ‘day-trader’ is probably the most obvious example – someone who actively buys and sells crypto assets to create short-term profit. However, individuals are unlikely to meet the description of a ‘trader’ for income tax purposes if trading on their own account, so they will likely be considered under the capital gains tax regime. To fall into the definition of ‘trading’, you would need to buy and sell crypto assets with such intention, sophistication, frequency and level or organisation that the activity amounts to a financial trade. If you meet the trading threshold, net profits will be subject to income tax at 20%, 40% and 45% (based on the tax bracket your income falls into) as well as the relevant national insurance bracket. General income tax thresholds in the UK are as follows as a quick guide, 2) Capital gains tax: In most cases, anyone buying, holding and selling cryptocurrency on their own account are considered to be undertaking investment activity and will be subject to capital gains tax. Disposing of crypto assets will result in a taxable event. Individuals pay capital gains tax on their total gains above an annual tax-free allowance. Any gains above this allowance will be taxed at 10% up to the basic rate tax band (if available) and 20% on gains at the higher and additional tax rates. There is no tax for holding crypto in wallets as a taxable event can't be deemed to have occurred. What is interesting is that swapping crypto is also considered a taxable event. eg if you swap your BTC to a stable, it maybe construed as a taxable event and would attract cap gains. 2) Taxes relevant for Companies For corporates that hold or deal in crypto assets, a thorough understanding of the Cryptoassets Manual published by HMRC in March 2021 and recently updated would be a worthwhile exercise. The manual mentions the following types of taxes that are relevant for corporates, Capital Gains Tax (CGT) Corporation Tax (CT) Corporation Tax on Chargeable Gains (CTCG) Income Tax (IT) National Insurance Contributions Stamp Taxes and VAT As one can imagine the nuances included in each of these sections are myriad. A succinct presentation is therefore difficult. You simply must explore the topic most relevant to you. Here are some notes, - Corporation tax on chargeable gains Chargeable gains in this context mean any profit/gains you've made from holding and disposing crypto assets. The manual clarifies If a company holds exchange tokens as an investment, they are liable to pay Corporation Tax on any gains they realise when they dispose of it. What constitutes a disposal in this context? Any activity such as selling tokens for fiat, exchanging tokens from one to the other (such as from BTC to stable), using tokens for payments and giving away tokens to another person are all considered disposal. - Corporate revenue received in crypto Companies may accept crypto currencies as a mode of payment for the services they render. Stable coins are commonly accepted in the crypto world nowadays. HMRC's manual as an example, if a company carrying on a trade accepts exchange tokens as payment from customers, or uses them to make payments to suppliers, the tokens given or received will need to be accounted for within the taxable trading profits - VAT VAT in general is a complex area of tax compliance. With crypto it doesn't get any easier. The general guidance from HMRC says, VAT is due in the normal way on any goods or services sold in exchange for crypto asset exchange tokens. The value of the supply of goods or services on which VAT is due will be the GBP value of the exchange tokens at the point the transaction takes place. No further example is provided. We interpret this to mean that businesses should assess in a normal way if VAT would be applicable for a business transaction or not. Simply because you might settle a bill or a customer pays you in crypto, VAT doesn't disappear. However, HMRC does clarify that Exchange tokens received by miners for their exchange token mining activities will generally be outside the scope of VAT on the basis that: the activity does not constitute an economic activity for VAT purposes because there is an insufficient link between any services provided and any consideration; and there is no customer for the mining service In conclusion, crypto transactions are increasingly becoming a focal point with governments and institutions around the globe taking a keen view of how these should be treated. There are known tax friendly nations for crypto holders (or hodlers) whereas other nations have restricted the use around them. Whichever way the world evolves, we're sure to see increased interest and scrutiny from tax regulators where crypto is involved. Have questions around crypto usage and holding in your company, please get in touch and we can chat you through your queries. Notes and references Primary source - https://www.gov.uk/hmrc-internal-manuals/cryptoassets-manual/crypto45000 https://cryptoslate.com/german-crypto-tax-policy-one-of-the-best-in-the-world-coincub-report/ All pictures used in the article are Creative Commons licensed and have been sourced from pexels.com

Crypto companies are not fiat-free. So as much as they would like to avoid dealing with main-street banks, it's only natural to want a regular account to deal with supplier and employee payments. Herein comes a big issue - many banks don't deal with crypto companies. They restrict, limit or even bar the usage of crypto in their accounts. However, even in this wary circumspect situation also, some challenger banks have welcomed clients who utilize digital currency. Let’s check some of the options open to crypto users. 1. XACE Xace, a UK-based fintech, is claiming to be the first gaming friendly digital bank to land a licence from the Financial Conduct Authority. In practice, the company develops digital bank accounts and allows cryptocurrency or gaming operators to send and receive payments without the need for traditional banks. It supports both GBP and EUR with IBAN accounts, as well as virtual debit card. X 2. CASHAA This one markets itself as a crypto friendly bank account. But it goes beyond that by offering a Bitcoin payment platform. So if you’re looking to accept Bitcoin as a form of payment, Cashaa does it well by combining it with a bank account. Therefore, Cashaa is ideal for not only B2B crypto businesses but also B2C. You can easily set up Bitcoin payment gateways for your business. They even give you the option to convert the Bitcoin you receive into fiat instantly. Cashaa Features UK Current account authorised by the FCA, supports SWIFT, SEPA, CHAPS, and BACS payment methods, has API to automate payments with your platform, seamless integration of Crypto and Fiat for both businesses and customers 3. FIDOR BANK Founded in 2009, Munich-based Fidor Bank AG, Germany's first Web 2.0 Bank, and Kraken are launching an initiative to establish a "specialised bank for crypto-currencies". The initiative aims to set up the world's first fully regulated and licensed financial services entity in this sector. The intention is to pool products and services from various providers of digital assets and to offer a wide range of financial products and other services related to crypto-currencies. Kraken, the leading bitcoin exchange for professionals and institutions, based in San Francisco, acts as co-creator of this initiative. Partnerships with Kraken, Ripple Labs, and Bitcoin.de have enabled Fidor Bank to establish itself as as a banking partner. 