And one topic that’s constantly on entrepreneurs’ minds is funding. It is something we are asked about a lot.

Developing a great business takes commitment, diligence, patience and in most cases, a good deal of money. Navigating the tricky waters of patenting your IP, and establishing your market can be expensive and finding and securing the financial resources that will allow you to focus on business growth is critical.

That is why we are delighted to work with Quick Start Consulting. We met as part of the Kickstarter programme and were referred to Hannah and her team.

Along with the other 84,757, Quick Start (QS) Consulting was also founded at the start of 2020 and is on a mission to help start-ups and early-growth stage businesses raise capital without having to give up their equity, or move too quickly for VC or Angel investment. They have significant experience of navigating the grant funding ecosystem and can effectively fill the skills gap so often found in start-ups of how to find and convert equity-free fundraising to accelerate early-stage R&D.

They specialise in helping SME businesses in the innovation, technology, sustainability, health and engineering sectors grow. They are good too, with a recent 96% success rate in Q4 of 2020. Their average grant funds come in at around £300,000 for a 12 month funding period. So whether it is a funding stream, a consortium of backers or growth partners your business needs, they can deliver a solution.

With more than 250 grants available, which change almost every week, ranging from £100,000 to £2.5m part of what QS offers is a level of upfront labour-intensive wrap around support upfront to get your project funded. They specialise in open brief funds which are for any innovation in any sector and give tailored advice on closed-brief, industry-specific grants, meaning they target their approach to find the funds designed specifically for your industry. They can spot the low hanging fruit and this level of due diligence means they can advise business owners accurately of their suitability for grants.

They work with clients across the UK, Europe and the US, matching clients with government funding, trusts and foundations, European funding, NIHR, accelerators and ITTs. If you have a new App, a design for new type of electric vehicle or medical device, then Quick Start Consulting are particularly interested in technology that disrupts industry, creates a new paradigm for thinking, prioritises sustainability or accelerates environmental innovation.

Does this sound like your business idea for 2021?

Of course, having a letter of intent from a retailer or manufacturer to validate your business idea is a wonderful position to be in. At Cypher, we work with a number of innovative businesses in the Oxfordshire area, but if you have a patent or an innovation that is protectable, or a product that is technically disruptive or unique, or you have great experience within the sector you are trying to penetrate, then Quick Start Consulting could be a great introduction for you.

A viable Covid vaccine has been developed and is available this month and this news alone will give people hope and confidence to return to whatever their new version of normal is. Personally, and professionally people will be ready to bounce back and we want to offer them a platform to accelerate this process.

At Cypher, we are delighted to announce the launch of the new OX100 Business Accelerator Programme.

One thing this year has surely shown us is that it’s almost impossible for business owners to create monumental success by themselves. Too often we make the mistake of thinking we can do everything on our own, without consulting those who have maybe been there, done that, got the t-shirt. It can truly be a recipe for disaster.

Still, many business owners believe that they can’t afford to invest in coaching, mentorship or sound financial advice. That it would be a waste of time or that no one is going to understand their vision as well as they do. But surely, the success of any empire is contingent upon the willingness to learn from the mistakes and achievements of those that went before. It’s simply a fact that if you want to build your own castle, first you see how others have made theirs stand the test of time.

Starting in January 2021, for £100 a month, the new OX100 Accelerator Programme will offer 100 local businesses just this kind of support. With regular business coaching, financial advice, and access to sales, marketing and legal experts, supported by quarterly masterclasses in key business growth areas it is designed help local business owners implement the right tools, techniques and mindset to drive high revenue growth through their existing business.

The programme lasts for 12 months meaning business owners can really focus on getting results using a set of highly effective tools to identify gaps in their business, evaluate risks and create a business model that stands-up to the scrutiny of potential investors, partners and customers.

Working directly with high-growth potential businesses and helping them to thrive will in turn support the local region to thrive as it drives new business, creates new jobs and in turn provides a real boost to the local economy.

