Study tips: Margins and mark-ups

Posted by & filed under Advanced Diploma, Students.

In a previous article we looked at how to calculate the cost of goods sold (COGS) and now we’re going to build on that understanding to consider mark-ups and margins. 

I also wrote an article on study tips which included percentages and covered the basic numerical skills we need to successfully calculate mark-ups and margins. So if you missed either of those, they would be worth a quick read before you carry on.

Let’s start with what margins and mark-ups are and their similarities, then we’ll look at their differences.

Margins and mark-ups are sales and profits

They are the difference between the cost of a product or service (COGS) and it’s selling price, in effect the profit, however they are expressed as a percentage rather than a figure. Put another way, a sales figure is made up of both COGS and profit.

All three of these components can be quantified as values or as percentages but margins and mark-ups are specifically the percentage related to the profit component.

As well as knowing what they are, the other fundamental bit of knowledge we need is:

  • when calculating mark-ups, COGS equals 100%
  • but when calculating margins, sales equals 100%.

Sales, COGS and Profit

This is typically a challenging topic so we’re going to use a table to help us understand it:

margins hdfiuhf

As you can see the table has the three component parts, a column for values and a column for percentages. We’re unlikely to have all the information we need to complete it but if we understand the relationship between the three components, we can use percentages and remember which component equals 100%, then we only need some of the information and we’ll be able to work out the rest.

Let’s start by looking at mark-ups

Imagine you are a manufacturer and you buy raw materials, make them into a product and then need to sell them at a price which covers the COGS and generates a profit.

Let’s say we manufacture hinges and it costs us £17 to make one.

If we want to make 40% profit we can use a mark up to calculate the selling price. Using the table, we can complete the two boxes we have figures for and use our knowledge to identify that COGS represent 100%:

hesiujdhgfkjbfds

In order for the sales to include both the COGS and the required profit it must represent 140%.

Now that we have all the percentages, we can calculate the missing values.

The easiest method to use is to calculate 1% first and then scale that up to 40% to tell us how much profit we will make, and to 140% to calculate the required selling price.

pof,flgt

So in this case we need to sell each hinge for £23.80 in order to have enough money to cover the £17’s worth of manufacturing costs and make 40% profit which is £6.80.

Now let’s consider margins

Even though they’re similar to mark-ups, margins are calculated differently and must not be confused.

The difference in the calculations from a mark-up stems from which of the three components represents 100%. Remember, for a mark-up it’s the COGS but with a margin it’s the sales figure.

Let’s imagine we work for a company who made £256,000 worth of sales and have a target of achieving a 25% margin.

The information we have, and our fundamental understanding, allows us to partially complete the table:

iudyfbew

As the sales figures includes both the profit and COGS, then COGS must represent 75%. Once we have all the percentages, we can calculate the missing values, being careful to use the right figures to calculate the initial 1%.

yewhdn

Therefore, in order to achieve a 25% profit of £64,000 the company’s COGS must be £192,000.

Once we understand the similarities and differences between margins and mark-ups we can use this theory to check our calculations to see if the figures look reasonable.

As a mark-up is a percentage added to the COGS, the percentage that represents sales should always be more than 100%. However, as a margin expresses the profit as an amount included in the sales figure, then the COGS percentage and the profit percentage should always add up to 100% but never exceed it.

In both instances though, once we’ve calculated the values of the components, it’s reasonable to expect that the sales figure should be more than the COGS. If it isn’t, we won’t be in business for much longer.

So how do mark-ups and margins help with an incomplete set of records?

Those of you who read the COGS article before starting this one, will recognise this table:

pgog

And that we went on to calculate that the missing figure for the closing inventory is £7,364. We weren’t told where the £97,906 COGS figure came from in the first place. So, let’s suppose that this company had generated sales of £122,382.50 and operates with a 25% mark-up.

Now we can combine the top section of the profit and loss statement (SPL) with the table we’ve been using to help us with mark-ups and margins. Put in the figures we have, then we can use our knowledge to work out the correct percentages, as COGS is 100% when calculating mark-ups:

ofhdnw

Now we can work out the values:

gill-8

Finally, we need to check our figures to see if they ‘look reasonable’ given all the knowledge and understanding we have and the skills we have applied.

In summary

As we have constructed our SPL out of order, we can re-work our figures to check that the opening inventory, plus the purchases, less the closing inventory does give the same COGS figure and that the gross profit is the same amount if we deduct the COGS from the sales.

Read more on Final Accounts Preparation:

Browse the full range of AAT study support resources here. 

