Money: Q&A with Stephen Paul

by | Oct 1, 2021

Long-time friend and sponsor of MINT, Stephen Paul from Valued Accountancy, delivered an informal lunchtime chat session earlier this year for Let’s Talk About Planning.

As a follow-up to that session, watch Stephen’s exclusive members-only Q&A.

Transcript of Video

(00:04):

Good morning, everyone. I hope you’re well. So I think I’ve met quite a few of us now. So I’m Stephen, I’m the founder and CEO of Valued and we’re based up in Consett or in theory we’re based in Consett. I live and work from Chester le Street. We all work remotely now as times have changed so much during the pandemic.

(00:23):

I’m delighted to be part of this session today. It is a safe zone so if you’ve got any questions you want to ask, stick your hand up, I’ll answer anything that I can. If it’s anything that’s a bit too technical or a bit, not quite sure or I need more information. I’m more than happy to take stuff offline as well, and have a further discussion with people later on as well. That’s not an issue whatsoever. The whole purpose of today’s session is basically to get those, those questions out.

(00:54):

And sometimes as business owners, we don’t want to look and feel stupid. We don’t want to ask the stupid question. Invariably it isn’t a stupid question, invariably, actually, it’s a question that two or three people want to ask. Just no one’s ever asked the question. Google normally is our friend, but also if anybody’s ever had any illnesses or anything, Google can also be our enemy as well. You kind of sit there and go, oh my gosh, I went off to the doctors a couple of weeks ago, had some tests. Oh, went off to a medical practitioner, went off and got some tests. And by the end of it, I was convinced I was going to be dying within a couple of days. It was like, what the heck? In reality, I don’t think it’s anywhere near as bad as what it was there. So Google is our friend, but it’s also our enemy.

(01:44):

Me, Stephen, I’m the founder of Valued. I said business 10 years ago, I’ve been a qualified accountant for around about 23, 24 years, which is a long, long time, especially when you’ve got two daughters, Lucy and Jessica who are, are eight and five. It’s scary to be honest, it’s, it’s scary the amount of times and the amount of experience that we’ve got. So happy to ask and to answer any questions I can. So should I just kick off with the questions that we’ve been asked or is anybody got anything you want to ask in the open forum here?

(02:22):

Do you want me to kickoff of the, the questions first. Yeah. Okay. Let’s let’s do some of these.

(02:27):

So, we have Peter, I think this could be your question now. I think it could be Suzanne’s. I’m not quite sure. Is there a proper profitability threshold when a business should consider moving from being a sole trader to being a limited company? Is that yours? Peter?

(02:43):

It’s a question I get asked a lot for the kickstart scheme. People who are sole traders who may be thinking about it. So I think it’d be quite a useful question.

(02:51):

Brilliant question. Brilliant. Brilliant question. Invariably there’s a huge there’s a huge misconception with with moving, from being a sole trader, to being a limited company. A lot of people believe that as soon as you become VAT registered, you have to become a limited company. Or the people believe that a limited company is 3, 4, 5 times more expensive to run. It’s not. It’s a little bit more expensive, but it is not three or four times more expensive.

(03:23):

The primary reason, or there’s two reasons why people would consider being a limited company. The first one is around tax , which I’m going to move onto in a second Peter. The other reason why people consider becoming a limited company is for what what’s called the veil of incorporation. So let’s use Peter, can I use you just as an example, since he asked the question?

(03:46):

So Peter’s a sole trader. I can’t remember whether you are or not. Peter’s a sole trader. If anything happens to Peter’s business and he’s borrowed money, let’s say he’s got an overdraft facility with the bank and the business goes overnight, sorry, Peter’s house, Peter’s personal debt is intertwined because the sole trader is Peter, right? So if the bank are knocking and say, we want that overdraft facility back, all the supply is come knocking and say, you haven’t paid your bills. We want that money back. Peter and the sole trader business are interlinked. Peter loses everything potentially, he’s personally liable.

(04:30):

As a limited company, Peter’s over here, limited companies over here. If anything comes to the limited company you have, what’s called the veil of incorporation. Pretty much a curtain comes down between the two and separate it. As long as Peter has acted in the best interest of the company as a director, then the veil of incorporation stays in place and Peter doesn’t lose his house or anything else.

(04:55):

Now, one of the other misconceptions of that is, Brilliant. I’ll be a limited company, no problems. I can’t ever lose my house. Sometimes it’s what’s called a PG or a personal guarantee comes along as well. Now, personal guarantee. Let’s use the example again, the banks come off and they’ve said, yes, you can have a an overdraft facility, Peter, but we would like you to personally guarantee that, let’s say it’s a £2000 overdraft facility. So what now happens is if the company goes under, Peter’s over here, veil of incorporation between. The veil of incorporation can lift because there’s this personal guarantee. So what you’ve got to be really, really careful of, especially with smaller businesses is that suppliers, especially banks will ask for a PG or a personal guarantee. It’s normally in the very, very small print.

You’ve gotta be really careful with that. If they asked for the personal guarantee you’re still liable for it.

(05:58):

All right. So just be a little bit careful with that. Nine times out of 10, you have that veil of incorporation and you are protected. You have the main reason, which alludes the question there is why would, what’s the critical point? The critical point is all to do with the tax and the tax amounts. Now, if you are, hopefully I won’t lose everybody too much here. Everybody can earn 12 and a half thousand pound a year before any tax or any national insurance. Sorry, before they pay any tax. National insurance threshold is a little bit less than that.

