Covid-19 An update from AAT’s CEO to students

Posted by & filed under Coronavirus - students, Video and podcast.

AAT’s CEO Mark Farrar discusses the current climate for with updates on assessments, subscriptions, synoptic windows as well as a student Q&A.

AAT Assessments 

  • Does AAT allow students to take assessments at home?

Allowing students to take assessments at home is something that we have explored.

Whilst some other Awarding Organisations do use this type of technology, it is not currently deployed for qualifications like AAT’s Accounting Qualifications as our qualification is described by regulators as  “high stakes” which means the assessments have to be taken under strict conditions.

Synoptic assessment windows

  • What is AAT doing with synoptic assessment windows?
  • What has been cancelled and will they be replaced?

With colleges and assessment venues currently closed, we have reluctantly cancelled the Level 3 AVSY window scheduled for the week beginning 27 April and the Level 4 PDSY window previously scheduled for week beginning 11 May.

We don’t know how things will develop but we will keep you informed of any decisions as soon as we make them.

Restarting assessments

  • How soon will assessments be back up and running after the UK emerges from the current lockdown?

Once we reach a point where Government regulations allow, we are working hard behind the scenes with the aim of getting our assessments live again as soon as we can. As the Government position shifts, we will look to provide an update as soon as we can on a revised assessment schedule.

Grading

  • Can we use predicted grades like that being discussed for A-Levels and GCSEs?

This is a very difficult area and one of the potential solutions that we are discussing with OFQUAL. AAT qualifications are used to demonstrate competence and skills at various levels and are linked directly in some cases to either a licence to practice or professional membership.

For these qualifications, it may not be considered appropriate to use an “estimation” approach to outcomes. We are monitoring the situation in line with government and regulator guidance and continue to explore options with Ofqual.

Student membership

  • What happens if my subscription runs out in the period where assessments are suspended so I cannot complete my qualification?

We have identified a number of students whose subscriptions ran out in March or will do so before the end of May. As it stands, we have made the decision to extend the subscription of these students by two months* and, if it affects you, we will have written to you about this.

*Please note that subscriptions have now been extended by three months – not two, for those who are eligible.

Useful learning resources

Further reading

8 top study articles on Management Accounting: Budgeting

Posted by & filed under Professional Diploma, Students.

We’re here to help with 8 essential articles on the Management Accounting: Budgeting unit.

1. Budgeting – Compiling the material elements

In this article, our AAT tutor looks at the material element of an operating budget, running us through an example scenario with you as the budget accountant. We cover the process of creating a draft operating budget.

Read the article

2. Labour, overheads and operating budget

Once you have the material elements of a budget nailed down, it’s time to look at labour and overheads. In this article, we look at adding these elements into a draft production budget, after establishing current labour costs and overheads.

Read the article

3. Production budget report

Once you’ve created a budget report, as a budget accountant it will be your responsibility to communicate this budget to a budgetary committee for approval. The written element of this task is key to your synoptic assessments, so take your time with this one.

Read the article

4. Limiting factors – Using standard costing to plan for production restraints

Standard costing is often used to calculate the expected cost of products. In this article, we look at how it differs from general budgeting, and focus in on how standard costing can be used to help plan production when resources are limited.

Read the article

5. Budgeting using standard costing – labour variance analysis

Our AAT tutor dives into standard costing and how labour variances can be analysed to determine how the actual costs differ from the expected cost that was budgeted.

Read the article

6. Budgeting using standard costing – material variance analysis

In this article, we look at the raw material cost statement, and see how material’s price and usage variances are used to monitor actual costs against those budgeted.

Read the article

7. What’s the difference between marginal and absorption costing?

Marginal and absorption costing are covered in various forms at all levels of the AAT Accounting qualification, but they’re often misunderstood by students. Firm up your knowledge with our deep dive into the tangible differences.

Read the article

8. What actually is standard costing?

Back to basics with standard costing in our final article, as our tutor looks at how standard costing is used in organisations, and the differences with general budget setting.

Read the article

Browse the full range of AAT study support resources here.

Top tips to engage your students online

Posted by & filed under Coronavirus - students, Training providers.