Free Excel webinar

Learn how to present effectively in Excel from expert Deborah Ashby. To view the recorded webinar please register your details below

View webinar

A day in the life of… Patrick van Aalst

Posted by & filed under Career.

In the third of our new monthly “day in the life” series, we spend the day with one of our members to find out what a typical day for them entails.

Name and job role: Patrick van Aalst FMAAT, Director and shareholder of The Laundry Company.

I get up at…

I’m a bit of a night owl and am routinely up until the small hours so I’m not an early riser. In the morning I’ll watch one half of a rugby match in bed and then start work around 10 am from my home office.

The first thing I do when I get to the office is…

Check the emails for both businesses – my accounting consultancy and The Laundry Company. I also sub-contract for another accountant so have a dedicated email for that. I’ll then process yesterday’s bank transactions download from Quickbooks.

My responsibilities are…

I’m Director and shareholder of The Laundry Company and do the admin, payroll, accounts, bill paying and managing credit control, although I use the team to do the direct communication for outstanding payments most of the time as they have the relationship with the customers.

For my accounting consultancy, I’m on my own so, of course, my responsibilities are everything, including doing the client work, the admin and the marketing. For marketing, I target two types of client. The main one is small limited companies. Because I have more than 20 years experience in management accounts and industry I want a little bit more than the end of year requirements.

I like to be hands-on and feel like I’m part of their business. I focus entirely on cloud accounting so they can have quick access to their reports. The second type of client is larger companies who might need short term hand-holding, for example, if their accounts payable is a bit of a mess, getting suppliers reconciled and making sure they don’t have things outstanding.

I’ve been working here for…

My partner was ironing from home and her business grew to a point where she started employing people and moved to an industrial unit. In December 2011 we were introduced to a laundry business for sale which we felt would complement the ironing and in March 2012 we acquired the business. We’ve been running the company ever since.

I started advertising my services as an accountant, both as a practicing accountant and a freelance management accountant in 2018 after I was made redundant from my Finance Manager role with a charity. I didn’t feel that I could commit to another employed role as I was still recovering from a motorcycle accident from two years before wherein I broke both legs. Unfortunately, the breaks didn’t bind very well and this resulted in a series of seven further operations over the last three years. I have an x-ray scheduled soon and I will hopefully then be discharged from hospital care (fingers crossed!). 

I’m qualified in…

AAT Professional Diploma in Accounting (Level 4).

A typical day in the office is…

I start work mid-morning and work through lunchtime. In the afternoon I’ll take our new Springer Spaniel, Monty, for a really long walk to wear him out which is also good physio for me. I’ll have dinner, a bit of downtime then start work again for an evening session.

During the day, I’m active on Facebook for marketing and I help other bookkeepers with their queries, I’m trying to position myself as the person to call if they need something a bit more technical than they can do themselves, plus I’m learning from others input too.

My most memorable work moment is…

When I was offered the Finance Manager role at the second company I worked for. I was Accounts Assistant at the time and had no idea it was going to happen. I had finished my AAT qualifications about six months before and just joined as a full member. It was such a boost at the time. Of course, later, it involved a whole lot of stress with all the extra responsibilities!

The best part of my job is…

Being involved in a whole range of business issues and having autonomy.

The worst part of my job is…

Fighting procrastination.

When I’m not at work…

I’m a gamer and a keen motorcyclist. Great weekends involve the motorbike, real ale, live music and friends.

If I wasn’t in this job I’d be a…

Absolutely no idea because I’m strangely obsessed with numbers, principles, and processes. If I had to choose, probably something to do with motorbikes, like a courier.

Become an AAT Member today

For more inspirational career content:

Study tips: Cost of goods sold

Posted by & filed under Advanced Diploma, Students.

Do you know how to wire a plug?  

I’m not sure if you can even open a plug up anymore to see the wires inside, but if you can and did, then you would see that there are three:

  • the green and yellow earth one
  • the brown one which is live
  • and the blue neutral wire.

That knowledge is the foundation of being able to wire a plug.

You need to know it and understand what to do with it before you can move on to applying the skill of actually doing it. This may seem like a strange introduction to a study tips article but the links between knowledge, understanding and skills are the same.

The cost of goods sold equation

This article is actually about the cost of goods sold (COGS) equation and how to manipulate it to find missing figures when working on a set of incomplete records. It’s a challenging area as you first need to know what’s included, then understand why we calculate it and finally how to do it.

Once we have that sorted for a set of complete accounts, we then have to step up a level in the application of our understanding and skills, to start problem solving by manipulating the equation.

This is where the wiring of the plug comes in; as long as you know where two of the wires go then you can work out where the third belongs. In other words, if we have all but one of the COGS figures then as long as we understand how the equation works, we can always find the one that’s missing.