4. BCB Group This is a business bank that focuses on the crypto ecosystem. Apart from GBP, it also supports other major currencies such as EUR and USD along with dedicated IBAN for companies and all major payment networks such as FPS/CHAPS/BACS, Euro SEPA, international SWIFT and US ABA. What sets BCB group apart is that apart from banking, they offer liquidity services. It comes with daily settlement for all major cryptocurrencies and fiat currencies and provides liquidity for some conversions. BCB Group also has a treasury to manage your Bitcoin holdings. BCB Group Features - Supports a wide range of fiat currencies and payment networks, native support for liquidity and fast settlement, offers treasury services if you don’t want to manage your Bitcoin holdings 5. WIREX Wirex, formerly E-Coin was established in 2014 in UK by CEOs and co-founder Pavel Matveev and Dmitry Lazarichev to make digital economy accessible to everyone. Wirex is one among the top crypto friendly banks. They give perks like 0.5% payback in BTC to its users. Wirex also offers debit cards. 6. SIGNATURE Signature is a NY based bank used by companies in and out of the US in the crypto space. They open accounts for businesses in the crypto space and are often used for day to day transactions. However, they do have higher balance requirements. This is not an exhaustive list of all possible bank offering bank account services for crypto companies. While some of them are quite open to companies that make all revenues from crypto activities, some others are keen for companies that have regular revenue streams supplemented by crypto based revenues. All of the banks will have their thorough due diligence and KYC procedures so be prepared with the documents and answers for questions that'll come up. We'll be discussing document requirements for bank account openings in a separate article. Meanwhile if you'd like to reach out to discuss your crypto accounting requirements, please write to neethustephen@evalua8.com Source : goodreturns.in, cryptobuyers.co.uk, fintechfutures.com, prnewswire.co.uk, Wikipedia.org

Crypto currencies are fast becoming a regular balance sheet item with many individuals as well as corporates interested in diversifying their portfolios. A good example being Business Intelligence (BI) application software vendor, MicroStrategy‘s investments in Bitcoin. Before we start discussing how to treat crypto assets in your company’s financial statements, it’ll be useful to have a think about the basics. Here is our article that speaks about some basic crypto concepts. Companies that want to experiment with crypto currency must ensure that their tax and accounting systems are able to cope. Given it’s a relatively new industry, a lot of the accounting around their presentation are incredibly manual. For, e.g. while you might be very used to having bank feeds for your GBP or USD bank accounts; you won’t have this for your crypto accounts. Let’s discuss some aspects relevant for the accounting of cryptocurrencies. 1. Understanding the use of cryptocurrencies in your business Businesses can use cryptocurrencies as a form of diverse investment or as a means of settlement, such as for payments. It’s more likely to be used operationally by companies within the crypto space, such as SAAS businesses that are building crypto-based products. Suppliers within the same industry and likely to accept payments in crypto as much as they use fiat. Global & US Tax Blockchain & Digital Assets leader Rob Massey at Deloitte Tax remarks in this article, "There’s a number of people that believe it’s not too far out anymore that we can actually start using smart contracts and programmable money to elevate commerce. If you think it’s not too far out, then why not start to engage in using crypto as a method of payment now, just in terms of readiness. The treatment of cryptocurrencies are very much unique to each company and function. So this needs to be carefully considered and where appropriate, seek advice from independent professionals. 2. Where does crypto sit on your financial statements? In this technical article published by ACCA, they’ve explored the various ways this asset can be treated. - There is a natural tendency to treat them like cash as wallets are very similar to bank accounts. According to IAS 7 cash equivalents are ‘short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Cryptocurrencies are subject to very high levels of volatility and they are not yet accepted as legal tender. So they can't be treated as cash / cash equivalents. - Can they be considered as financial assets? That doesn’t seem likely either as they don’t represent cash, an equity interest in an entity, or a contract establishing a right or obligation to deliver or receive cash or another financial instrument. (Refer IFRS 9) - Intangibles then seem the most likely way to go. Crypto currencies fit the description for intangibles well as they don’t have a physical substance. They are also capable of being separated from the holder and sold or transferred individually and, in accordance with IAS 21, it does not give the holder a right to receive a fixed or determinable number of units of currency. 3. Can they be treated as stock? Under certain circumstances, crypto currencies can be treated as stock. You’ll need to check if the company’s use of cryptocurrencies falls into the following cases, held for sale in the ordinary course of business in the process of production for such sale, or in the form of materials or supplies to be consumed in the production process or in the rendering of services. Companies that have upcoming ICOs for their own tokens should take note of this, as it’s relevant for how you’ll account for the tokens you would be minting for sale. 4. Accounting for crypto’s volatility As demonstrated, general accounting around these asset types is not easy. There are a lot of manual steps involved apart from the complexity arising from their use within your business. They are also very famously volatile within very short periods of time, hence not comparable to general forex unpredictability such as we’re used to for fiat. How do you account for these changes in value over a period? We now go back to whether we treat cryptocurrencies as stock or intangibles. We’ll only discuss the intangible aspect in this article. - Per IAS 38, intangibles can be measured at cost or as per a “revaluation model”. A revaluation