(06:36):

If you’re a sole trader and you’re earning £12,500, no problem. Be a sole trader. If you’re a sole trader that’s say making £25,000 to £30,000 profit. This isn’t turnover. This is profit, what’s left when everything’s come in, everything’s gone out. Profit.

(06:55):

Don’t include loan payments though, as well because loan payments are a major thing right now. That doesn’t come off your profit. With the bounce back loan that has started to affect people’s perception of profit. If you’ve got between £25,000 and £30,000 of profit, you start to pay 20% tax, 9% national insurance. You actually pay 29% tax, plus payments on account towards the following year’s profit as well. It can be quite a bit. So roughly between £25,000 and £30,000 of profit, you should seriously consider being a limited company because limited companies are paying 19% tax and 7.5% dividend tax, you pay 7.5% tax getting that money out of the company. So worst case you’re at 26.5% tax, as opposed to 29%. So you’ve got a couple of percent saving there.

(07:53):

Now what you may have seen there was roughly six months ago, was the government talked about bringing in a high rate of corporation tax and corporation tax was going to be 25%. I don’t know if anybody’s seen that in the news. It was a couple of months ago now. So they talked about businesses paying 25% corporation tax. Which is still one of the lowest in Europe, in percent. However, that’s the headline. The headline is that companies will pay 25% tax. In reality, what actually is going to happen is businesses that earn up to £50,000 profit pay 19% corporation tax. Businesses that earn more than £250,000 profit pay 25% tax. So it’s still, it’s a headline grabbing figure, but it’s still worth being a limited company at around £25,000 to 30,000 of profit. Does that help Peter?

(08:55):

Yeah, just in terms of the costs of being limited versus sole trader from an accountancy perspective, what’s the big difference then?

(09:04):

I’m going to come on, where I want to about making tax digital shortly. I think that’s gonna play a huge part in it, to be perfectly honest. In the past, sole trader to limited company, you’re normally looking at probably an extra £20 to £30 pound a month, as a rough indication.

(09:24):

And actually the conversion is quite simple. I went through it this year and actually the conversion from sole trader to limited was a fairly simple process really. It didn’t cost a lot.

(09:36):

The biggest issue that you normally have is you’ve got to press the reset button. Do you got to go off and get a new bank account? You’ve got to write all your suppliers and say, right, now I am Stephen Paul Limited instead of Stephen Paul sole trader. So there’s a bit of a headache around doing that, but it’s not too much of a, too much of a hassle.

(10:00):

Bop, bop, bop, bop, bop. What have we got there? So, Suzanne, I think I’ve just answered that. Sorry, I’ve been keeping an eye on the chat there. Marsha, HMRC grants take you over the VAT threshold but the turnover doesn’t. Do I need to register for VAT?

(10:13):

Normally not. Normally not. So grants are normally not included in turnover, but Marsha give me an example of the grant. Is it like a furlough grant and things?

(10:25):

Yeah, the person who was, we were discussing it yesterday, the person who was on about it, they’ve had furlough grants. They’ve had a £25,000 premises grant because they sublet to everybody else. So that seen their income go up and they’ve had to then decide whether to divvy it out to people who rent space. Then they’ve had the grants for being self-employed as well. So that takes them £24,000 pounds over this VAT threshold, but their turnover doesn’t.

(10:54):

Yeah. Normally none of that would count.

(10:56):

I didn’t think so.

(10:56):

Yeah. If I’m, if I’m brutally honest, the last now 18 months, 19 months, wherever we’re at, there’s been so much funding, so much grant funding, so many furlough money, bounce back loans, absolutely everything. And let’s be honest, some businesses have had nothing as well, but those that have had money it’s can quite complicated.

(11:24):

For example, we’ve got a client, I’ve had a session with them a couple of weeks ago, went through their accounts and they’re actually hairdressers. They’ve made more money in the last 12 months despite being closed than what they ever have. And it’s kind of crazy, but they’ve got the £10,000 grant, they then got the lockdown grants from the council and then got the furlough money and various other parts. And they were looking at it going, we can’t have made more money, but actually they made significantly more money.

(11:52):

Yeah. So we have got to be a little bit careful. We’ve got to be a little bit careful there as well. Lucinda, do you have to pay NI if you’ve already gone over the, over the years… Yes. If you’ve gone over the threshold.

(12:11):

Sorry. So the question is, do you have to pay NI if you’ve already gone over the threshold? IE you’ve paid enough to pay for your stamp in the future. I think that’s the question. I understand that. Yes, you’ve still got to pay it, right? So everybody has to pay national insurance until you hit the age where you don’t have to pay national insurance. I can’t remember what that is, but it’s basically pension age. I think it’s around about 60, 65, something like that from memory. You still have to pay it as long as you’ve gone over the threshold.

(12:42):

The other question I sometimes get asked around national insurance is, let’s say my profit is five grand. I’m not paying national insurance because I’m under the threshold. You may want to make voluntary contributions to actually volunteer, to pay national insurance, to get your pension, to get certain benefits in there as well. So you may want to actually make voluntary contributions for national insurance. That’s sometimes a question we get asked as well.