If you’re used to teaching in a classroom and the move online has been more than a little strange for you, rest assured you’re not alone.

AAT tutors up and down the country have been booted out of the classroom because of lockdown restrictions, and are now tackling the challenge of remote teaching. We touched base with a few of them to find out what’s working well just now, and how they’re keeping students engaged and motivated with assessments on hold.

Communicate more

Mindful Education partners with colleges to provide online courses. During Covid-19, they’ve made all of their AAT Level 2 and 3 lessons available free to all colleges, with additional guidance for tutors on how to use them, so they’re right in the middle of it with most AAT tutors.

Matt Brown, Director of Marketing and Student Experience at Mindful Education, helped develop the company’s guidance for delivering online lessons, and he had the following tips:

  • Replace a 3-hour face-to-face classroom session with a 1.5-hour virtual classroom lesson and a (less formal) 1.5-hour virtual drop-in session. Chunking time like this will help students stay engaged.
  • Remember that there are lots of positives of remote learning. It provides a more flexible option and students can access the courses at any time, on any device and revisit the lessons as much as they like.
  • Communicate more with your students now than would feel normal.

Mike Webster, tutor at Cardiff and Vale College, urges more communication during this time as well, in order to overcome the remote aspect of teaching online.

Students need time to adjust

Mike has been teaching for ten years and delivering blended learning for four. With lockdown, he now teaches his full and part-time students (ranging from 16 to 65-years-old) fully online. His students are engaged and enjoying learning and he is determined to keep up the momentum.

Mike’s top tips:

  • There will be a huge culture shift when you first move online. Don’t expect miracles initially. Students won’t be as productive if they are used to the classroom but I believe the use of technology makes for a more enriched experience.
  • Don’t try to use existing classroom materials or replicate it like-for-like online. You need to do things in smaller chunks. We use Microsoft Teams and Mindful resources and have managed to continue teaching with them almost seamlessly.
  • It’s not as easy to pick up on visual clues from learners online. Make sure you do a lot more checking in with the students. I’m going to each individual attendee in the virtual classroom to see that they’re keeping up.
  • We’re providing more of a support role to students focusing on their wellbeing. Some are at home with children or working too. It’s really difficult for them to balance everything. A lot are experiencing mental health issues so we direct them to the college support system if they need it.
  • We are giving the students AAT updates once a week, discussing any news to keep them calm and motivated.
  • We can track progress via Mindful’s online tasks and also set them practical homework to submit which we mark. I’ve been telling them to remember they can come back later with any questions after they’ve digested the information.

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Vary your teaching tools

Debbie Evans, training assessor at Walsall College, was previously holding fortnightly workshops in the classroom. Now the college is delivering workshops via Zoom, the popular free video conferencing tool.

Debbie taught purely face-to-face for ten years, then changed to blended learning when she started at Walsall College, so she’s had a bit of experience with remote learning before coronavirus struck. She believes it’s beneficial for learners and tutors to be able to work more efficiently and creatively, especially now.

Debbie’s advice:

  • Don’t be frightened of change or technology. You can get confident with it very quickly and a lot of our learners couldn’t wait to sign up for Zoom.
  • As well as using Mindful resources, we have a PowerPoint for each session to embed knowledge in a different way. We use the Zoom whiteboard function for engagement and in addition to  Zoom we utilise the AAT online resources like e-learning, Green Light tests, practice papers and webinars.
  • We gauge progress with Q&As, progress reviews, portfolio work and ask students to complete reflective statements. At the end of every session they complete a progress check built into Mindful to see how well they’ve done and to embed their understanding. Any areas of concern can be built into the next workshop.
  • We are now contacting learners at least once a week by email or phone to check in with them and reminding them of the support that’s available through the college, with regards safeguarding and counselling. There’s a lot to process right now, so it’s understandable that students might need more support.
  • We’re continually updating students with AAT and assessment news. We’re giving them alternatives to be working on earlier than we might have done usually to keep them engaged. They’re focusing on getting their portfolio work uploaded and doing their professional discussion.

Flexibility is vital now

Sarah Osei of Walsall College, is an NHS key worker at the Warsaw Healthcare NHS Trust. As she’s not at home when the remote lessons are being taught, Walsall College is giving her individual sessions after work. 