model can only be used if there is an “active market” for the asset. Hence in most circumstances, intangibles (think patents) end up being valued at a cost. This is then amortised over a period. Amortisation is like depreciation for a fixed asset, in a layman’s terms. Most known cryptos such as Bitcoin or Eth have an active trading market (exchanges); hence a revaluation model can be applied to them. When assets held are revalued, a gain or loss will appear. A revaluation gain is recognized via the account “Other comprehensive income” which is an equity account in the Balance Sheet. Even though, that sounds simple enough there are other factors that needs to be very carefully considered. For e.g. the accounting standard also says that in case of a revaluation loss occurring, that can only be recognized via the other comprehensive income to the extent a gain was previously posted. Any excess loss should go through the profit & loss account. So they need to be very consistently revalued over specific periods of time, with checks and balances in place to track a gain/loss. Given there are only a handful of tools that help with this and none really that suits an SME, using a google sheet to capture this month on month maybe cost-effective. If you use an accounting software such as Xero, the sheet itself can be attached to the journal entry that will be passed at month-end to create an audit trail. As can be seen, it’s a near impossible task to look at all the nuances of learning the accounting for cryptocurrencies. Consistency in both the method as well as the process of data-capture are critical. 5. Resources for checking a crypto’s value There are many useful websites one can use to check a cryptocurrency’s value over time. https://coinmarketcap.com/ and https://www.coingecko.com/en are two popular websites that provides current as well as historical values for cryptocurrencies. If you use trading exchanges such as Coinbase, it’ll be very valuable to note down the value generated at purchase or sale of such assets. You can save screenshots of the transactions while placing a trade which can then become a reliable measure of what was the value at a specific point and time. We’ll discuss more about crypto currencies held for sale and their treatment in upcoming articles. Disclaimer – There are 1000s of cryptocurrencies now available via public exchanges. And the use of each differs across businesses. If you need specific information on how to manage these transactions on your company’s accounts, please get in touch with us. You can write to officemanager@evalua8.com if you require further information. Note that we are not crypto investment advisors and cannot provide information on buying and selling crypto.

The term crypto currency was first coined in 1998 but the concept of digital cash came into being in the 80s. It has become a familiar word worldwide in the last decade. It was created accidentally by an unknown inventor known by the pseudonym Satoshi Nakamoto which leads us to think that it was a Japanese discovery. The name is a clear give away. The idea behind this invention was to build a decentralized digital cash system opposed to the physical or fiat money. Crypto currency in layman’s terms means a digital or virtual currency that is secured by cryptography, which guarantees the security or anonymity of transactions and the participants without the involvement from a central authority and safeguarding from duplicating expenditure. Currently there are an estimated 4000 crypto currencies in existence with Bitcoin, the original crypto currency and Ethereum ranking as the top two in the world. Here’s how crypto currency is in use today.... The most significant benefit is undoubtedly the freedom to make large sum private payments fairly anonymously. It can be used to buy goods and services just like we use normal printed currency. The scope of spending crypto currency ranges anywhere from travelling to buying luxury vehicles; where a vendor accepts crypto payments. It offers low transaction fees and speedy processing which is especially useful in international transfers. Another important aspect is that crypto currency transactions can be done by the unbanked too. Yet another advantage is the easy accessibility it offers. All we need is a smart phone or computer with a steady internet connection to send and receive funds. There are yield accounts for crypto currency which we can take advantage of. Some examples are Circle and Nexo that can provide anywhere between 5 and 12% returns. What are the risks involved? Investing or involving in the crypto market is not for the faint-hearted!! They are highly volatile meaning they are liable to sudden drop or surge in value depending on the climate of the market. They are unregulated. Till date they are not regulated by banks or governments even though there are current movements to reduce the autonomous nature of these crypto institutes . Crypto currency transactions are irreversible and they are solely dependent on a series of alpha-numeric characters known as the wallet addresses. Just like you have bank account numbers, these wallet addresses are where you'd be sending and receiving digital currency. A small error in any of the characters can cause the amount be lost forever. This is simply irrecoverable unlike you sending amounts to the wrong bank accounts. Another related issue is that when you first create your wallet you are provided a series of random words (called pass phrases or secret phrases). You need to carefully note this down in a secure place as once you lose these, you would have lost your entire crypto savings on that wallet. They are also very much vulnerable to hacking. They can be affected by forks - a split in blockchain network (a digital ledger of transactions) that can change the course of transactions on that specific blockchain for a period of time. Where is it headed now? It is still in its growing stage and good percentage of the world population is either yet to be introduced to this concept or is sceptical about it. The estimated crypto ownership rates at an average 3.9% as of 2021 with approximately 300 million users worldwide. But experts believe that they are here to stay and as we always say about any newbie discovery, it won’t be long when crypto currency will become a household term. Disclaimer - This article is only meant for educational purposes, please do not construe this as independent advice. We are aiming to publish articles relating to crypto accounting in the near future. In the meantime, if you would like to ask us about your individual or corporate crypto accounting needs, please write to officemanager@evalua8.com References All images used in the article are from pexels.com. They are free to use without attribution. The main pictures we have used are from Photo by David McBee from Pexels and Photo by Alesia Kozik from Pexels