(13:10):

The other one that sometimes just when you’re doing the tax calculation as well, I’m not sure whether it’s relevant. Anybody has student loans. I don’t know if that’s relevant to anybody in the today’s session? So sometimes what happens is you, you get your student loan and you’ve got to pay your student loan back when you’re self-employed through your tax return. So you end up paying it off through there. My opinion, it captures sole trader businesses really badly because you end up paying payments on account towards next year, student loan in essence, without it actually coming off your loan.

(13:49):

So it’s, it’s not a great scheme for that. That is another reason why you may want to consider being a limited company as well. Right? Let’s check out another question.

(14:00):

Lucinda’s got some great questions here. I’m certainly interested in making tax digital and what needs to be done? I think it’s just been delayed to 2024. So your hands up, if ever you’ve heard of making tax digital, okay. Stick a hand up. If you think it’s been delayed and you, haven’t got to worry about it.

(14:27):

Everybody that I know, including accountants, are going happy days! Don’t have to do anything with making tax digital. It’s gone down the road for another year. Don’t have to worry about it.

(14:37):

That doesn’t count for the VAT one, does it?

(14:40):

Actually it’s created a bigger problem and a bigger mess by delaying it for a year. Let me explain what making tax digital is because I think some people might not know what it, what it is.

(14:52):

How many of us use manual books records right now? Just stick your hands up. If your manual books and records. Now stick your hands up if you have Xero, QuickBooks, Sage, anything like that. So a few. Right, stick your hands up, keep your hands up those people if your information is a hundred percent accurate, every three months, a hundred percent accurate. One, one person, right?

(15:27):

What making tax digital does is that there is already making tax digital, right? Making tax digital is for VAT registered businesses right now. So anybody that is VAT registered has to submit quarterly returns to the Inland Revenue. Quarterly or monthly returns. Normally quarterly. Making tax digital comes along and it’s making tax digital 2.0. All it is for any sole trader business or rental income that has more than £10,000 worth of sales. Probably most people in this session, probably, you now have to keep digital records, no manual records. You have to keep digital records that are a hundred percent accurate and submit those every three months to HMRC. Anyone panicking about that?

(16:20):

Stephen, could you just explain what you mean by 100% accurate?

(16:24):

Peter, I don’t know if you’re on mute there.

(16:27):

Can you hear me?

(16:30):

Yeah.

(16:33):

My sound has stopped working now. Did anyone else hear Peter? There we go. Sorry.

(16:47):

I was just asking, can you explain what you mean by a hundred percent accurate? Do you mean all of your transactions processed and invoices processed and up to date?

(16:56):

Yes. Yes. Every single sales invoice. Can everyone hear me? Okay. We’re coming through there all right. Yeah. Every single sale and this has to be entered onto a digital system. Every single purchase invoice has to be entered onto a digital system. Banks have to be reconciled. It’s basically a year end accounts every three months.

(17:21):

What you then have to do, so quarter one you submit that. Quarter two you submit, quarter three you submit. Quarter four you submit. Year end, you then have to do your year end adjustment and the year end adjustment. You have to say what you got wrong and tie it all up in your year end set of accounts. Then the sixth step is submit a self-assessment tax return. It sounds easy? Making tax easier? It sounds a lot harder, right?

(17:53):

Go for it. Just ask questions.

(17:54):

Well, why do you still have to submit a tax return when they’ve got it all already?

(17:59):

Great question. I’ve got no idea, but you do. You generally do because the quarterly submissions is summary information, right? It’s summary information. Catherine, did you have a question you want to ask?

(18:15):

So I’m just thinking that all of my invoices are going to be fine and it will all be in Xero. And obviously Mike and Katie at Valued will have me sorted with that, but I’m just thinking off the top of my head.

Things like like pension contributions, charity. Well maybe charity will be on the Xero, but the things that I always, when I did my own tax return, had to scrat around and look for when I was asked to doing the return. So they’re not.

(18:47):

Yeah. So if it’s personal stuff, it’s fine. Right? You don’t have to do that. You still put that on the selfassessment return at the end of the year, right? If it’s business stuff, sole trader stuff, it has to go on the submission every quarter.

(19:02):

Okay. But obviously pension, private pension is your personal.

(19:08):

Yeah, that doesn’t right now. Couple of interesting points that comes from it. I love that maintenance care deal have added value to life. Misordered yep. Hopefully Catherine, hopefully couple of points I come on the back of that is, hang on a minute. I’ve got manual books. Can’t do that anymore. Right? The bigger problem is what then happens to accounts, right? So if you think Catherine, we’ll use you as an example. So you come in once a year, you give Michael and Katie your books and records. You give them the Xero data. Everything’s fine. We do your accounts once a year. Everything’s fine. No problems whatsoever. We’ve now got to do that four times a year. Catherine do you fancy paying four times as much money to Valued to do that? No, don’t think you do. Right? Do I want to employ four times as many people to do all that work?

(20:04):

Definitely not. Definitely not. Right. So this is the huge conundrum that accountants are going to have. In my honest opinion, you’ve then got, so you’ve got some clients that will be on Xero already. You’ll have all this and manual books and records. The people who are pure manual books and records, we’ve got two years to get them from where they are now to where they’re going to be. The words I’m hearing from my profession, and I was on a webinar last week, so this was 293 accountants were logged onto this, is that people who are, are doing manual books and records will be paying three to four times more money. To have their accounts done.