“The College has been great at accommodating me and it’s good to have the freedom to be able to continue my studies at home, having quality sessions at different times. It was a bit strange at first but I’m getting used to it.

We’re still using the Mindful lessons which have the in-built progress checks, and instead of face-to-face we use Zoom which is brilliant as things like past papers can be shown on the screen.

I don’t always like to put my hand up in class to ask questions so this works well for me. I’m more comfortable raising things online, then going through them one-to-one. 

With the resources that we have available I don’t feel that my studies have been affected. I feel that we’re still able to make progress and carry on.”

In summary

Being thrown in at the deep end might not be such a bad thing if it forces you to embrace new ways of teaching. Everyone will need a bedding in period but tutors and learners will quickly adapt to using video learning and online resources, and we may all come to enjoy the range of options and flexibility they bring.

Erring on the side of over-communication seems to be key just now, until you establish a working rhythm with each student. Check in with your students more frequently to ensure they’re keeping up and coping with all the changes.

Next steps:Join our free webinar where Mike Day will show you how to teach AAT UACS on a new platform called Xero Learn. Available on demand.

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Tips to manage your mental health while studying in isolation

Posted by & filed under Coronavirus - students, Mental health.

Feeling anxious, isolated, or scared? You are not alone. More than four in five Brits are worried about the impact Coronavirus is having on their lives, according to data from Public Health England.

Fortunately, there are lots of simple steps you can take to stay mentally healthy during lockdown.

Stay in touch

Now more than ever, it’s important to make the effort to stay in touch with loved ones online or over the phone. “Reaching out to friends and family is critical,” says Paul Farmer, chief executive of mental health charity Mind.

If you are finding studying at home lonely, you can also connect with other AAT students via online forums – or lighten the mood with resources such as podcasts.

Patrick Willis, Learning Services Media Lead at AAT, says: “The Learning Pods series on our new Lifelong Learning Portal gives you a chance to hear directly from subject-matter experts in our industry. “It is designed to delve deeper into key areas that students have historically struggled with, and provide a few laughs along the way.”

Be kind to yourself

It’s important not to put too much pressure on yourself, especially if you have had to take on new responsibilities such as educating your children or looking after older relatives while working from home.

Pursuing a new interest online is fine, but students should not worry about racing ahead with their learning during lockdown.

Instead, why not treat this strange time as an opportunity to really get to grips with areas of accountancy you find challenging?

“Try to ensure that you have time to exercise and recharge your batteries,” says Accountancy Learning tutor Ashley Pocock. “If you can study that is great, but the course and exams will be there when things return to normal.”

Stick to a routine

Following some form of routine, such as getting up at a similar time each day, is widely recognised as one of the best ways to protect your mental health. And when it comes to studying, having a routine can also boost your chances of success.

“I have encouraged my students to establish a daily routine with regular study and break times, and to aim to achieve a particular section or topic each week,” Pocock says. “This approach has been shown to both motivate students and help maintain their emotional wellbeing.”

Just remember to keep your days varied and look after your physical health too. Gareth John, chairman, and director of Accountancy training college First Intuition, suggests rewarding yourself with a treat after every study session. “Staying hydrated, eating a balanced diet, and making sure you get enough rest are all also good ways to improve your memory,” he adds.

Seek help online

The internet is a great source of information, advice, and support if you are struggling with poor mental health. Public Health England’s Every Mind Matters platform, for example, has lots of advice on how to combat issues such as anxiety, stress, and insomnia.

It also offers a free “Mind Plan Quiz” that takes just a few minutes and allows the service to provide you with wellbeing advice that is tailored to your specific circumstances.

Claire Murdoch, national director for mental health at NHS England, says: “While we stay indoors to save lives, we must also think about how we can protect our mental wellbeing, which is why I am encouraging everyone who needs it to visit the Every Mind Matters website.”

Top 5 NHS mental wellbeing tips 

1. Talk 

Maintain contact with friends and family via phone and video calls to share how you feel.

2. Routine 

Try writing a plan for your day; setting and achieving goals gives a sense of control and should help you sleep better.