At this stage, we have to be clear that while no financial investment will be offered to any businesses taking part in this programme, this, we hope is far outweighed by the measureable, tangible benefits of being part of a business acceleration programme that is designed to help business owners grow their business and in turn grow their wealth.

The Programme – in a nutshell

The curated curriculum guides business owners through some of the key elements of a business growth strategy, helping them develop sustainable practices, robust plans while also helping them to navigate through common challenges to avoid pitfalls. The programme consists of a number of interdependent elements, pieced together to accelerate business growth and development and includes:

• Interactive virtual sessions on topics essential for business improvements and growth lead by industry experts
• A structured environment and curriculum designed to help a business owner keep focus and grow in the right direction.
• Intensive masterclasses with subject matter and industry experts
• Collaborative and supportive community of like-minded business owners
• Access to coaching, financial expertise and peer to peer networking that can help accelerate your business
• inspiring talks, targeted training and workshops to ultimately help you evolve, change and grow

Who’s it for

This programme is designed to help business owners in any sector with a proven sales record, who want to expand beyond their current revenue streams. The OX100 programme is a largely ‘virtual’ business accelerator, which, other than for tailored, quarterly masterclasses does not require a physical space. Instead we will focuses solely on providing services, such as coaching, financial advice and access to sales, marketing and legal expertise remotely.

We are creating the type of community that most business owners crave. It can be a lonely endeavour to build and grow a business, so we hope that the ability to connect with others who are in the same place and learn from experts will not only improve emotional and business health but can build a collective strength that increases the chances of regional success.

As anyone who has started a company can attest, your cash position can be extremely tight as a start-up. Whether you have significant financial backing, are crowd-funding or using a redundancy package, you must make sure that your understanding of the company’s finances is second to none. If you don’t have a keen eye on expenditure and credit control and haven’t accounted for unexpected costs, you can surely expect your company to run out of money very fast.

Here are top five tips to ensuring your business maintains a healthy cash position:

1. Bill on time- every time: This sounds so simple, but can catch so many new business owners out. If, after completing an agreed service or piece of work, you don’t send your invoice for a few weeks and then your client delays payment by a few days, the compound delay can be very damaging to your cash flow position, especially if you have fixed costs, and fixed payment dates of your own to hit. This lackadaisical approach to manual billing can also make keeping track of what is due in and going out harder.
2. Automate your invoice system: Digital Accounting Software like Xero allows you to automate your invoice system. By using the Go Cardless plug in, your clients can sign up to a Direct Debit, which guarantees that they will pay on the same day each month. For transparency, at Cypher, we operate a monthly retainer model; all of our clients pay us a flat monthly fee and this gives them full access to the team, whenever they want. If you use Xero and connect your system up to Stripe, for example, then you can take payments from a card, via your phone instantly. This is something that a lot of our trade clients have found invaluable.
3. Agree suitable payment terms: Agreeing enforcing your payment terms, in line with your other business costs will ensure you receive prompt payment and can cover your regular outgoings. Late payers can cause a great deal of distress to businesses of all sizes, but it is SMEs that can be hardest hit. Late payment adds a layer of uncertainty and can cause the kind of cash flow crisis that we could all do without. The first step is to determine the level of risk on payments you can take as a business. If the answer is ‘none at all’ then payment in advance is the solution. This can restrict your market somewhat, especially in the B2B world where companies often expect to pay on account, but many service-based businesses do bill for time ‘bought’ in advance.
   For some, billing in stages works best. But if you adopt this approach, i.e. 25% deposit or 50% in advance and 50% in completion, then you should ensure that your initial payments covers the costs of any outlay on materials or the cost of actually producing the project. Also, try not to leave too high an amount due for payment at the end of a job, it can be tricky to collect, possibly because clients see that as your profit element and were more blasé about paying. Try instead to recoup as much or your own expenditure as possible, in advance as this will improve your cash collection and cash flow immensely.
4. Chase Bills before the payment date: If you don’t have a regular direct debit system in place and have agreed a suitable payment term, let’s say 30 days, then sending a client a reminder after say 25 days, suggesting payment is due the following week, while simultaneously thanking them for the work is a great way to ensure they pay on time.
5. Use a cash flow forecast to plan effectively: A cash flow forecast is critical to give you the visibility of what’s coming so that you can plan. We always offer clients a detailed cash flow forecast and maintain it throughout the year. In general, it is really important to get someone who understands figures to keep an eye on cash and profit But if you are fundamentally scared of your bookkeeping practices then you should seriously consider outsourcing it immediately and let someone take care of it for you.