(20:46):

Because you can’t, accountants can’t do it anymore, right? Just, it’s not logistically possible to sit and key in all this in. The nightmare point could be, if everybody has the same quarter, every client has to submit everything within 30 days of the same point every quarter. I see a lot of accountants not getting any sleep in that one. And having loads of time off in month one and month two, it doesn’t work. It doesn’t work. So that’s where we’ve got to get Xero, we’ve got to get the technology working.

(21:22):

And there is one other option. You can still use spreadsheets to submit this. You can still use your spreadsheets to submit it. If you use spreadsheets, it has to be able to tie in perfectly to the software. So at Valued, we will be going to our clients and saying, if you want to continue to use spreadsheets, it must be this format. And if you don’t use this format, we can’t act for you and we’re going to have to make that decision, right. Genuinely. And I think a lot of accountants will go down that route as well, because we’ve got to make sure I don’t want to charge Catherine three times more, three or four times more money. And I don’t really want my team to have to do three to four times more work. So we’re going to have to work together to do something. Lucinda?

(22:08):

Is that, do you think the way they’re going to go? That they’re going to want their clients to use spreadsheets?

(22:16):

Nope. Accountants would want digital records. So Xero, Sage, QuickBooks. That’s what we want. The quite interesting part, and I’ve seen the guidance from the revenue because we’re doing a bit of beta testing with it. You can actually sign up for this now, if you want it to. Not quite sure why anybody would, but you can’t actually sign up for it now just to see whether it works. The interesting part is when you submit the part, right? So Catherine, I’m going to use you as an example, right? And let’s say, Catherine, I’ve got absolutely no idea. So I’m just going to go Catherine’s made £100,000 profit this quarter, right? Happy days, right! Thank God. You know, when you kind of go, she didn’t look, she looked pretty shocked there. So hopefully it’s not £100,000 profit, but she made 100,000 profit.

(23:06):

What then happens is the revenue send you a message. Ba-ding, thank you very much. This is how much tax you owe, based on that £100,000 profit. Let’s assume that Catherine is selling ice creams and that’s a summer quarter, right. In the winter, she makes £100,000 loss. Ker-ching! This is how much tax you get back on that £100,000 loss. You’ve got four ker-chings. This is what’s happening right during the year. It’s going to be a great conversation for Catherine. Isn’t it, Catherine? You know how you’re selling ice creams? You’re gonna have really good months and really bad months. And you’ve got to put the whole lot together, right? For seasonal businesses. Now what actually is going to happen, in my opinion, it’s just my opinion, is I think it’s not going to be that long before the revenue say can we have the tax on that money now as well, please?

(23:57):

So instead of paying your tax twice a year, once a year with balancing payments and payments on account, I genuinely genuinely think in the next 10 years, it will be pay tax every quarter please. If only we had a huge problem where the government spent loads of money and need to get loads of money back, that could facilitate that. COVID I honestly think it’s Covid, right? I think that’ll be here in the next five years. We’ll be paying, as sole traders, that money back within five years, I think we’ll be paying that back as quarterly payments.

(24:36):

What is your advice for small businesses right now to do for this making tax digital? What should we be doing?

(24:44):

Go on to computerised software, to Xero, QuickBooks, Sage.

(24:48):

Doing it ourselves?

(24:49):

Doing it yourself, doing it yourselves, or outsourcing it to an accountant to a bookkeeper. Yeah. Start to do it now. There is going to be other options out there. My belief is that, do many of us bank with Starling? Yeah. So, you know, when you make a payment you’ve then got to click where it, where it’s been allocated to on the app. So you, you put a payment that says, right it’s this marketing, this vendor, that accountants, what is it? And you’ve got to click the button on the app to see where it’s being allocated to. I can genuinely see them creating some sort of link with HMRC so that you haven’t got to use Xero or anything like that. You can just do that but whether that happens or not I genuinely don’t know. I genuinely don’t know.

(25:41):

The crucial part for me is that you’ve got to, you’ve got to have accurate records. Now what HMRC have said is that they will not penalise you if you get it wrong. So if you submit something that’s not right, they’ll not penalise you until that year end wrap-up, but HMRC can also fine you. And it’s a legal responsibility. You do this now, or it will be they can fine you £3000 per time for not keeping accurate books and records that’s £12,000 in fines a year. If you’re not actually doing this. I don’t think that’ll happen. But that’s, what’s out there. That’s what’s out there right now. That’s sole traders. It’s been kicked back. The start date. The official start date is 2024. The official start date was 2023. And basically anybody that had a year end from this point to that point would be onboarded at different during that 12 month period.

(26:46):

Now what the new legislation, what new rules have told us last week, I think it was last Thursday, is that the official start date is 2024. I means that instead of having all of these clients coming in at different months, everyone’s off from a standing start on the same day, that’s even worse in my opinion. It’s even worse. So expect communication from your accountants. Those that are Valued clients on the call, you will be getting communications from us. We’re now sitting as a team thinking right. What can we do? What is the best way? Because genuinely Catherine, others, I don’t want to charge you four times as much and blame the government and say, we’ve got to do four times as much work. No, it’s not going to happen. It’s not right. Yeah. It is going to involve price rises, because software, for example, Xero’s just put their prices up by 10%.