What we need to know

This is simply the equation plus the sub-calculation for net purchases.

opening inventory + net purchases – closing inventory = COGS

(purchases – purchase returns + carriage inwards = net purchases)

Why we calculate the COGS

Understanding why we calculate the COGS is probably the most difficult aspect of this subject.

The cost of goods sold is calculated in order to fulfil the requirements of the accruals concept. It’s part of the top section of the profit and loss statement and represents the expenditure that has been incurred in generating the sales in a financial period. Put another way, it’s the cost of the goods or services sold by the company, hence the term COGS.

The accruals concept is also responsible for the adjustments we need to make to the opening and closing inventory. As we’re ‘matching’ income and expenditure to a financial period regardless of when the money was paid or received, we have to deduct the value of the closing inventory as we haven’t sold it yet.

It can’t be matched to this period’s sales figure as it’s still on the shelf in the stockroom. However, it will be the first stock that gets sold in the new financial year. Therefore, last year’s closing inventory figure will become this year’s opening inventory figure, to which we will add this year’s net purchases and then deduct the closing inventory to give us this year’s COGS figure.

Once the cycle starts, it just continues year on year, but remember if your accounts are for a new business there won’t be any opening inventory in the first year of trading.

Once we know what is included in the COGS equation and understand its purpose, then using it is relatively easy. All we need are some basic maths skills in addition and subtraction.

Calculating COGS

Here’s an extract from a trial balance.

gill-1

From it we can calculate the net purchase as:

£31,979 – £3,880 + £700 = £28,799

Then we can calculate the COGS as:

£2,368 + £28,799 – £3,267 = £27,900

Finally we need to be able to ‘wire our plug’ and that involves applying all the knowledge, understanding and skills we have looked at so far.

Calculating closing inventory from the COGS equation

Here’s another extract from a trial balance, only this time the closing inventory figure is missing. However, we have been told that the COGS figure is £97,906. We need to calculate the closing inventory figure and to do that we have to manipulate the COGS equation.

gill-2

We can calculate the net purchases as before:

£120,673 – £23,561 + £1,567 = £98,679

Then we can use the layout of a profit and loss statement to help calculate the closing inventory:

gill-3

We know that the opening inventory is added to this year’s purchases £6,591 + £98,679 = £105,270

We also know that we need to deduct the closing inventory from the opening inventory and purchases to give the COGS figure.

Laid out in this way, we can see that the closing inventory is just the difference between the £105,270 and the £97,906. Therefore, closing inventory must be £7,364.

In summary

This is only one of a number of ways to manipulate the COGS equation so you’re unlikely to be successful in this area unless you understand the ‘whys’ as well as the ‘hows’. You may have been wondering where the COGS figure came from in the example above, especially as we didn’t have the value of the closing inventory.

We’ll tackle this in the upcoming study tips article on Margins and Mark ups, when we have a look at how the rest of the top section of a profit and loss statement works and why.

In the meantime don’t take apart a plug unless you’re a qualified electrician.

e-learning-banner-1_aat-comment_728x90px

Read more on Final Accounts Preparation:

Browse the full range of AAT study support resources here. 

7 misconceptions about accountancy apprenticeships

Posted by & filed under Apprenticeships, National Apprenticeship Week.

A career in accountancy doesn’t have to start with a university education. Apprenticeships offer an ideal route for those keen on an accountancy career.

Here we debunk some of the possible misconceptions you might have about an accountancy apprenticeship – and get you started on the path towards a career you’ll love.

1. You have to be a school leaver

When you think about apprentices, you probably think about teenagers opting for the combination of work and study rather than building up massive student debt. Emily James is one: she started as an apprentice with BDO straight from school aged 18.

Now aged 20, she says: “Lots of my friends have gone off to university. At first not everyone understood why I was choosing to be an apprentice. But now some even regret not doing the same as me. I’ve learnt so much so quickly and I’m getting the kind of qualifications which will help me if I ever decide to move into industry.”

… Places can be over-subscribed

You don’t have to be a school leaver to be an apprentice – you just need to be at least 18 years old. However, do be aware there is huge competition for places. BDO had 11,000 applications for 600 trainee roles last year. This year it is taking on 150 apprentices across the UK as part of its trainee programme. Most will be straight out of school or not far off – but there are exceptions to this, say BDO.

Would-be apprenticeship employers will be looking for keen people who are ready to learn and are committed to the work involved in combining study and work. World-weariness and a know-it-all-already won’t get you a place.