3. Media

If news and social media updates are making you worried, try to limit the time you spend watching, reading, or listening to them.

4. Learn

Focussing on a hobby or learning something new can help to boost your mood. 

5. Exercise

Try to eat healthy meals, drink enough water, and exercise regularly (while following social distancing rules).

In summary

It’s normal to feel anxious and scared in a situation like this. So don’t be afraid to reach out if you need help – either to loved ones or to an organisation such as Mind (0300 123 3393).

Sticking to a study routine may help to give you a sense of purpose, but it’s vital to allow yourself plenty of time to relax and look after your physical and mental health too.

Further reading

HMRC told to delay IR35 by more than a year and carry out wholesale reform

Posted by & filed under Coronavirus, IR35.

IR35 should be completely overhauled and delayed for more than a year due to coronavirus.

That is the conclusion of the House of Lords Economic Affairs Finance Bill Sub-Committee in a new report.

The Government has not sufficiently analysed the unintended behavioural consequences of the proposed reforms. Contractors are already being laid off, despite the reforms’ delay.

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Many witnesses told the Committee that the rules have made them “zero-rights employees” with none of the rights of being an employee, or the tax advantages of being self-employed.

Wholesale reform required

Lord Forsyth of Drumlean, Chair of the House of Lords Economic Affairs Finance Bill Sub-Committee, said:

“The Committee welcomed the Government’s decision to defer these off-payroll working rules in the wake of the Covid-19 pandemic.

“However, our inquiry found these rules to be riddled with problems, unfairnesses, and unintended consequences. The potential impact of the rules on the wider labour market, particularly the gig economy, has been overlooked by the Government. It must devote time to analysing all of this. A wholesale reform of IR35 is required.”

Therefore, the Committee says the Government must reform IR35 to keep its promise of implementing the Taylor Review into modern working practices. This review called for the taxation of labour more consistent across different forms of employment and to deliver a fair balance between tax, rights and risk.

Extend delay, say Lords

Lord Forsyth also called for a longer delay due to coronavirus, so that businesses could prepare.

“The rules were deferred for a year because of the current crisis, but how prepared will businesses recovering from the crisis be to take on this extra burden on next year? The Government needs to think this through very carefully. We call on the Government to announce in six months’ time whether it will go ahead with reintroducing these proposals.

“Contractors already concerned by these uncertain times now have the added worries of paying more employment taxes and having their fees cut by clients making additional National Insurance Contributions. Also concerning is the number of companies getting rid of contractors in anticipation of the implementation of these new rules.”

The Committee says Government should announce by October 2020 whether it will press ahead with implementation by April 2021, or if there will be changes or further delay due to coronavirus.

The Committee also says the Government should allow the rules to operate for at least 18 months before it researches their impact. Currently, the plan is to do this after six months.

New bounce back loans to bail out small firms

Posted by & filed under Coronavirus.

The Government has announced another loan scheme to get emergency credit into the hands of very small businesses.

The Bounce Back Loans (BBL)  scheme will give small firms access to underwritten loans worth up to 25% of turnover, up to a maximum £50,000, within 24 hours of applying.

The loans will be available from Monday 4 May at 9am and will be 100% guaranteed by the Treasury .

Government guarantees

The BBL scheme has been developed in response to criticism of the Coronavirus Business Interruption Scheme (CBILS).

The CBILS scheme is criticised for being too slow and having too many conditions. It covers larger loans of up to £5 million, but so far only 20,000 have been issued.

BBL loans will be made available through a fast-track application process and on much easier terms.

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Chancellor Rishi Sunak says loans should reach businesses within days- providing immediate support to those that need it as easily as possible.

The loans will be interest-free for the first 12 months, with no repayments due in the first year.

The Government is working with lenders to ensure loans are advanced quickly. It also wants banks to charge a low, standardised level of interest after the first, interest-free, year.

The banks issuing CBILS  loans have been criticised for the long application process and tight conditions. Somewhere in the region of £3billion has been advanced so far.

