We talk about your business

Many first time business owners often have a
hard time adjusting to the things that they need do

Taxes can be hard to understand

Understanding your financials for the whole year can also be difficult.

Reassess your tax payments throughout the year to ensure that you avoid sudden, large obligations.

Make sure that you understand what is required of your business, corporation or LLC.

It is getting easier to stay on top of your finances as there are many apps available on your mobile which could help.

Capitalize on the latest technology and apps, by regularly checking for updates.

It is advisable to focus on financial bureaucracy for at least 15 minutes each week, so that you don’t forget anything

The most important thing is to understand your priorities, so make sure you know what is most urgent or important.

KEEPING YOUR BUSINESS
FINANCES ORGANIZED

It is always a challenge to many business owners to have to
juggle a lot of responsibility in running their venture.

THE FINANCES OF YOUR SMALL BUSINESS

A tax adviser would be able to answer all of you questions. It is useful to ask one for advice, even if you don’t have any questions, as there may be something you have missed. He can tell you what you should and should not be doing, as well as help you to avoid mistakes.

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PROFESSIONAL HELP

Getting professional help can help you to avoid serious mistakes which could damage your business.

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BUSINESS ENTITY

Many small businesses these days start as a partnership or as a single proprietorship and then gradually change.

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TAX PAYMENTS

It is useful to know exactly where you stand, so make sure you always know what your financials are.

LATEST ON OUR BLOG

What can you do to deal with your debts?

So you’re in debt, and you are struggling to manage. It is one of the worst feelings in the world. Not wanting to answer the door, or the phone; too scared to talk about it with your friends and family. It can be a real strain on your mental health.

But you are not alone. There are literally millions of people in the same situation as you, and it is important that you know there are several options available that can help you.

The first thing that people think about is bankruptcy. Even for people who know little about bankruptcy, it is a terrifying prospect that they would rather avoid. Bankruptcy is a legal debt solution, in which a licensed Official Receiver takes control of your assets, and your finances, to pay off as much of your debt as possible. This means they can take money from your wages, your benefits and sell your property.

What many people don’t know is that there are a number of other debt solutions available for people struggling with their debts:

Debt Management Plans

Debt Management’ is a phrase that a lot of people know, but few really understand what it means. Essentially, it involves negotiating with your creditors to lower the amount that you are paying each month. If you are lucky, they will agree to freeze your interest as well. This means that you can agree on a monthly payment that you can actually afford, and pay off the full amount over a longer period of time.

However, this is not a legal solution, and so creditors are not required to stick to it. It can also take a very long time to clear the debt, which will prevent you from being able to start fresh with your finances.

Individual Voluntary Arrangements

For a more legally binding arrangement when you have over £6000 of debt to more than one creditor, an Individual Voluntary Arrangement, or IVA, may be more suitable for your situation. An IVA will allow you to consolidate your unsecured debts into one affordable monthly payment, paid to a licensed Insolvency Practitioner, who will redistribute the money amongst your creditors. Legally, your creditors will no longer be able to contact you.

The amount of the affordable monthly payment will be based on your genuine income and expenditure, and you will pay this for only 5 or 6 years. After this time, your remaining debts are written off. Unlike bankruptcy, you will not be required to sell your home. However, if it has any equity, then you may be asked to mortgage it to pay your creditors. You could opt for an extra year of payment instead, however.

Debt Consolidation Loans

This is another way to consolidate your loans into one payment, so that you have only one creditor and only one payment to make. Debt Consolidation Loans are not legal solutions, but are initiated and managed by you. You take out another loan, and use it to pay off all your debts, and then repay that loan.

So if you have three loans: one of £500, one £3000, and one £1500. You take out a loan of £5000 to pay off each of those loans. Then you pay back the £5000.

This can be beneficial because large loans often come with smaller interest rates. However, if your credit score is already very poor, this benefit may not apply to you.