Key takeout: You don’t have to be young to be an apprentice. But bear in mind you will be competing with lots of others – many of whom will be young with fresh-out-of-school keenness.

How to build a great career with an AAT apprenticeship

Have you considered an apprenticeship as a route to gaining your qualification and getting the skills needed to progress your career? Do you have unanswered questions about how they work, who they are for and what roles that can lead to? Look no further, hear from us, along with Network Rail and Whyfield Accounting Services, to find out the answer to these and many more questions.

Watch now

2. You need to be a maths genius

 It’s not all about being great with figures. But you will need to have good qualifications. BDO wants candidates to have at least three A levels at grades A* to C as well as Maths and English GCSEs in grades four to nine.

Communication skills are vital. BDO Managing Partner Paul Eagland (himself a former apprentice) says: “Traditionally I would have said that intellect (IQ) and emotional intelligence (EQ) were the two most vital skills to a successful career in accountancy. A high IQ is needed to solve clients’ difficult technical challenges. Equally, business is based on relationships which flourish with honest and transparent communication and that’s why EQ is so important.”

… And there’s more

Eagland adds: “There is now a third skill needed: what I would refer to as digital quotient (DQ). Advancements in technology and digital processes have disrupted almost every aspect of daily life, created completely new markets and are challenging traditionally successful organisations. DQ is the area where a skills challenge is most likely but our apprentices have grown up in a world where “the internet is king” and where technology is at the core of almost everything they do.

“Learning how to utilise new technologies is second nature so taking on apprentices means from the very beginning of their career our advisers of the future are fully prepared to meet the demands of our clients now and going forward”.

Key takeout: You don’t need to be a maths expert. There are other skills just as important including digital skills.

3. Apprentices won’t climb the career ladder as fast as graduates

Not true says Lewis Scott, Digital Marketing Manager for website “not going to uni”. “Apprentices will typically find themselves progressing on the career ladder at an accelerated rate to their peers who have taken different routes. This is due to the experience they gain which makes them a lot more reliable to employers.

And James Brent, Director at Hays Accountancy & Finance says: “One of the huge benefits of apprenticeship schemes is that they help young professionals become familiar with an industry and a company, which can really help to get ahead in your career. Once completing an apprenticeship, your experience in addition to your qualification has the potential to springboard your career in accountancy.”

BDO’ Eagland adds: “BDO’s Leadership Team is made up of a number of former apprentices, including me, so I see us all as an example of how you can climb the career ladder with or without a university education.”

Key takeout: Apprentices progress just as fast as graduates.

4. University is better if I want to be a top accountant

University is a great experience. But it’s also an expensive one: in 2018, the typical graduate had debts of £36,000. Do you really need a degree to be a top accountant? Brent says: “Specific qualifications are certainly required for many career paths, but going to university or taking time out solely for study isn’t the only way to land an accountancy role.  

“One of the huge benefits of apprenticeship schemes is that they help young professionals become familiar with an industry and a company, which can really help to get ahead in your career. Once completing an apprenticeship, your experience in addition to your qualification has the potential to springboard your career in accountancy.”

In addition, accountancy graduates gain invaluable experience: they will be working on real business projects and learning from experts in the field. This might be more appealing than the lecture theatre/academic study of a university course.

Key takeout: Earn while you earn or accumulate student debt: that’s apprenticeships versus degrees.

How to build a great career with an AAT apprenticeship

Have you considered an apprenticeship as a route to gaining your qualification and getting the skills needed to progress your career? Do you have unanswered questions about how they work, who they are for and what roles that can lead to? Look no further, hear from us, along with Network Rail and Whyfield Accounting Services, to find out the answer to these and many more questions.

Watch now

5. I won’t make any money

Scott adds: “Apprentices get apprenticeship wages and upon completion of said apprenticeship, they will be paid at a competitive rate. We often see ex-apprentices actually being paid more simply because of their experience and advanced skill set.

While completing an apprenticeship, you’re being paid and learning. At university you’re paying to learn and amassing large amounts of debt. There are benefits to both of course, and it’s all down to the individual person and personality type to decide which would be best suited.”

Key takeout: You’ll earn as you learn and progress on the career ladder as fast as a graduate.

6. I won’t be as employable as a graduate

Yes you will – actually, you could be even more so. And you’ll be able to swap industries, companies and sectors as you wish. The AAT qualifications you’ll earn as an apprentice are world-renowned and will open doors to you across many industries and sectors. Scott adds: “Apprentices can switch careers seamlessly due to the nature of an apprenticeship.

Learning soft skills in a working environment results in the growth of a person and we can see young people really finding themselves whilst completing an apprenticeship.  

