Without customers your business simply would not exist. Some businesses are so focused on winning new customers that they often neglect to put any effort into retaining the customers they already have! Winning new customers is often far more expensive than retaining existing ones. Winning a new contract may cost time in terms of developing a sales pitch and cash in terms of corporate entertainment in order to win over your target client. By contrast, retaining an existing customer might be as simple as sending them a thank-you card with a voucher enclosed offering 10% off their next purchase!

Businesses constantly strive to grow their client base and to do this they must go out and put time and hard earned money into sales and advertising efforts. It’s during these times that many business people take their eyes off satisfying their current customers and this can lead to customers leaving. Customers of any business generally fall into three categories:

Loyal customers won’t leave for another product or service provider – even if a special offer is put to them. At the very minimum they will give their existing supplier the opportunity to meet or beat the offer. Maintaining loyal customers is an integral part of any business. Over time it has been proven that loyal customers will spend more with you and they will refer new clients on to you.

Satisfied customers are customers who are open to a better offer from the competition. They feel that the product or service they are receiving is on a par with other offerings on the market but they are open to switching to something better (given the right special offer).

Dissatisfied customers are not happy with your product or service. Some will complain, giving you the opportunity to target the customer with client retention measures. However, for every complaint that is received from discontented customers, there will be several who will complain to their friends or publish their complaints online without telling you, These customers must be targeted pre-emptively with customer retention tools.

The goal of any business is to move the customers up along the customer chain. Dissatisfied customers move to the satisfied category, satisfied customers move to the loyal customer category and the business continues to look after the life-blood that is the loyal customer category. Identifying and categorising each customer will take time and effort (hours analysing sales data). However it will be worth the effort if it helps you retain some hard earned clients. 

The programme will restart again sometime after 6 April 2013. Between now and then, it is hoped that HMRC will issue better guidance on what is considered to be an acceptable level of business records, with examples for differenet sizes and types of business. And, of course, it is hoped that such guidance will be agreed and consulted with interest parties beforehand, in particular accountants in practice!

The programme was originally launched in early 2011 with the intention of visiting 50,000 business. this target was revised down to 20,000 but after carrying out only 2,437 business record checks across the UK, HMRC have decided to put this programme on ice. The accountancy profession helped in getting the scheme postponed, with objections raised regarding such visits being used as a fishing expedition and also much disagreement with HMRC regarding what exactly constitutes good records and poor records.

At K Phelan & Company, we will continue to work with our clients to help improve the quality of their business records. Expect to hear more on this topic throughout the rest of this year.

Does your business qualify for the National Insurance holiday scheme? The government are keen to give money back to those businesses who qualify but who have not yet taken advantage of this relief. We can help you get some funds back for your business!

In order to qualify for the scheme, the key conditions are:

1.  Your business started after 22nd June  2010

2.  Your business is located in the UK but outside London and the South East of England

3.  Your employees started with your business for the first time on or after 22nd June 2010

If your business qualifies, you will be entitled to Employers NIC savings of £5,000 per employee, for a period of one year, for the first ten new employees.

Contact us now to find out more!

The Chancellor’s statement provides an update on the government's plans taking into consideration the latest forecasts for the UK economy from the Office for Budget Responsibility (OBR). OBR publish a twice yearly report assessing the UK economy's likely performance over the next five years. The report covers the state of the public finances and assesses whether the government is likely to achieve its goal of balancing the UK's budget within five years.

Within the statement George Osborne conceded that the UK risks falling into recession in the coming months with economic growth forecasted to be 0.7% next year, down from the 2.5% previously predicted by the OBR.

In addition he stated the challenge of cutting Britain's deficit was bigger than previously thought and more savings would be made by restraint in public sector pay.

The following briefing highlights the key points from the statement:

Economy

• OBR 2011 economic forecast revised down to 0.9% from 1.7%
• 2012 forecast revised down to 0.7% from 2.5%
• Economy expected to pick up in 2013, 2014 and 2015, forecast growth at 2.1%, 2.7% and 3%

Public Sector Pay & Pensions

• 1% cap on public sector pay rises for two year after the end of the current freeze next year
• Review into regional pay adjustments
• Rise in state pension to 67 to be brought forward to 2026 from 2034

Education and Families

• £1.2bn extra spending on schools in England
• Half to go to councils for more school places and half for 100 additional free schools
• £50 cut in water bills for families in the south-west of England
• Free childcare places for most deprived two-year-olds in England doubled to 260,000 

Housing

• Mortgage indemnity scheme to help up to 100,000 people buy homes with 5% deposit
• £400m Scheme to kick-start stalled construction projects in England
• 50% discount for social tenants wanting to buy their own homes in England

Transport Costs

• The average rise in regulated rail fares to be capped at 6% - 1% above inflation – in January, rather than the anticipated 8% cap
• Planned 3p fuel duty rise in January to be scrapped.   But duty will go up by 3p in August       

Benefits

• Working age benefits to be increased by 5.2% next year, in line with inflation
• Basic state pension to rise by £5.30 next year to £107.45 per week
• Inflation-linked rise in disability element of tax credits but below-inflation increase in other tax credits