At a glance

Eligibile

Business must be:

  • based in the UK
  • have been negatively affected by coronavirus
  • not have been an ‘undertaking in difficulty’ on 31 December 2019

Not eligible

  • banks, insurers and reinsurers (but not insurance brokers)
  • public-sector bodies
  • further-education establishments, if they are grant-funded
  • state-funded primary and secondary schools

CBILS

Philip King, Small Business Commissioner, commented:

“Some of our smallest businesses are in desperate need of cash and this scheme could be the saving grace that keeps them afloat.”

Last week, the software platform CountingUp 250 accountants wrote asking Government to do more for small businesses and self-employed.

CEO Tim Fouracre welcomed the new scheme.

“It’s a welcome move but the onus is now on lenders, particularly the high street banks with their reach and distribution, to actually start approving loans to those small businesses desperately in need of working capital. The high street banks have no excuse not to lend now.”

Kirsty McGregor of the Corporate Finance Network is concerned that banks are not best-placed to deliver.

“Speeding up the delivery of loans, for those who are willing to take on the debt, is certainly welcomed for the smallest businesses. However, I do worry about the ability of the banks to manage this new application process, especially when they are already under so much pressure to manage the CBILS applications.

“I would have preferred the Chancellor to provide funds to the English Local Enterprise Partnership network for a grant scheme, especially when both Welsh & Scottish governments have already announced such schemes for their businesses as devolved administrations & have been supported by HM Government to deliver this.”

Further resources

AAT Winner’s stories: Gemma Close MAAT

Posted by & filed under Inspiring stories.

Although AAT Rising Star of the Year Gemma Close MAAT, stumbled upon accountancy, she has thrown herself into making it a success.

Eight years ago, Gemma Close was at a crossroads. After studying a media degree at the University of Bedfordshire, she looked for relevant opportunities in West Yorkshire, but couldn’t find anything that fit the bill. She had been working in hospitality to support herself during her studies, however, which opened up an opportunity that she’d never considered before. 

Close studied AAT and looked for a job that would help her develop her career. That led her to Leeds-based CHN Financial Consultancy, which is where she’d make such an impression that she was named AAT’s Rising Star of the Year for 2019. 

A great mentor

Close actually started on reception at CHN while she studied AAT – the firm was very supportive of her ambitions. She moved into finance within a year. Close’s manager was a great mentor to her, as she had also studied AAT previously and kept pushing her to do more. “She understood every step of the way what I’d learned and what I could handle over and above my role.” 

Thanks to that attentive mentoring and her own dedication, Close was promoted three times in four years. Her career has grown along with CHN, which kept Close on her toes.   

“When I joined, there were about ten members of staff, and now we’ve got between 50 and 60. So I seem to have joined at just the right time to grow with the company, move up the ladder, and develop.” Importantly, she notes, “CHN has still got a family-friendly feel – we’ve not grown to the point where we’ve become over-corporate.”

Starting out as a finance assistant

Close started in the team as a finance assistant, and in 21 months was promoted to finance officer. At the end of 2018, she became finance manager, one of the most senior roles in the company’s business support teams, reporting directly to the company’s partners.

“The variety of tasks I undertake keeps the role interesting. I enjoy the analysis of costs and being able to implement new processes or products to help create efficiency. I also enjoy the responsibility of the role, having worked so hard to reach this position.” 

Rising star of the year award

Close received her Rising Star of the Year award last summer during the AAT Annual Conference, held in Stratford-upon-Avon. It’s fair to say she was unprepared. “It was a shock,” she says.

“It took a while for it to sink in. I was still sat on my seat after my name was called out, and my partner kept nudging me, saying, ‘that’s you – go on, go up!’ And I thought, ‘oh, right, yeah!’ But everyone was so friendly, and just being able to talk to the other winners felt really good.” 

Progressing to financial controller

When it comes to her next steps, Close would like to keep progressing, preferably to financial controller. “I’m not sure whether that would be something I’d be able to do at CHN – it would be a case of deciding whether I’d want to move on, or whether I’d be happy to stay on here,” she explains.  

In the meantime, she wants to do as much as she can to help CHN grow and develop its finance and accounts function. “We’ve taken quite big strides to become so big so fast – we’ve had to develop lots of processes in the background quite quickly, so it’ll be great to enhance them and drill them down a bit more, and get a bit slicker.”