7. Employers want graduate accountants

Not necessarily. Says Scott:  “We speak with employers every day and they all say the same thing: apprentices are more employable than graduates. Employers value experience and understanding over anything. An apprenticeship will give you the educational knowledge, hands-on experience, the understanding of a working environment, understanding each individual role and also the ability to adapt and utilise your own skills to be the best.” 

In today’s working environment there is a place for both graduates and apprentices. “Not everyone wants to go to university” says Eagland. “Many prefer the idea of not having student debt and being able to ‘earn while they learn’, so we think supporting apprentices is incredibly important in order to create a diverse workforce that represents society as a whole.”

In summary

Being an AAT apprentice is the start of an exciting career as an accountant. It is not the easy option: you’ll be studying while working and to get to a Level 4 will take typically three years. And there is healthy competition for apprenticeship places.

But the rewards are great: no accumulated student debt; practical, not just academic experience and learning ‘soft skills’ – interacting with others in the office, dealing with customers – you wouldn’t get at college.

Further reading:

Start marketing your business with these 3 tools

Posted by & filed under Members, Run your business.

Starting a new business can feel like you’re on a seesaw. Whilst you’re focussing on one area, others can drop – because it’s all on you.

When you’re the only one on the payroll, it can be hard to cover multiple areas at once (to the degree you’d like to), so we’ve rounded up the best business tools that will enable efficiency and growth from the get-go.

Tool #1 Website builders

Launching your website is an absolute business essential. Make this your number one priority.

Which makes website builders our number one tool to ensure you work smarter, not harder, in your business.

UK consumers were expected to spend £106.46bn online in 2019. This makes up 22.3% of all retail spend, a proportion that will reach 27.9% in 2023.

Your website is your digital basecamp – it’s the place your marketing activity points back to, the platform that ranks in search results. It tells the world about your business – what you are, what you offer, where to find you, how to get in touch. It’s important to get right.

Thankfully, the website builder boom in recent years has led to the creation of a number of extremely reliable, secure and user-friendly platforms that can help you launch your website on a small budget and at lightning speed.

The best bit? You don’t need to touch one line of code (unless you want to!).

You no longer have to enlist the skills of a website developer or spend hours figuring out domain hosting – simply set up an account and the builder will help you create a website that suits your style and business goals.

Website builders like:

will help you secure a domain name, provide a vast library of templates to choose from, and offer a drag-and-drop approach to content and function population. Below, you’ll find some of the main things you’ll need to consider before building your website. 

Key tip: Invest in quality photos/images for your website & marketing with some of the money you saved by using a DIY website builder. While there are some decent royalty-free images out there, you run the risk of other businesses using them too. A quality library of images (branded and non-branded), including an eye-catching logo, will be the gift that keeps on giving.

Key considerations before you create your website

1. What’s the main aim of your website?

Decide on this aim or goal, e.g. for customers to call your office and book an appointment, and then make it as easy as possible for your customers to complete this goal.

2. Brand guidelines

Ensure the template style and functionality reflects how you want your brand to come across. You might not have time to establish official brand guidelines yet, but keep consistency in mind at this early stage.

3. Room for growth

Does the website-builder have the features you need to expand with your business plans?

4. Integration

Do a quick check that the website builder you select integrates well with any existing accounts you currently have (and wouldn’t want to change) e.g. Mailchimp.

5. Responsive design

The majority of website builders will ensure that your website design adapts to the device it’s being viewed on (mobile, laptop, etc). When you’re selecting a template, view its mobile version at the same time to ensure you’re happy with both presentations before populating with content.

Tool #2 Customer Relationship Management (CRM) systems

Imagine being able to communicate with each of your customers in a completely tailored way – and it’s all automated. This is just one of the features of a CRM system.

In a nutshell, CRMs are designed to improve your interaction with both current and prospective clients. They collect and analyse customer data, alongside automating marketing campaigns that are tailored to customer preferences and interactions with your company.

These systems are an extremely powerful tool in your sales and marketing kit – they’ll streamline your sales pipeline and save you time liaising with, and retaining, customers.

Here are some of the main CRM providers and a summary of their features: 

1. Zoho CRM

Overview:

  • A popular choice for SMBs that want to get going with CRM quickly and affordably
  • A web-based CRM system that is highly customisable
  • A great solution for tight budgets, looking for helpful data
  • Good scalability and integration with other software
  • Responsive support team
  • Recently introduced Zia – an AI sales assistant, offering insights on trends, conversions, etc.
  • Zoho MarketingHub also available, offering additional features such as website behaviour tracking, survey campaigns and a marketing planner

Cost:

Per-user/month:

  • Standard: £10
  • Professional: £16
  • Enterprise: £30
  • Ultimate: £85

Free package worth trialling out the features but paid plan will offer more for your money if you’re planning serious business growth.