If your debts are small enough to be covered by a credit card, you can manually freeze your interest for a limited period of time by using a 0% interest credit card to pay off your debts. However, be aware that after this period of time, the interest rates will be very high, so you should be confident that you can pay them off in that period of time.

Debt Relief Order

Another solution is a Debt Relief Order, or DRO. This is a legal solution for people with less than £20,000 of debt and who have less than £50 in surplus income every month, and assets worth less than £1000. Unfortunately, this is not a lot of people, and the process costs £90.

If you meet those eligibility criteria, then the DRO is a great solution. Your application is submitted by your DRO advisor, and once it is successful, your debts are frozen and you don’t have to make any payments for a whole year.

After a year, if your circumstances have not changed, then your debts are written off. This means if your income has not improved, or your essential expenditure has not reduced, you can become debt free.

However, DROs are only applicable to unsecured debts, you cannot use a DRO on car loans, mortgages or tax arrears.

Your Options

Here at PRS Update, we understand how it feels to let your money worries dominate your life, but, as you can see, you have many options to consider if you are in debt, and there is bound to be something that suits your situation. So, don’t let yourself worry too much, and don’t let your creditors scare you – you’re going to be alright.

The personal finance guide for self-employed workers

There are more people than ever before registering as self-employed and tackling the working world alone – 1 in 6 at last count.

While you might have your area of work mastered, your book keeping down to a fine art and your tax returns worked out – there are some less immediately pressing issues that you still need to spend time thinking about.

Top of this list is your personal finance. You’re not in a position to just collect and present payslips anymore – so what do you do instead? How do you handle all those things that payslips or your employer had covered before?

We’ll take you through the major financial considerations you’ll have as a self-employed worker.

  1. Get insured

Although you might have welcomed breaking out of the 9-5 grind and making the most of your time as the boss – your enjoyment will quickly become despair if you lose the ability to work and cannot provide the financial support you need.

When you work for an employer you’re surrounded by a lot of things that stop you suffering if you can’t work – sick pay, phased return schemes and even health and safety law – but now you’re in charge of those things, and there’s little you’re going to be able to do if you just can’t bring the money in.

Fortunately, there are a variety of insurance products that are available for self-employed workers, each covering slightly different circumstances.

  • Income protection

An income protection scheme is tailored around your role and your level of earning. If you are unable to work through illness or injury this type of policy will pay out a regular amount of money that will keep you, your personal life and your business afloat.

Just because you’re self-employed it doesn’t mean that your costs drop off if you’re not working, there are plenty of payments that are likely to need keeping up with – including car or van lease, finance costs, professional accreditations, start-up loans – and much more. Income protection means you can recover properly before getting working again.

  • Critical illness cover

If you’re diagnosed with a critical illness while self-employed a policy of this type will pay you a lump sum – allowing you to handle business for a prolonged period of time while you recuperate.

Critical illness is unlikely to cover for smaller injuries and illnesses though – so make sure you’re covered for all eventualities.

  • Life insurance

Clearly, no one anticipates needing life cover when being self-employed – but it’s these unexpected and unlikely occurrences that life insurance is there for.

If you have a family and significant financial commitments, having cover in place in case of the worst is really important – as it can let loved ones cope with your illness or passing without the additional stress and upset of dealing with increased financial burdens.

  1. Get a pension – and cover your state pension

A good pension scheme is a major benefit of working for an employer but when you become self-employed the responsibility is all yours when it comes to thinking about the future.

Self-employed workers can choose between three different types of pension:

  • Stakeholder pensions
  • Personal pensions
  • Self-invested personal pensions

The type that’s right for you depends on your personal circumstances and how you will organise your business going forward – so it’s worth talking to an accredited pensions advisor about finding the right type for you.

Whichever kind you choose, it’s worth working in a way that resembles that of an employed worker – i.e. paying in an amount each month that you can budget for with your normal book keeping and financial management. That doesn’t mean that you can’t top up further down the line though – being self-employed gives you some flexibility if your income is less predictable.