(27:44):

So it will involve some price rises. However, find the right software, find the right accountants and speak to the accountant, just to find out what their plan is for make tax digital. As I say, at Valued, we’ve just said about about three weeks ago, we set up a, like a working committee to come up with what our plan is, because we don’t want to just go out and scare clients. We want to have a plan that is going to get us through to 2024. And right now we’ve put on a final number of clients that it is an issue for.

(28:16):

Lucinda, you’re bang on right there, you’re bang on right there. It is mad that I’m only making just over £10,000 and suddenly have to have a professional I can’t really afford. You don’t have to. You can still do it yourself. Yeah. There’s still no rules to have an accountant. So you can still do it yourself, but you’ve got to have digital software. So either digital, which is Excel or Xero QuickBooks, Sage, something like that. Right. Other things that we’ve got in there.

(28:52):

Observation, Marsha, it’ll mean major issues for the, those on universal credits. I think it will. And I’m not quite sure how that’s going to link whether the universal credits see what there is going to be every quarter and adjust it. I don’t think they can do that. I genuinely don’t think we can do that, but we don’t know yet. Catherine, Xero’s fab and easy, even for a dummy like me. Don’t put yourself down at all. What Xero is, is easy to use in my opinion. I do my accounts on an Excel document. Is this digital Jennifer? Yes, it is. But there is hundreds, thousands, millions of Excel documents out there. You’ve got to make sure it ties in. It’s got to tie in. So I would probably move across to a standard document for that.

(29:44):

If we can, let me just bring Marsha back into the room. I think that was it for the questions on there. Yeah. Okay. Spot on, right? Catherine sorry. I missed one out there. Liza, pricing product for recent retail. Not quite sure what the question was around that. Suzanne, have you got any idea what the question was?

(30:18):

That was the only thing that, the only bit that came through. Yeah. let’s I’ll cover pricing in a minute if that’s all right. Let’s move on to Catherine’s question. What are the advantages of becoming a limited company versus sole trader? Do you need to hit a certain turnover threshold, Catherine, are you OK here with, with what I said before there. Yeah. Brilliant. Okay.

(30:40):

So pricing, let’s just do a little exercise on pricing. I’ve got one, I never have a watch these days. I’ve always got my Fitbit. It’s right in front of me, my watch, right? Some of you may have seen me do this in the past. It’s a nice watch. It’s a Citizen EcoDrive watch. No one’s going to insult me, but put in the chat how much you would pay for that watch at a car boot sale, please.

(31:16):

Don’t think about it. Just stick a figure in, just a rough idea.

(31:32):

Hundred quid? Tight Scott, thirty quid. 20 quid. Oh God. It’s going down. I think some of us have done this on Let’s Talk About Money. Yes, I think you’re probably right. How much, we’ll cut to the end. How much would you actually pay in Harrods for this watch? Hundreds, hundreds, and hundreds and hundreds. It’s exactly the same watch, right? The person that has the biggest problem with your price is you, as business owners. The person who has the biggest problem with your price is you. The person that has the biggest problem with Valued price is me, because what you always think is, oh, I can’t charge that. I was brought up a fair day’s work for a fair days pay.

(32:19):

Come up with your pricing, come up with a price that works. There’s a couple of strategies you can do around that. But come up with some pricing that works and test it in the market, find out what your competitors are charging. Don’t have a race to the bottom. Don’t jump all over Groupon. Choose to be cheapest. Choose to get share, come up with what your price is, what your real price is. How do you actually do that? Identify what your costs are as a business, identify what it costs to actually make that watch and then add your margin on to it.

(32:54):

How often did we all walk in? I’m just going to use a Pandora jewellery shop just because it’s on jewellery. How often do you walk in or Pandora jewellery shop? And say, you know that charm that’s there for 40 quid. I only want to pay 20. How often do we go into Miller & Carter or any restaurant and say, you know that steak that’s down for 30 quid? I only want to pay a tenner. We don’t, do we?

(33:18):

So what we should do is we should know our price. We should make clear to businesses that we are interacting with, this is our price. This is what you get for this price, but this is our price. The difference between the car boot sale and Harrods, the service. That’s fundamentally the biggest difference. 68% of people leave businesses because of think or perceived indifference. 5% of customers leave businesses because of price, 68% leave because you don’t care about them. 5% leave because of price, focus on the 68.

(34:06):

To me, if you’ve got your price, if you’re fair with people, if you’ve got a reason that you price and stick with it, we’ve got some clients that we’ve worked with and now charge extra money, right? I’ve got one which is a design agency, the design agency, as soon as they got a bit of paper in, they charge £40 admin fee. Just for that bit, a bit of paper to set up the job. That 40 pound became £24,000 a year profit. 40 pounds became £24,000 a year profit by having that as part of their system. No customers complained about it. £24,000 came in. They paid the wage for the person to set up the job system.

(34:55):

So have a think about your business, see what others are charging, but make sure that you’re getting rewarded. If you imagine, if Catherine I can pick on you here, if I was to suddenly forgive me, I don’t know how much you’re paying us a month, I should know, but I don’t. Catherine, how much are you paying us a month? If you don’t mind saying. Right? So £67 a month. So £67 a month, 20% of that goes off to the VAT man. So about £55 comes to Valued. Right, out of the £55, if you use Xero, roughly £20 of it goes off to Xero. We’re actually £40 odd a month, right?