2. Hubspot

Overview:

  • HubSpot offers a completely free version of its CRM, making it a popular option amongst SMBs
  • Basic features provided such as a clean, visual dashboard, company insights, deal tracking and pipeline management
  • Sales, productivity and individual performance reports
  • Includes tools that notify your salespeople the minute a prospect opens their email or visits your website
  • Free meeting scheduling, live chat, email templates and click-to-call functionality
  • Customisable and integrates with popular apps such as SalesForce and Shopify
  • Add-on services for when your business grows e.g. Marketing Hub and Sales Hub

Cost:

FREE forever.

Unlimited users, data and up to 1,000,000 contacts with no time limit or expiration date. Whether you’re a team of 1 or 1,000. Full pricing details.

Starter, Professional & Enterprise pricing options per ‘Hub’ e.g. Marketing Hub, Sales Hub, Service Hub if you want extra features.

  • Starter: Starts at £42/month
  • Professional: Starts at £330/month
  • Enterprise: Starts at £990/month

3. Salesforce

Overview:

  • Coined the world’s no.1 CRM platform for business of all sizes
  • Massive range of features
  • Great customer support
  • Track sales journey, automate
  • Single view of each customer
  • One-click reports
  • Good scalability
  • Can be integrated with 3,000+ apps. Secure mobile app
  • Sign up for a guided tour

Cost:

Per-user/month, billed annually:

  • Lightning Platform Starter: £20
  • Lightning Platform Plus: £80
  • Lightning Platform Unlimited: Request a Quote

Tool #3 Email marketing

If used correctly, email marketing can be one of the most effective channels for promoting your business.

Most importantly, it’s an inexpensive way to upsell to existing customers, convert leads and store data.

There are a number of user-friendly email marketing platforms out there that allow you:

  • to manage your data lists
  • create call-to-action emails
  • personalise emails
  • create email design templates
  • send campaigns and track them

You can also automate campaigns, so you can crack on with other areas of your business.

Some of the most popular platforms include:

1. Mailchimp

Overview:

  • Free to use plans available
  • Paid ‘plans that grow with you’
  • Easy to use including ready-made templates and drag and drop builder
  • Integrates well with website builders and social media channels

Cost:

Per-month plans:

  • Basic: £0
  • Essentials: £9.99
  • Standard: £14.99
  • Premium: £299

2. Drip

Overview:

  • Good integration with Ecommerce CRM data to personalise and automate marketing emails
  • More than just email: Multi-channel touchpoints
  • Clear-cut revenue analytics
  • Additional integration e.g. add or remove leads to Facebook Custom Audiences based on automation action triggers, sync with your Magento store, use Shopify store customer data to personalise your multi-channel strategies at scale
  • Drip REST API available to unleash even more ECRM if you/your coding friends want to ‘explore what’s possible’
  • Comprehensive ‘Learn’ section including an intro course, guides and user manual

Cost:

Per month plans:

  • 14-day free trial
  • Starts from £36.72 – then subject to number of contacts in your account

3. Dotdigital

Overview:

  • More than just email: SMS, push notifications, social and more
  • Create, test and send data-driven automated campaigns
  • Good integration options including Shopify, Salesforce, Microsoft Dynamics 365 and Magento, as well as key business systems such as Ecommerce platforms and CRMs
  • Real-time, rich insights
  • Dedicated onboarding services for seamless migration
  • Global 24/5 support from expert technicians

Cost:

Per month plans:

  • 14-day free trial
  • Packages: Accelerate, Amplify and Custom. Must request pricing packages directly via website submission form

In summary

Just getting started with marketing your new business, can be the biggest hurdle. But with a background in finance, not marketing, you can certainly be forgiven.

Prioritise that website to establish your online presence. Next up, get your client list onto a CRM to start automating and structuring your customer touch points. And finally, we recommend getting an email marketing tool like Mailchimp. Compared to running a successful social media account, email marketing is a much smaller time commitment, but can be very effective.

Let us know how it goes

Read more on marketing your business:

Study tips: Advanced aspects of time management

Posted by & filed under Advanced Diploma, Students, Study tips.

The sixth and final article of our series on some of the trickiest areas at Advanced level.

Study Tips: Advanced Level series

We’ve worked through a business scenario to illustrate how the AAT Advanced Diploma in Accounting can be applied, in practice, to the typical day-to-day tasks of a part-qualified Accounting Technician.

