AccountingWEB rounds up the latest from the small business world, including rising tax takes, stable confidence and Brexit tips…
SMEs remain confident
Confidence among Britain’s businesses is holding up well despite the uncertainty surrounding Brexit, according to Barclays research.
While 2016 was a turbulent year for the economy in general, the majority of the 1,010 small businesses interviewed as part of the survey were feeling generally confident and optimistic.
In total 43% of businesses surveyed maintained confidence in the economy throughout 2016, with 33% stating that their confidence had decreased, while 50% of businesses expected modest but steady growth of between 1% and 10% in 2017.
Brexit was, unsurprisingly, the top concern of most businesses, with the weak pound causing difficulties for almost all firms with links to the Eurozone. Indeed, exchange rates were also a worry for 30% of the businesses surveyed.
HMRC raises additional £468m from SMEs
While small business confidence may be rising, so too are their tax bills. Local compliance teams from HMRC tasked with investigating SMEs raked in £468m of additional revenue last year, according to a freedom of information request put in by accountancy firm UHY Hacker Young.
In recent years HMRC’s focus moved from large businesses towards SMEs, which the Revenue estimates are responsible for 51% of the UK’s tax gap (the difference between the amount of tax due and the amount collected). This works out at £18.3bn in lost revenue in the year 2014-2015.
However, UHY Hacker Young warned that the clampdown risks causing disproportionate problems for small businesses unprepared for the increased scrutiny.
Commenting on the growing pressure on small business to ensure their tax affairs are accurate and up-to-date, tax partner Roy Maugham said “without adequate care, small businesses are at risk of being pulled up over minor mistakes or small disparities, which could incur disproportionately heavy fines and penalties.”
How small business can prepare for Brexit
Government estimates suggest that 8% of the UK’s SMBs export to the EU, and last week’s confirmation from Prime Minister Theresa May that the UK will leave the EU’s single market left many feeling apprehensive.
Paul Bulpitt, head of accounting at Xero and co-founder of The Wow Company, took to the blogs to provide some practical tips for small businesses to weather the Brexit storm:
1. Manage your debtors in good time
For growing businesses in particular, late payments can pose a significant challenge. Know your customer and credit check them to make sure they are able to pay their bills. It’s also a good idea to agree payment terms before you supply to help keep cash flowing
2. Invoice clearly and promptly
Incorrect invoicing can hold up payments. It’s important that any delays are not because of your own errors. Make sure you know where and who to send invoices to, and raise the invoice as soon as the job is complete
3. Use tech to keep your finances agile
Cloud accounting software enables you to invoice fast, handle payroll, reconcile with banks, record and manage expenses, all in one place. With your finances under control and a clear view of your financial picture, you will be in a much better position to stay afloat
4. Be pessimistic when forecasting
Aside from the weak pound most businesses have remained relatively unscathed by Brexit so far, but the process is only beginning. With this in mind, it’s important to consider the worst case scenario for your business and to plan accordingly. How will the change in trading taxes affect you once we leave the free market? How will your profits be affected by leaving the EU? Plan for the worst case, and anything less than this will be a bonus
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Tom is AccountingWEB's technology editor, providing unbiased news and analysis from the accounting tech universe.
He started with AccountingWEB in the heady days of 2015, where he worked first as business editor and then editor of the site. After two years as editor of ICAEW Insights, he returned to AccountingWEB in 2022 with a specific...