In a crisis, cash is king! Remember, no matter what your turnover is, if your cash flow is negative, then your business doesn’t stand a chance.

It was a virtual event and I enjoyed a ‘fireside chat’ with a representative of Fathom, who provide our state-of-the-art business performance and planning software. Out topic was called ‘Advisory Rebooted’ and was designed for us to discuss, moving forward, the way accountants should package and offer this value-add service to their clients.

There are many advisory services; including cash flow forecasting, revenue projections for future planning, and budgets vs. actual reviews. These services are usually bundled up and sold as an additional service, typically on a quarterly basis. But rather than get into specific details of what is or isn’t offered in this service, instead we discussed a new approach to how these services are offered and how clients can benefit from this change of focus.

For transparency, at Cypher, we operate a monthly retainer model; all of our clients pay us a flat monthly fee and this gives them full access to the team, whenever they want. Some months clients will speak to us a lot – and get a lot for their money- but some months they are happy and just check in for ten minutes at a time and the investment from our side evens out. We have shifted our focus away from ensuring someone had done an hour of billable time and that have made money from it, because, trust me, that’s not what our clients want.

In general, we have seen a shift away from the need for a big advisory product. Now our quarterly client meetings aren’t driven by the quarterly reporting pack, but rather our advisory services are built in, throughout the quarter and clients are drip fed their information in a timely manner. It still acts as a driver for other services; let’s say, for example, that a client is about to buy another restaurant or take the lease on another office space, this still requires a cash flow forecast and a business plan and some KPIs, so we focus on building that pack and then delivering it.

The value for our clients is that they can speak to us for 30 minutes a day, every day, in the weeks leading up to the purchase, which makes them feel comfortable. And this isn’t about the nuts and bolts of the purchase, this is for things like ‘have you got the till set up?’, ‘how are you recruiting?’, ‘will you take out a loan from the brewery, or a corporate finance company or are there better products on the market?’

It’s a softer form of advisory, but it suits us and our clients because we wrap it up in one fee. If we were charging for it by the hour, then it would be much less attractive and much harder to sell. You don’t want to ambush your client with a different bill every month for the ad-hoc 45 minutes here and there.

As we all know, potentially the UK is on the brink of another nationwide lockdown or firebreak. It’s important that as a business- and a sector- we learn our lessons from lockdown part 1 and adapt accordingly. As a team we decided that when we came out of the first lockdown if we had the same level of clients, paying us the same level of monthly fees, with no-one dropping out, that would be a considerable win. So we made sure that during those initial weeks we gave all of our clients what we called ‘Lifeboat calls’ and just made sure that each business owner knew their options, understood the support that was on offer and that we were available for them.

In fact, we experienced a 60% growth in client business and took on more business in that time than we had during the previous half of the year. The reason cited by almost every new business was the same; we were visible and were there for our clients, whereas their current accountants were not. They just didn’t get any contact from them at a time when perhaps they needed it most.

After that initial period we realised that we were getting quite a lot of emails requesting a ten minute call with member of the team. So as a result of these early efforts, now two hours a day is blocked out in our diaries. If a client calls in the morning, we know can fit them in by the afternoon of the next day. The whole point of offering a ‘you can get hold of us anytime service’ is that clients can actually get hold of us. It falls down if we don’t have any time to actually get back to them.   Business owners, if they have a problem with something, are used to calling someone and getting it resolved very quickly, accountancy needs to be like that.

