Starting your own business is an exciting time for any business owner or entrepreneur. But before you dive headfirst into establishing your fledgling company it’s important to do some planning to make sure your new venture is built on the most solid of foundations – and that means asking yourself some critical questions about your business idea.
If you’re looking to gift money or property to your family, it’s vitally important that you consider the impact of inheritance tax and capital gains tax on these gifts.
The tax implications can be complex, but with the right advice and the right inheritance planning, it’s possible to save up to 40% of your inheritance tax costs using the currently available reliefs and exemptions.
The hotel and leisure industry is a sector that’s more susceptible than most to the peaks and troughs of seasonality.
Whether you’re running a guest house or a large-scale hotel, your challenge is always to make the maximum profit from the rooms you have available – and to work with the seasonal changes in room utilisation to make sure you generate the best possible income from your paying customers.
One way to improve your hotel’s efficiency – and to place more focus on profitability – is to make use of the latest in online, cloud-based booking systems, and to integrate your booking software into your financial systems.
There’s a strong tradition of farming being a family affair. And when you’re running a family business, you’re no longer just managing a farm; you’re also the custodian of an ongoing farming enterprise that must provide for future generations.
So it’s hugely important to take a long-term view when making business decisions about your farming business, and to put a serious amount of consideration into the impact of any changes you put in place.
And that’s why clear, well-informed planning is such a vital part of your farm management.
Farming is one of the staple industries of the UK economy. But it’s also a sector where revenues and profits can fluctuate greatly depending on market forces and economic conditions.
If you’re running your own farming business, it can be a challenge to keep on top of the dynamic nature of these fluctuating profit margins. But there are ways to get control of your key financial numbers and plan accordingly to keep the farm bringing in money and the business ticking over effectively.
And the cornerstone of getting control of your farm’s finances is coding, tracking and measuring the transactions being carried out within each of your enterprises
The benefits of tracking your finances with accounting software
In the past few years there’s been a seismic shift in the world of accounting. The traditional paper-based approach to accounting has gradually been replaced with easy-to-use accounting software that gives farming businesses greatly improved visibility of their core financial information.
A modern accounting package, like Xero online accounting, gives you a way to manage your bookkeeping, invoicing and accounts through a single all-in-one solution. But there’s another incredibly important reason for putting software at the heart of your financial systems: and that’s the ability to record all your farm’s transactional data in minute detail over time.
When you run your accounts from a software solution, you have the ability to code the transactions for every separate enterprise, or every separate product in your farm’s range. You can create costs centres for each enterprise and even go so far as to break down the cost and revenue items within each of these cost centres.
It’s like putting the cash and receipts for each area of the farm into their own unique pot – making it far easier for you to see where you’re making money and where you’re spending money.
Getting the information you need to make good business decisions
So, why is it important to have this visibility of your cost centres and coding? There are a number of reasons why coding your transactions is a positive move for your financial management and reporting.
- When you look at your profit and loss reports, you have a far more detailed view of the revenues and spending for each particular element of the farm.
- You improve your understanding of the farm’s financial health – you can immediately see where you’re losing money, or making money, and track it back to find the reason for the positive/negative impact.
- You can track the performance of your costs centres over time and get a complete overview of how each element of the farm is performing.
- You are better informed, have clearer data and can make business decisions about the future of the farm based on hard evidence and numbers. For example, if that dairy cost centre continues to make a loss, maybe now’s the time to sell it off and focus on your profitable beef herd.
By working in partnership with your accountant, you can regularly review all the cost centres within the farm and get the best possible overview of how each enterprise is performing in the market.
And when you have the right information, and an experienced farming specialist accountant on your team, you can be proactive about reducing any negative costs or refocusing the farm around the most profitable enterprises.
How forecasting keeps you one step ahead
There’s another huge benefit of recording all this transactional data about your farm. And that’s the ability to take your actuals (your historical financial numbers) and to project this data forward in time to predict the future performance of the farm.
Extrapolating the profit and loss from each enterprise forward 6 months gives you an accurate idea of how much money each enterprise would be making – helping you see which path is the more stable option.
And if a key variable, like the profit margin on milk, changes, you can very easily plug this into your forecast to scenario-plan new options and outcomes.
With this ‘crystal ball’ giving you a view of the future, you’re one step ahead of other farms in your marketplace – and one step ahead of any big changes in the farming market.
Talk to us about getting control of your farm’s numbers
At Saint & Co, our Farming Services team specialise in helping you to get the financial information you need to manage your farm effectively.
We can personalise your accounts to include cost centres, and use these enterprise accounts to identify if the business is performing well or badly. And, crucially, we can help you make informed decisions about your next steps for the farm, based on this financial information.
You are the expert when it comes to running your farm – we know that. But we’re here to provide you with the financial numbers you need to make your business model more profitable, your tax strategy more effective and your long-term future more certain.
If you want to get in control of your farm’s finances, please do come and have a chat with us.
Contact your local Saint & Co office and arrange a meeting with one of our farming business specialists.
Getting a better understanding of your tax liabilities is a fundamental tool in improving the financial success of your farm or agricultural business.
As we highlighted in our previous blog, it’s vital that you have a clear focus on maintaining positive cash flow and have profitability built into your farm’s business model. And one of the key ways to reduce your costs and increase profits is to be on top of your tax and applying a consistent tax strategy for the business.
So, what impact does tax have? And how do you plan ahead to minimise the effect of tax costs on your farm’s profits?
When push comes to shove, you want your farm to turn a profit. All the early starts and long working days should translate into a healthy year-end profit – but that will only happen if you’ve got control over your spending, revenues and cash flow.
So, how do you address the issue of getting on top of your farm’s profitability and cash flow?
Farming isn’t an industry for the faint-hearted. It’s tough, physical work that requires strength of spirit and real tenacity to keep the business stable and turning over enough revenue to keep the farm afloat.
Here at Saint & Co, we appreciate that it can be difficult to drag yourself away from the day-to-day running of your farm in order to look at the underlying financial and strategic elements of your farming business.
But, take it from us, finding the time in your working week to consider the effectiveness of the business elements of your farm is the best way to secure your long-term future and profitability.
So, with this in mind, we’ve highlighted four key areas that every ambitious farmer should have on their business to-do list.
Getting more sales and more customers sounds like a great prospect, doesn’t it? If you’re sending out more invoices and increasing your existing customer base, then it follows that you’ll also see a hike in profits, doesn’t it?
The answer is ‘Not always’. And if you’re increasing sales each month but not translating this into profits, you can get caught in a downward spiral of low profits, negative cash flow and outstanding debt liabilities.
Is your goal is to make better decisions for your business? Do you want to act quickly when there’s an opportunity and help your business to grow and prosper?
Then getting your accounts done early can help immeasurably in achieving your goal of enhanced decision-making and improved business performance.