Business & Jobs

• OBR forecast of total public sector job losses up from 400,000 to 710,000
• Credit easing programme to underwrite up to £40bn in low-interest loans to small and medium-sized firms
• £1bn business finance partnership to raise money for medium-sized firms
• Regional Growth regeneration fund to get £1bn in extra funding
• £250m support package for energy-intensive firms, £500m for science
• Business rates holiday relief for small firms extended to April 2013
• New time limits for planning applications
• £1bn ‘youth contract’ to subsidise six-month work placements for 410,000 young people
• Qualifying period for unfair dismissal to be increased from one year to two years from April 2012
• Bank levy to be increased in January

Government Borrowing

• Borrowing forecast increased to £100bn in borrowing over four years
• Borrowing forecast to be £127bn in 2011-12, falling to £120bn, £100bn, £79bn and £53bn in following years
• Debt to GDP ratio to peak at 78% in 2014-5, falling afterwards

Spending

• £5bn new spending over three years, including £1bn for the rail network
• Go-ahead for 35 road and rail projects across England
• Aim to unlock a further £20bn in investment from pension funds

Overseas Aid

• Funding will not exceed 0.7% of total GDP

Subject to the signing of a Ministerial Order, Revenue plan to introduce a new RCT system from 1 January 2012. The new RCT system, while leaving the essentials of the withholding tax intact, fundamentally reforms the way RCT operates and how principals in particular engage with Revenue.

The new system is electronic which means that from 1 January 2012 principals (or their accountant) must engage electronically with Revenue. This requirement is separate from any mandatory efiling requirement. Principals therefore must be registered for Revenue’s Online Services (ROS) to use the new eRCT System.

 Another fundamental change is the introduction of a 20% rate of deduction for subcontractors who are substantially compliant. The principal will be authorised by Revenue to deduct tax at the appropriate rate from each payment to the subcontractor. The rate that is applied to a subcontractor will depend on the subcontractor’s compliance record. In general however, subcontractors who currently qualify for a C2 card will be at the zero rate in the new system, provided they continue to keep their affairs up to date. Most subcontractors currently at 35% will be at the 20% rate in the new system. The 35% rate is being retained for those subcontractors that are unknown to Revenue or who have failed to address serious compliance issues.

Subject to a number of transitional measures applicable in 2012 only, an overview of the changes to take effect from 1 January 2012 is as follows:

Electronic system for RCT principals

All contacts between principals and Revenue will be through a new electronic RCT Service. All principals must be registered for ROS, even if they have previously been given an exempt status from mandatory e-filing, unless they have engaged their accountants to perform all RCT functions in the new system.

 Subcontractors are not required to register for ROS, but if they do, they will be able to view all transactions on their RCT account through the online RCT Service, and avail of 24/7 self service options.

Contract notification

The principal must notify Revenue of each contract through the online RCT Service, providing basic information in relation to the contract. When notified of a contract, Revenue will inform the subcontractor of the details supplied by the principal and will also indicate the subcontractor’s RCT rate.

Payment Notification

The principal must notify Revenue in advance through the RCT Service of each gross payment to be made to each subcontractor. When using the Payment Notification process, the principal will be presented with a list of subcontractors with active contracts; therefore a contract must be notified to Revenue before a Payment Notification can be made.

Deduction Authorisation

Revenue will respond to a Payment Notification with an online Deduction Authorisation which authorises the principal to deduct the tax, if any, from the gross payment notified. The principal must give the subcontractor a copy of the Deduction Authorisation and Revenue will automatically credit the RCT deducted to the subcontractor’s tax record.

If a principal makes a relevant payment to a subcontractor without having notified Revenue of the payment and been issued with a Deduction Authorisation, the principal will be liable for tax at 35% on that payment, together with a penalty of up to €5,000.

Deduction Summary/Returns

After the end of the principal’s return period (monthly or quarterly), Revenue will collate the information from the payment notifications for the period and prepopulate a Deduction Summary which will show details of each payment notified to Revenue in the period. Amendments can be made to the details on the Deduction Summary up to the return filing date. There will be no annual return (currently RCT 35) in the new system.

Subcontractors

Subcontractors will be advised, in advance of 1 January 2012, of the rate which will apply on commencement of the new RCT system. The subcontractor will subsequently be advised of any changes to their RCT rate as determined by Revenue from time to time.

For any further guidance or advice on the new RCT system, please contact our office now!

HMRC will be able to request full details of income declared to mortgage lenders and carry out their own cross-checking. There are often valid reasons for such differences and it will be important to make it clear at the application stage why there may be differences between income declared to your lender and income declared on your tax return.

You should speak to your professional advisor before making a declaration of income to your mortgage lender. If you believe that this is something we can help you with, get in touch with us now!

The prospect for the next few years is one in which the economy will be less dependent on government, with spending to be cut aggressively and with one recent forecast predicting a decade of weakness in consumer spending. Exports and investment in new and innovative products and services have to be the engines of recovery.