Further reading:

Coronavirus cash-flow planning and consultancy best practice

Posted by & filed under Coronavirus.

Having a tight grip on cash-flow planning is important for small to medium-sized businesses (SMEs) at the best of times.

But with the recent coronavirus (Covid-19) means that most SMEs urgently need to review and continually update their current assets and income, balancing these against current and future expenses and liabilities. Cash-flow consultancy is a value-added service that you can be offering to your clients.

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Cash-flow: the size of the problem 

If a business is in its early years or has been concentrating on growth (and therefore continually reinvesting) they are unlikely to have a buffer of extra cash to see them through the tough times, let alone the entirely unanticipated times. 

Small and medium-sized businesses make up more than 99% of all UK businesses. According to the Covid-19 Business Impact Tracker study by the British Chambers of Commerce, most small businesses have three months or less of cash reserves with which to try and survive. 

Should you be offering cash-flow consultancy? 

If you’re an accountant looking after small businesses then you should consider offering cash-flow consultancy as an additional service for these reasons:

  • It’s another service that you can charge for
  • You’ll be giving the advice to help ensure the health and survival of the business (and therefore your client)
  • It can help reduce the stress that the business is under
  • It positions you as the expert
  • It will help you to build closer relationships with your clients
  • It sets you apart from other accountants
  • It could help you gain new clients
  • There is good technology available to help you prepare forecasts and reports

Responding to the pandemic – scenario forecasting

This free AAT webinar will take you through how the coronavirus (Covid-19) pandemic has effected modelling, forecasting and risk modelling.
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Cash-flow consultancy best practice: A Covid-19 case study 

Kevin Drew tells us how his accountancy firm Ascentant has been assisting small businesses to conduct cash-flow consultancy to help them survive Covid-19. 

“We have been working with Local Enterprise Partnerships to signpost clients to webinars and funded training to make them more financially aware. When we ask most clients how many months of cash reserves they have or if they are cash-flow positive or negative, they do not know. 

Educating clients on their finances, business continuity and scenario planning is key to them making long term business decisions to help their business survive. Awareness around cash-flow is key to this.”

Cash-flow consultancy best practice

“Ascentant have been offering free reviews and signposting consultations with clients to review their pain points, project their cash reserves in a worst-case scenario and provide them with advice, templates and resources to begin undertaking their own financial reviews.

We will project a client’s cash-flow from their financial records over a 12-month period and then start to factor in what may happen if they lost a large or key client. We will also look at procurement to identify lower-cost suppliers or other cost savings to save cash. 

Making clients think about things over an extended forecasted period and not just day-to-day really helps them to start managing their business, set goals and help it survive rather than just running it ad hoc with no visibility of KPI’s or knowing where funding will come from for the next rent or payroll payment.”

  • Where the objective might previously have been growth or profit-focused, the priority now needs to be cash-flow. Your client might need an explanation that the problem with monitoring profit is that it doesn’t take into account debt repayment, equipment payments, taxes or cash received.
  • In cash-flow forecasting, you will need to analyse the immediate needs and the future needs of the business. For Covid-19, the priority needs to be on surviving the short-term situation, particularly if businesses are waiting on funds and loans.
  • Identify the business-critical payments. Avoid any unnecessary spending and review direct debits and standing order payments.
  • Closely review savings, investments, and income withdrawals to see if they can be altered.
  • Conduct scenario analysis to consider the best and worst-case scenarios.
  • As well as scenario analysis, the cash-flow forecasts will need to be regularly monitored. Apply updates to both scenarios as soon as any changes occur.
  • Always take into account that the personal finances of a small business owner and their organisation will inevitably be inextricably linked.

Should you charge for emergency advice?

During the pandemic, a lot of companies and business proprietors have needed emergency cash flow planning. This has created a huge workload for accountants, and there are differing views over whether accountants should charge for this.

Paul Donno FMAAT, AAT Licensed Accountant says: “To help our clients obtain essential funds we have decided to extend our services to include forecasting and therefore have not charged extra for this service.  Our view is that we need our clients to pull through this with us and to burden them with additional fees would be wrong.”

David Fredericks says: “As an ongoing chargeable service there would not be any extra charge to clients. However, it will be a business decision whether or not other clients are charged the full fee or a COVID-19 fee.”