This final visit to Gorgeous Threads & Co sees Lewis using a spreadsheet to work out how to effectively manage his time, in order to complete a project he has been given by his manager.

Using spreadsheets to manage your time

The project is divided into two parts, and Part One will need to be finalised and signed off before Part Two can be started, as there won’t be an opportunity to go back and amend it. 

Part One is made up of three sections which are not related and all have sub-sections. 

Part Two is in two sections which again aren’t related, and have a number of sub-sections. 

Lewis’s manager has given him a breakdown of how many elements are in each sub-section and the time allocation for each part.

As it’s quite confusing, Lewis has put all the information he has onto a spreadsheet to make it easier to understand. He wants to work how to best manage his time to get the project completed by the deadlines, before he starts actually doing any of the work required.

Click here to download his spreadsheet and replicate Lewis’s work.

Lewis starts by using ‘AutoSum’ to find out:

  1. How many elements are in each sub-section
  2. How many elements are in each part

He can easily see that in in Part One the 45 elements are equally distributed between the three sections. As Lewis has 75 hours allocated to Part One he can logically, spend a third of the time on each.

Part Two doesn’t divide as simply but Lewis is comfortable working with proportions as he uses profit ratios for financial accounting and he proportions overheads in management accounting. 

The maths is the same, he just applies it in different contexts. In this case, he needs to work out what the number of elements in each sub-section are as a proportion of (divided by) the total number of elements in Part Two and then apply that proportion to (multiply by) the total time he has available:

He can then absolute the cell references (discussed in Part 3) to G14 and G2 and drag the formula to H15:

Lewis reduces the number of decimal places so that the time allocated is rounded to whole numbers and he cross-checks that the total of cells G15 and H15 are 90, by looking at the value shown for ‘SUM’ on the bottom tool bar, when both cells are highlighted:

Lewis now has a basic time management plan that allocates 25 hours to each of the three sections in Part One, which he can complete in any order but must all be finished before he starts Part Two. 

Then in Part Two, 41 hours are allocated to Section 1 and the remaining 49 hours to Section 2.

Lewis is pleased with his plan but is also a little uneasy about Part Two and Section 3 of Part One, because the number of elements in the sub-sections are not evenly distributed.  

He therefore decides to break his time management plan down further.

He repeats the proportioning formula he wrote to allocate the hours for Part Two but this time divides the number of elements in the sub-section by the total number in the sub-section and multiplies by the time allocated to the section:

Now Lewis can see that when he’s working on Section 3 of Part One, he should spend seven hours on the first section and only two on the second, in order to give himself enough time to complete the last sub-section, which contains the most elements.

Likewise in Part Two, the final element contains the most sub-sections of the whole project.

Therefore, he’ll need to be very mindful of his time keeping to ensure that he still has 25 hours left at the end of the project to fully complete this last bit.

In summary

Lewis is aware that what he’s produced today is a theoretical plan which he can monitor his progress against, to keep himself on track – just like the budgets Gorgeous Threads’ monitor on a monthly basis.

The time management plan has shown Lewis that he’ll not be able to spend more time on an element than has been allocated, without risking running out of time. 

Therefore, he’s now off to check what’s involved in each section of the project to ensure that he’s well prepared and will be able to complete it successfully.

Read more on AAT Comment;

 

Browse the full range of AAT study support resources here

Becoming an AAT apprentice changed my life

Posted by & filed under Apprentices, Career-boost.

Employers are being encouraged to look beyond traditional hiring routes to apprenticeship schemes that can unlock fantastic long-term career options.

It is hoped that parents and young people will also see past common misconceptions about apprentices and instead see them as the business leaders of the future, working across all sectors and in a variety of positions.

Apprenticeships can change lives

AAT has been at the forefront of demonstrating that apprenticeships aren’t just for young people wanting to enter blue-collar trades, like plumbing and joinery. Around 20% of AAT’s 90,000 students (two in three of whom are female) are training as apprentices; and they represent all ages from school leavers through to career changers. As these two stories show, AAT apprenticeships can significantly change people’s lives.

“I overcame homelessness to make it as an accountant” – Mimi Beard

Mimi Beard, 21 from Falmouth, Cornwall, works full-time in the Truro office of chartered accountants and business advisers, PKF Francis Clark. She attends a local college one day a week, as part of her apprenticeship.

Mimi has had to overcome huge adversity to get into her chosen career of accountancy.

“My upbringing was turbulent,” Mimi explains. “My dad left when I was four months old, and I was responsible for caring for my mum who had major mental and physical health problems. My twin was fostered when we were 15 and conversely I found myself homeless before I began my GCSEs.”