The changing nature of the economy presents a whole series of questions for any business:

• Ø       How can it manage its workforce through the peaks and troughs of activity?
• Ø       What finance will it need, short term and to invest?  
• Ø       What are the challenges of entering and maintaining export and / or new markets?
• Ø       How does it develop new and innovative income streams?

There is no ‘one size fits all’ answer to these questions. Different businesses will have different requirements but here are a few tips from quality businesses that have succeeded in past tough times:

Put Your Customers First

For the next few years, arguably more than ever, companies need to understand their customers, be able to respond to their needs and the pressures they are facing. Household income has been squeezed, which some experts predict will continue to be the case until 2013. For most consumer-facing businesses, that means offering value for the customer. The key here is to invest time in understanding your customer spending patterns and their needs.  

Take some time out to research these needs; look at how you satisfy these currently and what you could do to improve your offering. Think of ways you can change the delivery of your product or service.

Simple things like discussing your offering with the customer before providing it, letting them know how things are progressing, calling them up to make sure everything went OK after delivery.

Constant communication with your customers before, during and after the sale is a key factor for successful business in tough times. Ask yourself what you could do to improve this in your business.

Also take time to seek out new revenue streams. Consider rebranding some of your offerings and selling abroad or on the internet. What new income streams are available to you and how can you take advantage of them?

Control Your Costs

Keeping the cash coming is fundamental but so is controlling the rate at which the cash flows out. Take some time to think about your costs and what you could do to improve the way you manage your business. Regular review of targets to actual costs on a monthly basis is paramount to good control of your business.

Look at the way you do things - are there alternatives? Consider alternative suppliers, alternative payment schedules, better use of electronic point of sale, stock management and quality control.

Sit down with your accountant and discuss your strategy for controlling costs and the management of these. Brainstorm how you can do things more quickly and more efficiently and formulate a strategy for the next year.

Manage Your Employees 

One of the biggest costs for firms is the cost of employment. Taking on new staff is expensive, equivalent to fresh investment in the business. Many successful businesses are reviewing the value they get from their employees and are taking time to discuss how they can be more customer focused and efficient in their roles.

Look at alternatives to salary rises, the use of performance related pay and a bonus structure that rewards both good service to customers and increases in sales. Get all employees involved in how the business can improve and do this regularly. 

The Blueprint for Success

There is no single answer but there are some general principles. Be flexible, but also be alert to the dangers. The successful businesses of the future will be fast on their feet but also aware of the risks. They will be lean and efficient. They will be the ones who spot and take advantage of the opportunities that are there. Tough as the outlook appears for the coming years, there will still be plenty of opportunities!

If you know of any trader who should be VAT registered but is not for some reason, please do both them and us a favour by suggesting they meet us for an informal chat. That is not meant to sound ominous – the point is that HMRC have just launched a campaign to target what they reckon is 40,000 businesses whose turnover exceeds the annual VAT threshold of £73,000. 

We can help anyone in that position by making a disclosure before HMRC come knocking on their door, and that should mean a substantial reduction in the penalty level normally charged. Unusually in this form of tax amnesty, HMRC have not said what the reduced penalty level is, but we would always fight hard to get this set at the bare minimum to reflect the particular circumstances of the case.

HMRC are aware of this and the taxman has decided to use the Internet to gather information on possible non-registered businesses. Web robots will act as search programs to extract names, addresses and other key data from websites of trading businesses. This data will then be matched to information held by HMRC to confirm whether or not the business is properly registered for tax purposes.

Businesses that are not properly registered with HMRC could be liable to fines, penalties and possibly more worse depending on the severity of their non-compliance.

If you are self-employed or running your business through a limited company and you are worried that you may have missed a deadline for registering with HMRC, it is vital to address the matter now.

K Phelan & Company are here to help you. Your first consultation will be provided free of charge. We will advise you on what you need to do to ensure your business gets compliant and stays compliant!

Contact us now for your free, no obligation initial consultation.

Consumers of everything from retail products to business services are becoming more and more value conscious as a result of the economic downturn. This has put downward pressure on prices which has resulted in many businesses cutting prices in order to remain competitive and maintain market share.

The customers of your business are in a money-saving mood but they aren’t willing to sacrifice on quality. This presents business owners with a new challenge – to maintain a quality product or service but offer more value to customers at the same time. Your business can take advantage of this focus on quality by minimising price reductions and instead offer more “value added” to customers. Since customers today are more focused on value for money you must make them feel like they have got more “bang for their buck”.

Take a management consultancy firm as an example. Instead of reducing their prices, they could offer more “value added” services free of charge to customers by offering a free 2-hour business strategy health-check. This health check could consist of a review of the current business plan, as well as sales and marketing activities with a report being developed showing the business which areas to focus on throughout the rest of the year.

The customer has now received extra value for the same price that they paid last year. The customer now feels that they have received value for money and the consultancy firm has managed to avoid cutting prices. Therefore the business and the customer benefit from the value-added approach.

As customers have become more focused on the value they receive, more and more businesses have implemented this value added approach. Tesco have done it by offering mobile phone services, car insurance and financial services in store. 3 mobile have done it by offering unlimited data usage plans to mobile phone packages. Now it is your turn to give your customers a little value added extra and avoid cutting your prices at the same time!