(35:29):

On doing that you’ll never know, never have known in the past that actually we’re not getting £67. We’re getting about £40, right? If I was to charge you £69, would you leave Catherine? If I was to charge you £166, would you leave Catherine?

(36:00):

I would definitely have to consider the options.

(36:05):

Right? But if you imagine we’ve got, so what have I done? I’ve just put two quid on your price. I’m not going to do it really, don’t worry right? But I’ve just put two quid on your price. If you imagine that two quid on the price times by 500 limited companies is a thousand pound a month, extra revenue. Catherine’s not leaving over two quid. She’s probably not leaving over a hundred quid is what you just said there.

(36:32):

Well, it would depend on what other accountants could offer me and I’m quite good with Xero. So I might just do it myself.

(36:40):

Exactly. Well, there’s different levels where you kind of got a couple of quid, nobody argues about. A hundred quid, a hundred percent I’ll be looking around, right? There’s a cut off point there. Find out what the cut off point is because two quid times 500 transactions is a thousand pounds. A thousand pounds, times, 12 months. That’s 12 grand, not bad for two quid, is it?

(37:02):

So break it down into very small numbers and then multiply that. And as soon as you start doing small numbers, multiply by a bigger number, it has a massive effect, massive, massive effect. Okay. Does anybody else have any specific questions around pricing, more than happy to answer any others that you may have?

(37:24):

I’m actually thinking of putting my prices up. And just really an opinion from anyone on the call. Is there an ideal time? I’m thinking like January, cause it’s a new year. Or would it be an April when it’s a new financial year?

(37:44):

We tend to find it easier in April and it’s a less hard pill to swallow, but we work in an industry where it’s necessary. So for example, people’s car breaks down in December. They don’t want me charging more in January for that. So I’m having to take you around, I’m actually in a car at the moment, wrapping a vehicle at the minute. So I’m having to like do it at the same time. I was just going to take you over there, but it’s just maybe not a good idea.

(38:09):

But yeah, they would be in a huff if I charged them more because of Christmas, you know what I mean? People don’t like that Christmas thing. We tend to do our financial planning and what we’re going to do next from February, because also January is that mad month where you don’t know where you’re at and everybody doesn’t know what day is. So we’re in February, you know what I mean?

(38:35):

Yeah.

(38:35):

No, that’s good. That’s good. Good thoughts. Thank you. No one else got opinion on that? Nope. My opinion, today sounds good. Tomorrow sounds all right. If I put your price up in, if I put everybody’s price up in April, I’ll lose a thousand pounds a month between now and April. Why do I want to do that?Because it fits into a financial year? I wouldn’t. Genuinely I’d look at it, have the conversation with customers and just say this is what it is.

(39:19):

I’m realising that at the minute that costs have gone up for me.

(39:24):

100% yes.

(39:24):

I mean, I’m paying on oils to get in a car. I’m paying a third more than I was two months ago, which is insane.

(39:33):

Yeah. If you think, if you think we all, well, a lot of us buy Christmas presents all the stuff coming in from China, from various other places, shipping costs have gone absolutely horrendous, absolutely horrendous. So we’re all going to paying more for Christmas presents. We’ll pay more for shopping now, because all the containers were in the wrong place at the wrong time, the price of shipping just went through the roof. So we are all paying more money than what we did. It’s about the value to me. It’s about explaining the value.

(40:03):

People aren’t going to leave over a couple of pounds. So I would genuinely do that. Someone suggested there Jennifer I would just say it’s a price review. A hundred percent, a hundred percent. We’re actually going through it right now where we’re sending engagement letters to every single client. We’re doing a review for every single client and saying, this is what this is, where we’re at.

(40:28):

So new clients charge them the new price from today, will be my view. Other clients you might have to, they might not, not stomach a full increase on day one but they might stomach something. Let me just give you a guide here. I’ve got a client that’s a really, really good friend of mine. I actually questioned whether they were a really good friend of mine about a year and a year and a half ago. That client, I think I mentioned on the last time we did one of these, they were paying round about £250 a month.

Something like that for their accounts, we’re doing all sorts for them, obviously all sorts. We went off to them and requoted them and I really didn’t want to have the discussion. I put it back a couple of years, but I went off to them and said, oh, it needs to be £750 a month. And I settled on £600. The response from them was, We’ve been waiting for years for you to put the price up, really the person that had the biggest problem with the price was me. Not them, not them. So have the conversation with your customers about the price. You can always say, no, I’m not comfortable putting up that all for Peter, for example, or whoever it might be. Just do the review. Absolutely love the idea of the review.

(41:43):

Right? Was there any other questions? I think we’ve answered the questions that have come in originally there. So has anybody got any other questions they want to ask me?

(41:58):

Hopefully I’ve not scared you too much for making tax digital. Genuinely it’s my honest viewpoint is when I’m talking to other accountants, we’ve got to get the importance of it over to other accountants. I did a webinars, as I said, on Friday and a lot of accountants were basically, it’s been kicked down the road. We’re going to look at it in April next year. We don’t care. A lot of accountants think it’s going to keep on being put down the road further down the road. It’s not, it’s been put back slightly, but the impact’s pretty much the same. If not worse for accountants, for business owners.