John Thornton, AAT President advises the following approach for enquiries from distressed companies: “If you have capacity, be upfront about what you can do and what the cost implications would be. If you can’t help them get out of the way and let them go to somebody else who can.

“Part of being a good professional is to know when to stand back. People in difficulty need to be quickly connected with people who can help them. If you can’t do it, stand out of the way and let them go to someone who can.”

Dealing with creditors and debtors

“We encourage clients to be proactive on chasing debts, reviewing aged debtors, and to put in place cash collection tools such as GoCardless direct debits for monthly recurring payments.”

Advise your clients to:

  • Send invoices early
  • make it easy for people to pay them
  • look for early payer discounts
  • chase invoices early
  • agree on clear payment terms and plans.

Make sure your clients pick up the phone and talk to people. They don’t need to tell creditors every detail about their situation but they should try to come to a mutually agreeable solution. The last thing they want is to create bad relationships with suppliers or worse still, have their debt sold on. And they are more likely to be moved higher up the list for debtors if they call them. 

Planning and contingencies

“We try to give clients little tips such as saving the VAT when a customer pays a bill in a separate savings account so that they have the funds available to pay their VAT bill rather than spending it.”

  • Identify possible changes to the sales mix or business model. Look for alternative revenue streams. Are there products or services that can generate cash-flow quickly or can they move from bricks and mortar to online?
  • Check for cost efficiencies in the delivery of products and services. Focus on inventory control and lease (don’t buy) where possible.
  • Look for short-term revenue strategies like selling gift cards, encouraging pre-orders or driving discounts (although this should be done with caution).
  • Explore the support options available. Government relief funds and loans or overdrafts and credit from the bank.
  • Consider furloughing staff or making redundancies if necessary.

Key takeaways

  • Cash-flow is of great concern to most SMEs right now due to the effects of Covid-19.
  • Consider offering cash-flow consultancy as a service to help your clients or to attract new ones.
  • The cash-flow consultancy will need to be thorough, updated regularly and include suggestions for changes that can be made quickly within the business.

Summary 

Most SMEs will be in a situation now where they are (or should be) keeping daily tabs on their cash-flow. You could be offering to help as an extension of your services to them. 

Further reading 

Accountancy firms write to Government as furlough portal goes live

Posted by & filed under Coronavirus.

HMRC has met its deadline to deliver the portal for Coronavirus Job Retention Scheme claims, opening the way for millions of people to receive support for their salaries.

The CJRS portal was designed in just 48 hours, was delivered in around four weeks and is capable of handling over 400,000 visitors at a time.

“Against a backcloth of the history of Government IT projects, the fact that the portal is operational and is working at scale is impressive, and shows the Government has taken a radical approach,” said John Thornton, AAT President.

“We have had no problems so far. The speed of delivery is unprecedented. It’s a wonderful achievement by HMRC. Hopefully, they can maintain that momentum post-coronavirus,” said David Fredericks AAT Vice President.

However, despite the successful launch, there are still questions around the scope of the job retention scheme and other Government support measures.

Accountancy firms lobby the Government

Concerns that some individuals and companies are being left behind has led 250 accountancy firms, including a number of AAT Licensed Accountants, to put their name to an open letter to the Government.

The letter was organised by Countingup, a business banking app for small businesses, and requesting that the government does more to help small businesses survive the impact of Covid-19.

Representing over 70,000 small businesses and 250 accountancy firms, Tim Fouracre, Countingup’s CEO explains that the letter was written at this time because accountants are being inundated with queries from their small business clients.

Two main have themes have been identified:

  1. Support those businesses left behind by the Coronavirus Job Retention Scheme (JRS) and Self-Employment Income Support Scheme (SEISS).
  2. Provide more clarity on the process and timings of JRS and SEISS grants.

Within the letter, concerns are raised that the CJRS and SEISS do not go far enough to ensure the survival of the many small businesses that are not eligible. For those who are eligible, the process and timetable for the JRS and SEISS are unclear and put’s these businesses at risk.