To facilitate this instant feedback, we have also changed some of our channels of communication. We have a number of clients on our Slack system and many choose to WhatsApp us on a regular basis – even with gifs. We created the WhatsApp group initially so that during early lockdown, when so much new and complex information was being circulated, we could create videos that acted like a daily briefing and explained the impact for small businesses. We wanted to get ourselves out there, get in front of as many businesses as we could and offer up to date, accurate advice. WhatsApp seemed the most suitable way of doing this.

Typically, the WhatsApp chat it is more informal; it is for one line questions that require a single word or one-line answer, it’s not for a big tax advisory report. The feedback we get from clients is that if your clients can’t get hold of you then they will go elsewhere. A lot of bad will has been generated in lockdown when business owners couldn’t get hold of their accountants or support services when they needed them most. You have to be able to put your arm around your clients, or someone else will.

There are certain clients of course, that still take a scheduled, quarterly meeting with us, but there needs to be an absolute reason to use this model. If the calls are about something small that we can advise on immediately then we wouldn’t look to schedule further meetings unnecessarily. For clients that are growing or pivoting into something else, then the quarterly meeting is still core to their support, but every client gets a base line level of advisory service that they can understand and that they can buy into.

Digital Accounting Software like Xero allows for real time feedback and assessment on a business’s figures, performance and cash flow. We are simply changing our business model to offer an advisory service and level of human interaction to match. Now we are where our clients are, whether this is on Slack, WhatsApp or Facebook Messenger. The chat is less formal and it allows for an instant response, even if we can’t solve the problem there and then. Rather than set up an email and start to type a ‘Dear client’ note, it moves quickly and questions can be answered quicker, which reflects the relationship we have with clients. We see ourselves as more a friend in the phonebook than a big expensive corporate accountant.

The Chancellor of the Exchequer, Rishi Sunak, launched the scheme in a bid to help hundreds of thousands of youngsters across the UK into work. But there was a catch – to qualify for funding, businesses had to be able to offer a minimum of 30 placements. As most of the businesses in Oxfordshire- and certainly amongst our client base -are SMEs this meant there was a real possibility that businesses and young people locally would miss out on the scheme altogether.

We think that the Kickstart scheme represents a fantastic opportunity for local businesses to develop young talent and fuel the Oxfordshire economy and following a bit of research, we discovered that the solution was to set ourselves up as a facilitator and manage the process collectively on behalf of several firms.

We shared this idea with our clients and wider network and the response has been phenomenal. So, this month, Cypher has stepped up and created an umbrella organisation to enable multiple local firms to unite and access funding and create jobs to enable young people in Oxfordshire to launch their careers utilising the Government’s Kickstart programme.

So far, we have been really pleased to see so many people pulling together to make it work locally. Already a number of our clients have signed up to offer jobs in sectors including property, hospitality, accountancy, law, and various trades. Here at Cypher we are also taking part and will be offering a trainee accountant role.

Via the KickStart scheme, companies receive 100% of an employee’s pay at the age-related national minimum wage to cover 25 hours per week, as well as a one-off grant of £1,500 to cover National Insurance and pension contributions. The whole scheme is a win, win for everybody.

It means that employers can source ambitious young people and train them with the safety net of the first six months fully funded with no obligations to continue. It means local young people can receive the help they deserve at such a challenging time to get their feet on the career ladder.

As part of our commitment to this programme, the team at Cypher, will gather all the jobs and company information from each firm and manage online applications to the Department for Work and Pensions. You’re welcome!

There’s probably never been a wide-spread situation where people are joining professional services firms from being on Universal Credit. It’s unprecedented, but we feel that young people locally deserve a break and small business deserve the backing to support them

This new system will see 2s and 7s in the number plate throughout the 2020 decade. It is a time that many business owners will be considering upgrading or changing their car. Up until recently, if you’d asked your accountant if you should buy a car through your business, the answer would almost always have been no, because the Benefit in Kind tax you would pay to run that car through your company would far outweigh any tax relief you got on the vehicle.