(42:33):

The other thing I didn’t mention with making tax digital as well is, and I don’t know how relevant it is, partnerships was meant to be coming in on the same date as well. They’ve now said partnerships will come in the year after. So 2025. Limited companies is meant to be coming in on 2025. I suspect that will probably come in on 2026. I suspect, but there’s no guidance on limited companies for when that will come in. So just because you’re not a sole trader, you will still get caught if you’re a partnership or a limited company there.

(43:04):

Jennifer will, or is there extra bits for CIC, no guidance right now on it. There’s no guidance whatsoever in terms of CICs, right now. I’m sorry, if I do hear anything, I will let you know.

(43:19):

Stephen could I ask you a quick question. Just obviously we’re coming through COVID, the government’s got a massive pitfall to fill in terms of the economy. Is there anything as a small business we should be doing or could be doing because we’re going to get hit somewhere along the line, aren’t we? Is there anything we could be preparing for now in your experience to avoid massive bills in the future?

(43:43):

Yeah, I think it was probably two questions in that bit. I think the first one is, what am I seeing today on a daily basis? What I’m seeing on daily basis is that a lot of businesses have had the COVID grants. They’ve had the rent grants, they’ve had the furlough money, they’re making some money. Yeah. And it is really, really hitting people. So what we’re doing, and what we’re seeing is that like that hairdresser, for example, they’ve made more money. So then making payments on account based on the new increased income amounts for the following year. So that payments in January next year in July next year are higher than what they normally would be.

(44:20):

So go back to the accountants and say, right, my profits were exceptional because of COVID either up or down, this is what it needs to be. Have those discussions with the accountants because I do genuinely believe that next year is going to be a problem in terms of people’s tax bills or the year after.

(44:40):

So if people who had no support, next year their tax drops, year after, whacked in the face, as your tax bill suddenly rises. There are other things on there as well is you’ve got like bounce back loans, start repaying them, when it’s possible, when you can start to repay them. If you haven’t got the money to pay HMRC, pick up the phone, talk to them, they’re heck of a lot more amenable right now to actually helping and supporting businesses.

(45:12):

They’ve started, as of the 1st of October. So a couple of days time they can start winding up petitions again on businesses. I think you’re going to see a lot of businesses start to get wound up again by HMRC because they’re not, they haven’t paid taxes. I think there’s going to be quite a few investigations and I know for a fact there will be investigations into people who’ve taken the self-employed grant and weren’t entitled to it. Especially the fourth and fifth grant.

(45:48):

That is a problem. People may have to start repaying those things back as well. There’s new initiatives coming out from the revenue for accountants, where basically they, they asked the accountants is there a problem with this one? That’s normally telling you we don’t want to open a full inquiry, but have a look at it, get it sorted, pay the tax back and we’ll call it quits. That’s starting to happen.

(46:14):

Well, let’s be honest, furlough finishes in a couple of days. Lots of, of stuff are all happening in the next couple of days. I think just keep an eye on that. The big thing for me is make sure that you’re claiming every expense that you can as a business owner, it’s gotta be wholly and exclusively for the purpose of the business. But how many of us go out, we parked somewhere, we forget to put the parking tickets, the parking receipt in the accounts?

(46:41):

Digital software like Receipt Bank, Dext as it now, is you take a picture of it. You don’t lose that receipt. You put it on some software, make sure you’re capturing. every single thing. Make sure that you get in the timing’s right? So sometimes people may get paid in advance for work. Make sure it falls in the right year. Make sure you have proper conversations with your accountant about what’s actually in the account. Make sure you understand the figures. If you don’t understand them, ask them, just say to the accountant, I don’t know what, what you’re talking about. Right? I would never ever be offended if somebody said that to me and I’d be heartbroken if my team were. We’ve got to make sure that you understand what the figures are because you can actually change those figures on a daily basis.

(47:31):

You’ve got 365 times in a year to make it better or to not screw it up whichever way it’s going. So make sure that you understand the figures. Those would all be the biggest things for me.

(47:45):

Also, sorry, probably bigger than that. Actually I just thought about is if we go back in 19 months, whenever it was, we never expected to have this length of time off. We never expected all these businesses to close. We never expected all the hardship, the hurt, the, the successes of some clients. Some clients have made an absolute fortune. A lot of hospitality, places that we work with now are running on less staff than what they were 19 months ago. Because they found that actually, if they do table service, they’re going to have less staff in the bars. Not everybody because some bars it is stand at the bar type of bars. Some accommodate table service a little bit better.

(48:34):

What am I, what’s the point I’m getting at there? Just look at your business and don’t go back to the way it was pre COVID, if there’s a better way. You can blame COVID for everything. You can say, actually, this is now why I work from home. I work from home because actually I don’t enjoy going to an office every day. I enjoy dropping the girls off at school every day. But I do miss the social side of working in an office. That’s why we do lots of social stuff with the team.

(49:02):

Have a look at what’s happening, where your business is and just don’t force yourself to go back to what it was because everybody else is, you don’t have to do that. The other thing as well, and I talked about it on the Let’s Talk About Money session we did a couple of weeks ago and I did it on Valued Facebook last week. Understand your why. That’s probably the biggest advice I would give any business owner. Understand your why. Why do you do what you do?