Those not eligible for CJRS and SEISS grants

  • Directors on dividends – small businesses with directors remunerated primarily through dividends. 71% of our respondent accountants raised concerns over this group
  • Newly self-employed sole traders who set up after 6 April 2019
  • Self-employed sole traders who historically had tradable profits of over £50,000

Fouracre commented “with the Coronavirus Job Retention Scheme there is still a massive gap for limited companies with directors who remunerate themselves with dividends. They are not eligible for CJRS but are adversely impacted by the pandemic in the same way as any other business. The government needs to help these businesses out urgently”.

In a recent survey of its accountant customers, 71% said they were concerned about small business owners who paid themselves through dividends.

One potential solution in regards to the directors of limited companies paid through dividends would be to allow dividends paid to directors of limited companies to count in the same way as a salary says Fouracre.

More clarity on process and timings of grants 

  • Cash flow – Many businesses face immediate collapse and more urgency is needed to award grants earlier
  • Eligibility – Clearer information to be given to small businesses around how to claim and who is eligible. 59% of respondent accountants raised concerns over this
  • Trading profits – Clarity on the definition of “trading profits” used in the SEISS. Is it box 23 or box 28 of the SA103(short) or something else

Fouracre said “help has started to come through and we’re fully supportive of the CJRS launch. From what we’ve heard from our accountant partners the process for applying has been relatively painless, which is great news. Now we need to see the SEIS grants launched because sole traders are still waiting for the cash they urgently need”.

“We welcome the government support that’s being made available to sole traders and limited companies. We simply appeal for it to be provided equitably across the range of small businesses represented in the UK” Fouracre concluded.

The full open letter is available here. 

Further reading:

Viewpoint: let’s move the conversation from fear to survival

Posted by & filed under Coronavirus.

If you’ve survived this far, well done! Now it’s time to help clients and colleagues see the big picture, suggests Caroline Plumb, CEO of Fluidly.

More than 6 weeks on from the 11 March, when it was officially declared a pandemic, the impact of the virus has become a harsh reality.

For a long time, I was waiting for the UK Government to really step up – and in some ways, they have done that.

The highly publicised range of support measures keeps expanding and covers everything from salary support via the Coronavirus Job Retention Scheme to loans and grants, business rate discounts and deferred VAT payments.

So far, the biggest issue has been how easy it is for business owners to actually access the support, understand the options and find the best route for them. 

That means there is an opportunity for accountants, and businesses like mine  (which helps companies manage their cash), to step up.

Help businesses face what’s ahead

While it’s easy to get caught up in the specifics of each coronavirus support scheme, really, businesses need general help for planning in a downturn. We are looking at a global recession that will have a huge economic impact for years and business strategies need to reflect that.

So, what are the options?

Clearly conserving cash will be key.

For a huge number of small businesses, they’ll be operating on incredibly thin margins – roughly the equivalent of one month’s trading.  And trading is inevitably going to be down. The harsh reality then, is that there will only be a couple of options for firms – make payroll or reduce staff, or, worse than that, go bust.

Furlough is a good option in the short-term, but what about once the Government support runs out? It’s essential to keep the bigger picture in sight.

The importance of regular forecasting also can’t be stressed enough. It’s hard to envision exactly what the impact is going to be month-on-month. There’s a lot of noise out there. I’m certainly finding it hard to cut through it all – so I’m trying to focus on the actuals, my numbers.

Extra finance

Companies clearly should also look at potential finance options but, more than ever, may need help assessing what’s best for their business.

The Coronavirus Business Interruption Loan Scheme (CBIL) is a minefield, and not the only option, which needs reiterating.

What’s more, while practical advice and support is crucial, now is also a time when your clients will need emotional support.

The world feels scary, but business owners are notoriously resilient – and they may need reminding of that.

It might not feel like it right now, but once we come through this, there may actually be some learnings to build on.

Clearly, we are in the midst of tough times.

Volatility inevitably evokes anxiety, but it also creates opportunity.

More than anything, we need to keep calm, focus on the things we can action, and try our best to transform the conversation from one of fear to one of survival – and hopefully, eventual growth.

About the author

Caroline Plumb OBE is a business ambassador for the UK Prime Minister and  CEO of fluidly, which delivers intelligent cash flow for SMEs.