However, that all changed quite recently, and we are now in a position where, if you buy an electric car, then the benefit in kind tax is zero percent. And as anyone with even rudimentary maths can tell you, zero percent of anything is zero! Last month, I got to drive a Jaguar i-pace, Jaguar’s first all-electric model and winner of an incredible 62 awards, including an unprecedented treble of World Car of the Year Awards. It boasts the best part of 400 horsepower and some 513 lbs of torque, which means it can get from 0-60 in under 5 seconds with a top speed of just over 120 mph and has a range, albeit a little optimistic of around 250 miles per charge.

Watch our Top Gear style video to see how an electric car can save you £000’s in tax. 

It’s an impressive machine, but what it even more impressive are the tax savings you can now benefit from by having a car like this in your business. The benefits of buying a car through your business are quite straightforward. You now get 100% of the cost of the car off set against your profits – on which you pay corporation tax.

Let’s go back to the i-pace; it is on the forecourt for around £65,000 and at that sale price equates to around £12,500 off your Corporation Tax bill. And, what’s more you get to drive one hell of a car. The Benefit in Kind Tax will stay at 0% until April 2021 but then will rise to only 1%, then 2% until 2024.

If that isn’t reason enough, then consider this; if you are currently funding your car privately, but using it for business, then the money you are using has already had tax deducted. If you are taking a salary or dividends out of your business then HMRC are charging you tax on those funds before you make any payments. But, now, if the company buys the car, then not only do you save all that good Corporation Tax relief on the price of the car, plus the running costs, but you also get to keep more of the money you do take out – because you aren’t funding the car – or you take less out in the first place, so pay less personal tax on it. Either way it’s a win, win.

For a really good example of the savings you can now make, compare the tables below that show the monthly costs of the i-Pace (left) to a Jaguar f-Pace (right); a £40,000 diesel model of a lower spec.

If you are in the 40% personal tax bracket, it could be as much as £504 a month!

Or you could decide to lease the car, and make monthly payments but never actually own it and have to give it away at the end. If you choose this route you still get the tax relief on the lease payments, and also get to recover some VAT, (which you don’t do with the outright purchase) and the Benefit in Kind tax stays exactly the same. Using this route, the tax savings are significantly reduced, but you are laying out a lot less cash up front.

Over a three-year lease the tax relief looks something like this:

Now you might be thinking that this is all well and good, but you don’t have £65,000 to spend on a car, whether that is through the business or not. Well that is fair enough, I have used the i-Pace as an example, but in true BBC fashion, other electric cars are available. You can get one from around £25,000 and as long as it is new and electric then you can still benefit from all the tax savings!

If you are a business owner, who drives a car, and wants to save some tax, then you should seriously consider making your next vehicle an electric one and for the first time perhaps, do it through your business.

Either way, we always remember that the key factor is to generate wealth and be able to access it as easily and as tax efficiently as possible. We keep this in the forefront of our mind when advising businesses owners, so that cash is not stockpiled in the wrong place whilst ensuring that clients have access to the funds in their business when they need it. Ideally, this is all done, without triggering unnecessary tax bills. But, to take money out of a profitable business, there are some fundamental principles to remember.

Principally, the business should have a separate bank account to the business owner and the money in this account isn’t yours until you ‘pay it’ to yourself. Business funds should be kept separate from personal finances and treated like they are someone else’s.

How the business was initially set up and funded will also have an impact on the remuneration plan we create for a business owner. At Cypher we generally deal with business owners of private limited companies. As a separate legal entity, limited companies  not only protect their owners from certain liabilities, but stand to be more tax efficient than sole traders.

1: Director’s Loans v Share Capital

For start-up limited companies, the distinction between a director’s loan and share capital is something we spend quite a lot of time discussing. This is a concept that trips up so many new business owners so it is vital they get a handle on how their director’s loan works and why it’s so important.