December 2019 saw everyone making grand plans for 2020 – a celebration of sorts. But with Covid-19, this year will definitely not be remembered in history for something big and positive. Now in December 2020, I keep thinking to myself "Where are we as humans at handling this global pandemic?" What has it taught us so far? And what would the future look like – from a business and human perspective?’ Here is what I think: Humans have proved to be resilient It has been more than a year since the first reported case of this novel virus. There were a few of us cautious and prepared, while a few others waited, and yet another set – believed that this virus will die down on its own. Whatever our belief system, we as a human race have come out a resilient bunch. We are hopeful that the vaccine will enable us to put an end to this pandemic. We are hopeful that our life will get back to normal. Meeting loved ones, greetings with hugs and being in the company of people – because at the end of the day – we are social animals. Business perspective: this pandemic can be viewed as a catalyst that's pushing the old and bringing out the new. Why do I say this? Here is what I think is going to happen in the next couple of years (which is fast becoming the new normal): 1. Physical office spaces: With the outbreak of the virus, traditional companies were forced to reconsider the option for their employees to work from home. They were forced to reimagine their business structure – for its survival. The first step to this was to trust its working team to be able to work and execute projects from home. With the positive traction that’s come about, corporates- have understood that it maybe more profitable for companies to opt for a flexible work scheme than expect its employees to be present in person in physical office spaces always. How does giving up/ downsizing an office space benefit the company? Some obvious reasons like - reduced rent and other costs associated with maintaining an office With office commute almost nil, Mother Earth has benefitted largely. The time which was earlier spent on commute is better used to manage schedules by employees. This helps boost employee performance in the long run. What happens from here? Flexi working will become a norm rather than the exception. The 5-day work week could become a 4.5-day work week. Departments may choose to meet physically by rotation to maintain social construct. Greater emphasis on the environment with more green initiatives and corporate responsibility in these areas becoming more of an active desire than a line on the financials. 2. Business Models – All Online / E-commerce? This pandemic has forced many of us to rely on ordering in. From groceries to food and the infamous toilet paper – the way we shop have fundamentally changed. My personal bet is a growing demand for more businesses embracing the online over the physical. Isn’t it largely normal to browse online rather than shops, even now? 3. Global pool of talent This pandemic is global. That also means, businesses are now thinking -global. And not just for suppliers and outsourced consultants, but also hiring resources around the globe. A phenomenon of hiring talent based on abilities and not restricted by geography. With the reduced need for physical office space and reliance on internet and video conferencing; companies and businesses - now have access to a global pool of resources; and they are starting to put this to good use 4. Scope for new industries and businesses E-learning and emergence of global academies in educating the younger minds and upskilling eager minds E- medicines and teleconsulting Data privacy regulation – since there will be heavy reliance on tracking and tracing human data every millisecond. Cryptocurrency – assuming the growing need to avoid transacting in physical currency in each geography rather have one universal currency for transacting globally. It's all personal at the end of the day.. With the global pandemic, we also realize, that one person’s action/ inaction can either save or take away lives. We need our families more than ever – they are our support system. We are forced to evaluate our own priorities – our relationship to survive and get through the tough times. But this pandemic has also taught us to be resilient to adapt, to think and come up with new ideas to solve existing and future threats/ dangers. As a species the urge to survive and fight back has never been stronger. 2020 is a year like no other, but hey! We have at least learned to slow down and evaluate what is important and how we can protect what is most precious to us – this earth, its people, our loved ones.

With most of the information now on the cloud, your discussions with the accountant can now be elevated to the next level - focusing on strategic goals for the business. You identify key challenges to business acceleration, discuss and mitigate financial risks to the extent possible and have a more positive, open relationship with your finance person. The only thing that breaks this flow of things? That folder on the side of your desk space called “Receipts”. Open that at your own risk – scores of paper scraps usually fall out. They range from coffee shop bills to scribbled notes from cabbies. The only thing you want to remember from these are the conversations you had and the people you met – not; the need to squirrel them away “to be passed to the Accountant” The big advantage Most people I know are very comfortable with their tech. Banking apps are common, we check bank balances easily, comfortably and on the go. This can be achieved with your business numbers too - with a bit of process to get things flowing correctly. Many small business owners I know are constantly worried about their monthly finances. They don’t have a way to see the business numbers apart from what’s in the bank. There are constant lingering questions., Am I actually making money? What is the opportunity cost of me doing this business? As much as you’d like to think of a business as separate from the individual, my experience as an entrepreneur has taught me this is far from the truth. It’s very personal. The risk you take to come out of a comfortable monthly wage is intensified when you have personal commitments. Certainly - knowing the numbers that make or break your business should be a priority. A collaborative platform When it comes to keeping your transactions accessible, it’s hard to beat the cloud. It’s easy to set up and run and most of them come with handy phone apps. Top apps like Xero also claim enterprise grade security. Once you have the relevant information captured in the system, accessing them to make informed decisions become habitual. We had a client who came from a traditional system and had to put aside hours and hours to prepare financial reports for their investors. Having a legacy system was a large part of the problem. It was near impossible for them to give the right kind of access across the Board. This would have enabled people to get