(49:31):

How many of us have heard of Simon Sinek Start With A Why? The book that was out there. I think I might have bought it for a few people over the years. There’s another guy out there called Paul Dunn, probably doesn’t mean a lot to many of you. His book, Paul was the, he was like an accountant guru 20 years ago. He’s a very, very well thought person within the industry. I was telling him I was doing a session on the why last week and he said, Just follow this advice and I did and it worked. And what he said is get your phone go, Hey, Siri, voice record. Normally when I do that it actually flashes up Siri. Do voice record and then say Mary had a little lamb. What’s the line that happens after that?

(50:28):

Lucinda’s going to tell me Mary had a little lamb? Yeah?

(50:39):

Its fleece was white as snow.

(50:43):

All right, Peter, when you get up in the morning, the reason you get up in the morning is to, yeah. You may say to go to the toilet, take a shower to get ready to drop the kids off at school. I want to tell you that’s naff. Do it again, right. It took me four times to get mine. And then when you’ve got the reason why you get up in the morning I’d like you to add two words, the reason I get up in the morning is blah, add the two words. So that blah.

(51:28):

Record yourself when you’re doing that, record yourself when you’re doing that. Right, I’ve done that now with probably a dozen clients in the last week, and it’s been amazing the results, because when you actually know why you get up in the morning, what your purpose is, what your why is, it’ll make you get up in the morning with a bit of purpose and a bit of sense.

(51:51):

So when it is cold and it is dark, it’s horrible. You’ve got a reason to be doing that when you’ve got your reason to be doing it because you want to make a better life for your wife and kids. In my case, because I want to experience things, because I want to make a positive impact or make a difference to a positive impact. When you know what your why is, you’re then not deviating.

(52:15):

You’ve got clarity. You can make sure that your pricing fits with your why. You make sure that your pricing is getting you the money that you want to go on those holidays to have that time off, to do whatever you want to do. When you’ve got your why, you then bring the stuff in that’s right for you. When you’ve got the why, you will work with the right customers and you sack the ones off that are useless.

(52:39):

You work with the right suppliers because it’s ethical because it fits with your morals and ethics. When you’ve got the why, work becomes a heck of a lot more fun. To genuinely find your why, have a look at the cash flows, have your purpose for why you’re doing what you’re doing. Make your cash flows around that. Don’t go back to the old way of work. The world changed March, 2020. The world changed forever in the UK.

(53:13):

I feel feel bad Marsha. Marsha just put, we got rid of a member of staff after the Let’s Talk About Money training. I do feel bad about that!

(53:23):

It might be worthwhile mentioning. It’s just one of those things where I looked at it and went, are you making enough money per person? And how much are you costing me to be here? And the young man himself had been here less than six months. Some of the stuff he was doing after we checked it, we were having to redo and he was taking longer than everybody else. So it took twice the length of time and I was having to pay somebody else to do it. Repeatedly. So I spoke to him on the Thursday after your discussion, gave him the Monday off and said, look, have a long weekend off and decide what you want to do. And I got an email on the Monday night, so I didn’t sack him. He decided to leave after that

(54:02):

Because the world changed March, 2020. You probably did him a favour Marsha. Cause he may not have been happy. I’m sure he might find something else.

(54:12):

No, I don’t think it was unhappiness and his partner had another business and every weekend and three evenings a week, he also did that. Getting no time off, he doesn’t particularly want to do her job, but I think that he decided no, I’m not going to stay. And it was quite a shame, but he was spending 30 hours a week on her job and her business.

(54:39):

Yeah, press the reset button. You only press the reset button. So understand your figures, ask the questions. Don’t be frightened to understand your numbers. Genuinely, don’t be frightened to understand your numbers, get some digital software that will help you in the long run. The government’s going to force you to do that in two, three years time, anyway. So you might as well do it now. It’s going to cost you more money. Sorry, not my fault. It’s the government, right?

(55:05):

Find the right software. Don’t go and buy the cheap stuff, right? Because the cheap stuff normally, and I’m generalising here, but this cheap stuff sometimes causes more problems than what it actually solves. We’ve got a few clients that have used various bits of software and it’s an absolute pig to try and solve the accounts out from it to the point of we normally ignore it and just start again. So I would normally stick with Xero, QuickBooks, QuickBooks are the market leaders in my opinion right now. So I’d probably stick with one of them. Was there any other questions?

(55:46):

Thank you for a great session Stephen. We appreciare it.

(55:50):

No problem. Thank you very much. Catherine’s putting that she’s going to increase the price of her initial assessment. Well done, well done, well done. One of the things that we do and Suzanne, you’ve heard me talk about this and Marsha I think you did as well on the last session is part of my why, is to make a positive impact on the world and make a difference, make a positive impact on the world. So one of the things that we do is there is 1, 2, 3, 4, 5, 6, 7, 8, 9 people on this call, we will make a donation through b1g1.com to facilitate some fresh water for people who are not as fortunate for us.

(56:38):

So we will facilitate that. Every single time that we do a live, we make a donation on our behalf just to say, thank you for the opportunity to do this. Thank you, Suzanne. Thank you Mint for the opportunity to do this and it’s our way of saying thank you and giving back every single time that we do a session, we do make a donation on your behalf. So thank you very much for that as well.

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