A typical scenario might be that to set up a business and fund it for the first five to six months, a director or owner transfers a payment of around £15,000, into the company bank account. Generally, we would advise that they DON’T put this in as share capital (i.e. create 15,000 £1 shares), when they set the company up.

If a business owner invests their £15,000 in this way, this money belongs to the business; it is sunk, dead, and is not coming back to them until the company is closed down. Instead, what they should do is create a single £1 share and invest the remaining £14,999 as a director’s loan – a loan from them to the company. As and when funds are available, this loan can then be repaid, tax free, to the business owner.

If, once the business is profitable, they want to take funds out of their company, they have the option of taking dividends (the first £2k of which is tax free, the rest taxed at either 7.5% or more) or repaying the director’s loan.

Generally, the most tax efficient strategy comes from a mix of dividends and directors loan repayments. We do advise a note of caution here, as this is an area that can cause difficulty for some business owners.

If a business owner provides a start-up loan and then begins to draw on these funds, monthly as part of their remuneration package this is fine in itself, but, if the company stops making a profit,  and the owner/director continues to take this same amount then the directors loan account could end up overdrawn (i.e. the business is now loaning money to the director!).  This could result in a 32.5% Corporation Tax charge if it’s not managed correctly, so it’s really important to talk to your accountant about your director’s loan balance regularly.

2. Directors salaries

Business owners running a limited company must remember that the revenue and profits they generate are NOT their money, it is the company’s money until they pay themselves a salary or take funds out as dividends.

If a business owner intends to pay themselves or any other employees more than £113 a week, they should first register for a payroll scheme with HMRC. If you use Xero to run your business accounts you can use its inbuilt payroll module to create the payslips and file the monthly reports with HMRC.

If you would like advice on setting up a payroll scheme or with running your ongoing payroll then get in touch with our experts today

Typically, most directors’ start on a salary of around £9,500 a year, which we recommend businesses put through as payroll. This amount is below the threshold for personal tax, and National Insurance Contributions (NIC). Business owners avoid paying Income Tax and NIC, but they still qualify for the State Pension and benefit entitlements because they earn above the Lower Earnings Limit of £6,204/year. The company then saves 19% Corporation Tax; this is the same for every director that contributes to the business.

3. Dividends

After wages or loan capital, assuming the business is profitable, further funds can be taken out as dividends. Dividends represent the distribution of corporate profits to shareholders, based on the number of shares each holds in the company. This is an important point to note, as any dividends paid out need to be in proportion to share ownership. If it is a 50/50 split, then one director can’t be paid 100% of the dividends.

It is worth knowing that the first £2,000 taken out as dividends is tax free; the balance is taxed at the dividend version of your marginal rate which is 7.5% or 27.5% depending on your level of taxation. If a business director decides to take the minimum allowance as a salary and instead take the majority of their funds out of the business as dividends, then to understand the level of dividends a company can yield, first we have to understand what profit the business is expected to make over the 12 months of its financial year and how this will affect cash flow.

Remuneration planning

To help business owners plan the remuneration they can or need to take out of a business, we spend a lot of time with start-ups building them a basic remuneration plan. Often a new business owner will have some funds to survive on for the first five to six months, but we also advise them to still take a salary even if it is at the lowest rate. This is sensible for tax planning.

Then in month nine of a business’s financial year, we offer a pre year-end review, which is a service we provide for all clients. This means that clients get tax advice before the year end, rather than after year end. You can do little to affect it in month 13 because it has already happened.

By month nine we can forecast a more robust remuneration plan, identifying the real levels of profit a business is likely to make. We know we are taking out £9,500 for salary, we need to keep around 20% back for corporation tax, which leaves a dividend of ‘x’ that a business owner can then take out of the business.

Having a business plan and a remuneration plan enables a business owner, particularly a start-up, to have confidence that they can survive the first year and understand the levels of income they can expect. Tying all their funds up in their business may not be feasible with other household bills to pay.