the information they need direct from the software - when they needed it. Workflows that encompass complex relationships A large part of the work we do is to customise layouts and what general accounting software provide to suit a company’s specific needs. Businesses today more than ever have broader needs – irrespective of their size. There is hardly a start-up or small business I know, that does not have global business relationships – be it customers, suppliers or general support systems. You need workflows within a business that accurately reflects this. A lot of young companies have adopted cloud as a part of their workflows, simply because they identify that having one system is not bringing the right efficiencies. And these businesses have transactional needs that differ only in scale; not complexity from their larger counterparts. Selecting an appropriate cloud platform allows for more specialist connector apps to be integrated to it. This in turn can create virtual finance departments that mirror those from larger enterprises. Sholto Macpherson, An Australian business tech journalist, articulates why SAAS companies like Xero have achieved record growth levels serving the small company niche sector. In his 2017 article for CPA Australia, he writes, “Accounting software has moved beyond crunching bank reconciliations. It can now connect you to other business software and financial services, and automatically feed data to add-ons to update information and cut out tedious administrative work” The Xero eco-system for example now boasts over 500 specific apps that cater to a variety of functions and industries. And this number is growing. Enhances the personal touch and strategic discussions With most of the information now on the cloud, your discussions with the accountant can now be elevated to the next level - focusing on strategic goals for the business. You can identify key challenges to business acceleration, discuss and mitigate financial risks to the extent possible and have a more positive, open relationship with your finance person. The final word Ultimately a finance function cannot centre around a system alone, you always need people to reiterate and make sense of the numbers in relation to the business as a whole. And the cloud allows the focus to be on the facts that add value to a business. It allows numbers to be a natural part of the decision-making process- not the hindering, stuttering agenda item that founders hate to get involved in. Note - This article was first published in spotonmagazine.com based in Bournemouth

​Life can only be understood backwards, but it must be lived forwards - Anonymous Nothing holds more true for the predicament global small businesses face at present. Government aid for COVID hit small businesses are changing fast. Amidst mounting fears of a second wave and how badly that may affect already tottering businesses, here are three points that may help you feel more in control. 1. Payment terms, discounts and pause options - when customers approach you wanting to cancel or freeze services, it’s always a great idea to understand the actual problem. Is it a temporary lack of confidence in the ability to pay OR is it more long term such as the business shutting down completely? If you are in a good cash position; it’s worth offering a “pause” or long term payment options that might help tide over temporary difficulties. This would save you the client long-term as well as the added goodwill of stepping up during a crisis. 2. Short term loans and funding - there is still funding available; if you are bootstrapped but need a helping hand now is the time to look for funding. If you’re in need of financing chat with your inner circle to lay down basic rules. In a market downturn; there are investors who’d look for a quick bargain. If you feel you’d need investment in the next 8-12 months, it’s better to start your quest today. If you’re pre-revenue COVID relief loans maybe hard to come by. Banks may still offer overdraft facilities but would have much higher interest rates. It's always better to approach the bank (especially the one you bank with regularly), when you are in a positive position to talk about overdraft options. 3. Assessing revenue risk - this is the time to assess your monthly recurring revenue with a firm hand. Build in a churn rate to your MRR to understand how much more sales could you potentially lose - month on month. These could be any clients where you have market knowledge of financial trouble or have consistently complained about your products - the idea is to look for tell-tale signs of trouble and make provisions for revenue losses stemming from that in your cash flow. When cash reserves dwindle, hard decisions are needed.Having time on your side might ease some of them. A classic example is negotiating overdraft. If you have good cash reserves today but don't see that lasting, the best thing to do is to negotiate a facility with your bank today. Not when it's dire where you could be slapped with higher interest rates. If you are undergoing financial stress and need to talk through cashflows, budgeting or risk assessments, please reach us via our Contact page.

COVID-19 ECONOMIC INJURY DISASTER LOAN • Not restrictive in case of what the loan can be used for • Administered through SBA • Eligibility requirements are straightforward – not sector based / for certain industries alone • Company should fall within a Declared Disaster area in the US and most areas around the country are included • Any business with less than 500 employees can apply • Financial queries - past 12 months gross revenues (that is sales before any deductions are made); cost of good sold (direct costs) as of 31 Jan 2020, number of employees • Apart from this, most questions were relating to the business in general – how many years of trading, date of incorporation, details of owners, whether the company is owned by another corporation, etc • Declaration that the company or owners are not under inquiry for criminal offenses, perjury, fraud and the like • Loan-related question - Is the applicant or any listed owner currently suspended or debarred from contracting with the Federal government or receiving Federal grants or loans? • You can also choose an optionto be considered for an advance of US$ 10,000 Paycheck Protection Program (PPP) Meant specifically to protect jobs Loans have to be used for specific purposes of meeting specific costs "only" if it has to be waived off (forgiven) SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities. This program is for any small business with less than 500 employees SBA Express Bridge Loans Can get up to US$ 25,000 if the company has a business relationship with an SBA Express Lender Faster process Will be repaid in full or in part by proceeds from the EIDL loan No restriction of how a business can use this The SBA Website explains it as – it’s meant to overcome the temporary loss of revenue they are experiencing and can be a term loan or used to bridge the gap while applying for a direct SBA Economic Injury Disaster loan SBA Debt Relief Loans from third-party providers where the SBA will pay the principal, interest and fees of current 7a loans for a period up to 6 months Also applicable for new 7a loans issued prior to Sep 27th, 2020 7a loans are specific to the COVID program, which will be disbursed through preferred lenders. Each lender may have some qualifying criteria Types of 7a loans – Standard 7a up to 5 million, Small 7a up to 350,000, SBA express up to 350,000 also with a faster turn around period that the Small loan. For the express loan SBA only guarantee up to 50% of the loan, for the small loan SBA guarantees up to 75% Export express – up to US$ 500,000 Export working capital – up to US$ 5 million International trade - up to US$ 5 million also meant for export businesses that are suffering