It’s important not to forget about your state pension as a self-employed worker too. You’re still expected to pay your National Insurance contributions (NICs) – and must have done so for 35 years to benefit from the relatively new flat-rate state pension.

Employees pay ‘Class 1’ contributions – whereas self-employed workers pay a fixed amount of ‘Class 2’ contributions along with ‘Class 4’ contributions – which are based on profits. Both need to be kept up – but all add up to the same level of pension contribution. If you ever find yourself falling short – you can always top up.

You can pay up to £40,000 into a pension annually – and the lifetime limit is £1m. The HMRC’s “carry forward rule” also means that you can use the past 3 year’s contribution limits too – which is especially useful if funds have been tight as getting your self-employed business of the ground began.

  1. Finding a mortgage

It used to be that mortgages for self-employed people were very hard to come by – lenders often considered self-employed workers a less attractive and less reliable prospect for repayment, meaning that when mortgages were available, they were often at increased cost.

Then, the advent of self-certification mortgages saw this turn around – mortgages for people who were not traditionally employed were given on an ‘affordability’ basis – meaning that if you could demonstrate the means to pay – you could get a mortgage. It wasn’t long before this was seen as irresponsible lending though, and after the financial crash of 2008, self-certification mortgages were banned.

Fast forward to 2017 and lenders are becoming more comfortable offering mortgages to the self-employed – and since there’s been such an increase in numbers, self-employed people are now seen as a legitimate area of the market – and not just an exception from the norm.

If you’re hoping to secure a mortgage, there are some basics you’ll want to cover – having a minimum of 1 years filed accounts is important, with 2-3 being even more ideal. What’s more, mortgage providers are concentrating more on your field of work – rather than your employer, so if you’re working in the same industry – just with a different approach to how you’re paid – you stand a better chance of hitting the eligibility criteria.

Balancing Building Your Business and Your Life

Those of us who have tried to run a business know how much it takes a toll on your life. In our previous jobs, if we had them, we had clearly defined hours, and clearly defined projects. Tasks would have a beginning, middle and end, and you would work 9 to 5 to achieve them. But when you are running a business, it feels like there is always something you could do more of.

You could do more fundraising, you could do more promotion, you could do more networking; and why not start a little earlier, at 8am or 7am, to get as much done as possible? You can’t really just stop what you are doing at 5pm, either, so why not work a little longer – just until you’ve really achieved as much as is physically possible in the day? You are just being the best that you can be, right? If you don’t, you might not be a success, right?

Wrong. Your personal life is just as important as your work life, no matter what stage your business is at. Here are just a few reasons that it is just as important to have a personal life as a work life:

  1. Your Mental Health: being a work-a-holic can burn you out, and make you more prone to anxiety, depression, and all sorts of negative side effects that, while obviously damaging you personally, could also damage you professionally in the long term. If you ignore these problems, they are likely to get worse until the only way to get better is to stop working altogether.
  2. Similarly, some of your best ideas can happen when you are relaxed. Let your mind rest, and you might dream up a fantastic solution when you least expect it. A rested mind is an active mind.
  3. At the end of the day, you need to ask yourself ‘what are you doing it all for?’. There is nothing wrong with the answer being ‘for me’, ‘for the excitement’, or even, ‘for the customers who need my service/product/idea’. But most entrepreneurs will agree that they also do it for their loved ones. However, if the cost of earning money as an entrepreneur means you don’t spend any time with them – maybe the cost is too high.
  4. Finally, your mentality can affect your employees. Even if you decide that you don’t need a personal life, that doesn’t mean your employees aren’t entitled to one. Sometimes, bosses who mean well can accidentally promote a culture of constant overtime, just because they are the ones who set the pace and culture of the office. As well as being a bit mean, this can demotivate your staff and tire them out, making them less able to work efficiently.