COVID 19 has changed our lives in significant ways. Businesses and human lives have suffered in the ensuing economic downturn. There is no easy way to survive this. Here is a quick summary of what is out there for most SMEs. Support for employees to retain jobs The government's "furloughing employee/s" scheme is a clear call to action for most companies - try to retain employees where you can. There are sectors like retail and hospitality that are highly affected. Saas and service sectors have also seen slow-downs outside of the norm. Read more here for the Government furlough scheme. Here are some quick facts to help - The meaning of furlough means a "leave of absence" due to reduced operations or the role simply does not exist under new corporate conditions - An employee on furlough "CANNOT" work or undertake any activity that adds to revenue generation for her employer. This includes training "if" that can be construed as supporting a revenue generation activity. - Once the emergency status around COVID is lifted, HMRC will conduct for claims processed. So a clear paper trail showing why employees were furloughed would be necessary. - Be aware of contractual clauses existing for employees under the employment contracts while preparing letter for furlough. - An employee's consent is required to place him on furlough. This is especially true in the cases where you are only planning to pay employees the 80% being reimbursed by the government - Furlough and un-furlough can be done as long as one set of furlough is not less than 3 weeks - this should be supported by a strong business case. - Employees can be furloughed from more than one job and the limit of £2,500 is per job. - HMRC is currently building the system through which these claims can be processed. This is expected to be in place by end of April, but could take longer. If you are only able to pay employees once the disbursement from HMRC is received, please make sure this is communicated clearly to them UPDATE - The furlough scheme is now operational and companies can start submitting claims from April 20th. The scheme has also been extended to the end of June 2020. CBILS Loan Scheme SMEs can also apply for interest-free loans under the "Coronavirus Business Interruption Loan Scheme". All information and participating entities can be found via this website. The first port of call should be your corporate bank, they have your financials readily available hence may be able to turn around decisions on a short term loan faster. Things to watch, 1. Is a personal guarantee required? Though the government has essentially underwritten 80% of the loan value, some financial institutions are asking for personal guarantees from business directors seeking loans. This is not a favorable position as the director would then be putting his personal assets on the line in case of a default. So shop around in this case. You may get a smaller loan from another provider without this restriction. 2. These loans are meant to be free of interest. It could be interest-free for 6 months with a max period lasting 12 months, from what we understand at present. Details of individual bank processes are awaited as we write this. 3. We understand that HSBC has a questionnaire process that is online. You are required to write each answer within 5000 words explaining how the loan would help you bridge the losses due to the pandemic. UPDATE - A client of ours have submitted a claim to HSBC. They use Xero to manage their numbers and an instant connected with the HSBC portal was possible. This enabled data to be transferred to the required format from HSBC within minutes. No time was spent on preparing the initial set of numbers. Post this, a phone interview took place and the bank asked for 12-month of realistic forward projections. This should show how the loan can bridge the financial gap caused by the pandemic. VAT Deferrals and businesses that get a VAT refund Businesses are allowed a VAT deferral period between March and June 2020, so you don't need to pay VAT for these 2 quarters. This is a deferral and not a waiver. HMRC would collect this in batches once these 2 quarters are completed - within the year 2021. You still need to submit your VAT returns but are not required to pay. Make sure your direct debit is canceled so automatic deductions do not take place. Businesses that usually have a VAT refund, should continue to file their returns on time. HMRC will make refunds as usual. PAYE and NIC Deferrals If you need a PAYE and NIC deferrals, make sure you reach HMRC via their live webchat or phone line set up for this purpose. This is "NOT AN AUTOMATIC" entitlement and you need to have express permission to not pay your PAYE dues. You may be allowed a deferral period. From our experience, a month of leniency was allowed with specific instructions to inform HMRC before the end of this period in case more deferrals are required. Else a penalty and interest per normal are likely. You can chat with HMRC via their webchat - use this link. This is not always open. If you don't see advisors online, we recommend you keep the tab open and refresh every 10-15 minutes. Consistent cash flow forecasting The COVID pandemic has thrown the regular processes usual companies follow around budgeting and forecasting under the bus. Cash is hard to come by in terms of investments and companies are critically assessing their overheads. Now more than ever, you need a robust forecast function. This can be done on an excel sheet - there is no need to subscribe to a software for this purpose. The most robust companies we work with review cash flows at least twice a week, if not daily. Cut down on expenses that you can live without with fair warning to the suppliers. This is a tough time for everyone, so if you can sustain suppliers even on a lower cost tier, please consider this. We are working more than normal to keep up with client queries and demands; not to mention homeschooling. Please feel free to reach us if you do have urgent queries and kindly excuse in case of slight delays.

Companies incorporated in the UK are generally familiar with the application for SEIS / EIS. Many small companies have used the schemes to attract top investors. The main difference between the two schemes are their target market. SEIS is great for start-ups and smaller companies whereas EIS can be effectively used for larger and more mature companies. The general process if you are making an application would be, 1. Getting an advance assurance: This is an application to ensure that when you do apply there is reasonable certainty of the outcome. Needless to say, if the advance assurance application you put in come back negative, reassess your position AND / OR depending on whether you go for an advance assurance 2. You put in an application. You can also directly go for an actual application under the scheme. This is called a compliance statement. So this can be your first step instead of having an advance assurance done. The good news is that both of these can be completed online via the gov.uk links. How you would demonstrate that you meet the risk to capital condition if you are already operating and have 1-2 years worth of actual operating results. Now the “Risk to Capital condition” was introduced in 2018 and all companies applying for either of EIS or SEIS should explain how they meet this condition when they make the application. HMRC’s rationale is explained via their policy paper published in Nov 2017, as follows, The measure introduces a new condition to the EIS, SEIS and VCT rules to exclude tax-motivated investments, where the tax relief provides most of the return for an investor with limited risk to the original investment (that is, preserving an investor’s capital). The condition depends on taking a ‘reasonable’ view as to whether an investment has been structured to provide a low risk return for investors. These schemes have been abused for the tax breaks and having this test questions the main reason for the investment - that it’s just not for the sake of a tax break. The format This is usually prepared in a word document and converted to a PDF document before upload. You explain your thoughts as to how your company meets the requirements and attached as part of your submission. What to include? There are 2 main conditions you need to address when preparing this document, 1. Does the company have objectives or the intention to grow and develop over the long term? 2. Is there “significant risk” that the investor will lose the money they invest under the scheme - this includes any returns they would gain under the tax relief allowed? The tricky part is that the answer to both questions should be “aye”. They are sort of self conflicting in a way but it’s a fair question to ask. In a true entrepreneurial venture, as the company grows, there are also risks associated with that growth. Let’s focus on question 1 - Does the company have objectives or the intention to grow and develop over the long term? This is perhaps the easier of the two questions. Answer it truthfully. 1. Start with your financial assessment, have yous sales grown? Do you expect the growth to continue into the future 2. How about the key metrics applicable to your industry type? Such as number of customers, average sale value or the number of employees 3. How would having the investment help your company? Would it be used to develop new products or purchase new equipment. 4. Include a graph of growth to make the statement more factual. Keep the write-up simple and easy to understand. There is no right or wrong length. A recent statement we helped a client prepare ran to approximately 200 words for this section. Question 2. Significant risk to investors capital This is more tricky than showing you have intentions to grow. Entrepreneurs are usually tuned to put their best foot forward in all circumstances, so we would have to think long and hard about what would constitute an actual risk for the company. The first question I would ask here is, “Why do I actually need the money?” The answer to this question might give you an indication. I need the money to develop a new product, why? Because the new product might give a market edge that a competitor is lacking. What if that product you are developing fails to deliver? Then there is a risk that the money we put into it is also lost. See what I mean…. It’s slightly negative but it’s important. At the least the entrepreneur asking for the money should realize and acknowledge that where money is concerned, risk is a natural. Here are some examples of what could constitute significant risk ~ Key / Major client dependency - there are start-ups in certain sectors that have only a handful of clients, there is nothing wrong with this. But if one of them decide to stop services / go out of business themselves, it could present a genuine risk to the company applying for SEIS. ~ Industry specific risks - there is hardly any industry left in the world where you do not compete against a new entrant / larger businesses pivoting into newer areas. This is something you can talk about without essentially shooting yourself in the foot. Something like - “While we enjoy sufficient market certainty, the threat of new entrants / low cost global competition is very real. Research shows there are XXX% new entrants into this area. This can have an impact on the long term health of the business if risk mitigation procedures are not adopted. * Remember - speak facts, you are not here to present doom and gloom, rather a realistic view of what may be potential threats to your business model. ~ Key product / tool dependency - if your revenue model is centered on a specific product; that particular product going out of favour / newer and more slick replacing it would mean that your business growth would slow down. You could say, there are potential risks that the tools we use to drive our sales, such as Salesforce, become a less popular choice with customers. If so, that would mean we would then have to change our business model market realities. While this sort of pivot can be achieved, it would slow down the current growth trajectory and could cause risk to money invested.* ~ Summarise your position - Make sure you summarise the statement. There is no one right answer here as you can very well imagine. The risks differ per company across industries. And example to summarise would be, As demonstrated, we are a growing company with definite pipeline. But we are also conscious of areas where our business model would need a pivot. So we genuinely feel there is significant risk involved with the amount of investment we have made.* Be confident in what you present In general, a two-pager alongside your Business plan (which is one of the documents you submit) should be sufficient to address this issue. A word-count of between 500-525 should convey the matters nicely. HMRC may ask you more questions relating to the risk to capital condition you have presented. View this as a positive, it enables you to explain matters clearly. This is one area which does not cause an automatic rejection of your SEIS most of the times. There is a right to appeal should the company be rejected on this basis as well. We also recommend this highly valuable article written by Seedlegals as essential reading. If you are looking at SEIS/EIS and confused with the risk to capital condition, we would be happy to vet your statement. Feel free to reach us via our Contact Us page. Disclaimer * the examples provided are meant as guidance only. Feel free to use the wordings if it applies to your specific scenario, but remember that one size doesn’t fit all. You need to write about your business in realistic terms. We are happy to review your risk statements, please feel free to contact us via - Contact us.