Clearly, working that hard isn’t worth it. You are sacrificing yourself, your loved ones and your employees.

It can often feel very unnatural to let go and work less, when it is something you are so passionate about, but, although you may have forgotten it, the biggest and best advantage to running your own business (and more than likely the reason you wanted to do it in the beginning) is that you are your own boss, and you have complete control of your life. This means it is actually quite easy to recapture control of your life, but how can you go about doing it?

  1. Get used to writing out what work is essential, what work is very helpful, and what work is just a nice idea; or in other words, what you SHOULD do, what you COULD do, and what you WOULD do (if you had more time).
  2. Concentrate on the first two categories, and, if you can, try to plan doing one aspect of the third as a slow, long-term project. You can’t do everything at once – and you also probably shouldn’t.
  3. Then find your own equivalent of 9 to 5, which suits you. Maybe ask your loved ones when is best – you could time it to work around dropping your kids off at school, or always being able to make Friday date-night. But the most important thing to do is: stick to it!
  4. If you are finding that you need more time than that just to do the absolute bare minimum of what is necessary – then you may need some serious restructuring within the company. Delegate parts of your job to employees, or, if you can, create a whole new role to share the load with. If you are still at a ‘work-alone-from-home’ stage, consider cutting back on some of your aims, or pushing back their deadlines, so that you can cope working less hours.
  5. If you are struggling to let go of the long-term ‘would’ projects – make it your number one goal to build your company until you are able to hire someone to delegate all the ‘should’ tasks to – a Chief Operations Officer. Once you have done that, you can use all your time to work on ‘could’ and ‘would’ projects. This also means you are training someone up who could take on your role, should you ever decide to retire.

However you decide to do it, it is important that you have a work-life balance, even if the weight of the world is on your shoulders. If not for yourself, then for all the people who care about you, worry about you, and depend on you.

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Effectively Organizing the Finances of Your Small Business

Get professional help for taxes

It is always hard for one to figure out on his own how much it is that he is supposed to pay as far as taxes go. It can get pretty complicated easily. So, instead of wasting time trying to figure things out on your own, what you can do instead is call a professional to assist you. A tax adviser would be a really good person to call who can offer you guidance and answers to many things that you have questions of. He can offer you what you should and should not be doing as well as ensure that mistakes are prevented moving forward.

Re-evaluate your business entity

Many small businesses these days start as a partnership or as a single proprietorship and then gradually change to a different structure as they progress and grow. This is why it may be best for you to consider forming or incorporating LLC to make sure that you are better protected against financial risks. This is also effective at saving you on taxes.
If you are considering this, make sure to talk to your accountant or your lawyer on the numerous legal entities that you can go for. Then, determine which one would be most appropriate and practical for your business.

Review the estimated tax payments

It is important to review the finances of your business to make sure that you get an idea where you presently stand. It is a good idea to get a forecast of what the business’ financials are going to be for the entire year as well. It is important to get estimated tax payments to be reassessed drug the year to ensure that you can avoid large obligations on taxes as well as penalties.

Personal and business finances must be separated

It is important to take appropriate steps in ensuring that your finances and that of your business are duly separated. While this is something that is required for businesses that are corporations or are tagged as LLC are required to do this, this is not something that is required of them if they have the business under sole proprietorship. This is why this needs to be something that businesses need to put a ton of effort on.

Use mobile apps for organizing finances

There are a ton of apps these days that can be used on the mobile phone that will make it easier for you to keep track of where things are and how they stand where your finances are concerned. It is advised that you check out what these apps are and try to capitalize on them as much as you can.

Keep track of your financial goals

You can do a weekly tracking of your financial goals. In fact, it is a good idea to devote to least 15 minutes every week to allow you to get your business finances properly organized. It is all about getting it know your priorities. So, make it a point to take the necessary steps to be always ahead of your financial standing. Nothing will surprise you anymore when you have taken enough time to ensure that things truly are in proper order.

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