Let’s face it, we all have those moments when we are deeply dissatisfied with our service providers - mostly it’s telephone companies and internet providers. But many accountants are not very far in terms of coming up short. Over the last 2-months, we have been speaking with a host of normal company-folk to understand what frustrates them the most about the lot of us. Here’s the top list of complaints we heard: Not proactive Everyone needs to be reassured about their business. When you are not a numbers person, you need validation to see where your business is headed - financially. When accountants fail to step up to that shoes, it’s deeply frustrating to business owners. There is information galore on the internet about KPIs and ratios and benchmarks you should achieve. But how is that relative to your clients’ business? Finance guys - take charge!! If you know what’s out there, take the time to communicate. How are we solving this? 100% cloud. Yes all your numbers need to be where you can see them - FAST! When we put our clients on Xero, they always own their subscriptions - so your financial information is always with you. We don’t own it We ask you to describe your biggest pain points before you are onboarded. Nothing over the top, just want to understand where we can add maximum value How did our clients react? Like an absolute charm. 85% clients have stayed with us for more than 3 years (that’s about how long we’ve been alive) Pricing for bits and bobs We were on the phone with an acquaintance of ours last week. They are not a client (for now), just a bunch of guys we know and like from our co-working space. They were explaining to us how disappointed they were that their Accountants send them an invoice at the end of the year with additional costs they were not aware of. We needed to understand this scenario in detail. From our own experience, we couldn’t quite believe that a professional wouldn’t advise clients of possible charges before raising an invoice on them. Their initial quote looked a bit like this, Annual accounts and tax filing - XXXX Self-assessment taxes for Directors - XXX “ADHOC Bits and bobs” - XXX Yes, that says there “could” be additional charges. But, the client did not understand what it meant. As they asked their Accountants for additional support / advice through the year, the “bits and bobs” kept adding on. How are we solving this? Universal Accountant’s truth - sometimes when we pick up work, there is more to it than initially imagined. The common additional work we handle is corrections to previous work performed, company secretarial support or SEIS applications. We are upfront about additional costs. Transparency is important to us as we are here to build a customer base for the long term. Trust is 2-ways. Here’s an extract from an email we sent a client: The client agreed to my above email. And once the job was done, we had some good news for the client, The reason why we are bringing it to the forefront is because a lot of professionals are reluctant to speak about their pricing. We admit it is a difficult thing to gauge, before we see what you need done. Nevertheless, we understand how important knowing what something will cost is for our clients. In line with giving our clients that transparency, our pricing page is now under construction and we’ll share it with you soon. Jargon land Let’s be honest here, everyone loves to show-off - at least a little bit. We honestly do not believe that accountants use more jargon than other professionals (ever spoken to a Surveyor?) But therein could be the problem. While we might be “talking normal” when we say “per tax laws you can’t claim depreciation only capital allowances”; you might be wondering - what does that even mean, or how does that matter to me? How are we solving this? It was a long journey out of jargon land. Circa 2014, I was attending a networking event in Singapore. The topic was “writing in plain English” and the presenter - Shirley Taylor. When she showed examples of “not good writing” it literally looked like my emails leaked. I openly admitted to writing long-winded emails and to the benefit of all, we reworked some of those sentences. Thankfully, it has improved ions since then... An example - My 2014 email would read, "Please find below, the instances where you might find that certain business expenses are not tax deductible" Fast forward to 2019, it would usually read, "Here are some expenses that HMRC doesn’t allow… " Businesses are full of challenges. Adding anxiety to that by sending out emails that require a tax dictionary is not fun for anyone. We are taking a conscious effort to minimise technicalities in our client communications. Closing paperwork/compliance too close to comfort This seems to be one of the most common issues people have with their Accountants. Excerpt from normal folk convo, “It’s very close to comfort and especially noticing this for our VAT returns. We are fairly cash organised. Had we know our VAT bill around 2-weeks before the due dates, that would enable us to use that cash elsewhere”, comments from a small agency owner in Bournemouth who wishes to remain anonymous. Small businesses can always use cash to run ads, pick up a new product or even move it away to a higher interest earning deposit account. Not having enough knowledge about upcoming outflows is inefficient. How are we solving this? Primarily put processes in place. We always have a “you expect - we expect” chat at the start of any engagement. If a business expects us to deliver cash forecasting, that’s what we need to do. But it’s equally important to have an honest tete-a-tete to see what are the impediments to this. Did clients like it? THEY LOVED IT!! We were very surprised by how much clients appreciated processes. When we first started doing this, we were concerned that people might be put off by it. Quite the contrary, people are happy to adhere to process, help to solve financial queries faster and get to the important bits - how to get the numbers that actually help my business. From frustrating to awesome….What can we do to make you feel better? Businesses; like people; have certain personality - sometimes you don’t get along with someone for purely personal reasons. If there are business reasons why your accountant is not working for you, look at alternatives. It has to start with you, As a business, what do you need in an Accountant? Someone who would help comply with the law and largely leaves you alone or you need constant guidance and nudges about your numbers. The kind of finance guy you need for both are different. When you buy anything for personal use, you hardly buy the first thing you see - you take time. At the minimal, pick up the phone and speak to the person concerned directly and always ask to speak to the person who would be dealing with your company before making a decision. If you have an Accountant and are having problems, speak out. You need to let them know you feel things are not going well. This might change the working relationship completely. No success there? It's all right, you can talk to us. We never shy away from a real conversation. Call us! I’ll leave this quote from Shindler’s list to conclude, ~ My father was fond of saying you need three things in life. A good doctor, a forgiving priest and a clever accountant. The first two, I’ve never had much use for” Additional reference material - this brilliant post from The Profitable Firm