Dedication to success

At just 16, Mimi ended up in the Penzance branch of the YMCA, where she completed secondary school. Despite the challenges she’d faced, Mimi’s dedication to her education resulted in a fantastic set of GCSE results that enabled her to continue her studies further, taking on business and politics A-Levels at college.

Mimi really began to see the results of her hard work and determination when she secured a role with tech company Hi9, where her interest in finance began to grow. She then applied for KPMG’s work experience programme and was thrilled when she discovered that she had been successful.

Her enthusiasm and experience at KPMG, along with good grades in both her A-Levels and AAT Level 1 exam, secured Mimi a place on PKF Francis Clark’s apprenticeship programme shortly after completing college.

Mimi has now been at PKF Francis Clark for over a year and loves the challenges that work provides. “Every day is different,” Mimi explains, “and therefore work never feels repetitive. My employer offers a well-rounded approach to accountancy and they show me the different paths I could go with my career.”

Building on her experience

Mimi takes a very active role at PKF Francis Clark, continually learning new skills and building her experience and in 2019, she won the title of ‘Accountancy Apprentice of the Year’ at the Cornwall Apprenticeship Awards.

Mimi’s commitments also go above and beyond the office. Outside of her work and studies, she finds the time to support socially disadvantaged young adults. She regularly provides talks to employers about the importance of offering opportunities to the socially disadvantaged through education and employment. She also became an ambassador for a homelessness charity in 2019.

“Before studying, I was working part-time in retail” – Damilare Oladunni

Damilare Oladunni , 23 from Lewisham, South London, works as a Finance Assistant for Caplin Systems, an independent software company.

He’s currently studying for his AAT Advanced Diploma in Accounting, and has been studying AAT for nearly three years.

“Before studying, I was working part-time in retail,” says Damilare. “I decided to do the AAT qualification because it provides you with the perfect foundation for embarking on a career in the accounting and finance industry.”

Damilare is earning while he learns, combining four days a week doing a variety of tasks for Caplin with a day at college studying for his next exams.

Combining studying and working

“I often found studying and working challenging as I wasn’t sure how to best distribute my time,” he adds. “But my current system of working and studying enables me to be efficient in both aspects of my life.”

“I’ve benefited from employer support too, with regular meetings with my manager to ensure I am fully supported at work and with my studies. For one of the AAT exams I found most challenging, they organised a senior manager to sit down with me two or three times a week after work to assist me in studying.”

Away from the workplace, Damilare has been able to focus on his other love – boxing. “I’ve started taking part in charity events,” Damilare says, “but would like to join a professional boxing club because I enjoy keeping fit.”

Open doors to an exciting professional career in finance with AAT.

Further reading:

Inheritance Tax: end exemptions, scrap reliefs and halve the headline rate

Posted by & filed under Tax.

Echoing the report by the All-Party Parliamentary Group on Inheritance and Intergenerational Fairness, and ahead of the Chancellor’s Budget on Wednesday 11 March, AAT has called for several changes to be made to the current process around inheritance tax. Including halving the current headline rate from 40 per cent to 20 per cent.

AAT recommends that the headline rate of Inheritance Tax (IHT) be reduced from 40% to 20% and simultaneously, the majority of exemptions and reliefs should be ended. Mark Farrar, AAT Chief Executive, explains why.

Although only 4% of estates are liable for IHT, more than 50% of the electorate are concerned about this tax, perhaps contributing to its label as “the most hated tax” amongst the British public.

What are these concerns, why is it so hated and how could it be made fairer and more effective? These are all issues that AAT has considered carefully in recent years.

Avoidance

IHT can be significantly reduced, in some cases avoided altogether, with careful tax planning. Many exemptions and reliefs are complicated or at the very least, not widely understood, often requiring  professional advice for those that can afford it. It seems neither fair or desirable to have a tax that is so difficult to navigate that only the well advised are able to minimise their or avoid liability.

Double taxation?

Some commentators complain about perceived double taxation i.e. having paid tax throughout your lifetime,  you then have to pay it again in death. This conveniently ignores the reality that no tax is paid by the deceased precisely because they are dead! It is effectively the recipients of the estate who will receive a little less because of tax, those who in many cases will have made little or no contribution to the wealth amassed.

Double taxation arguments are very rarely used in relation to the many other taxes’ individuals have to pay which will largely be paid with money that comes from income that has already been taxed. It therefore seems curious to apply the argument here.

Continue, reform or remove?

Given the unpopularity of this tax, its relatively high headline rate; the inherent unfairness of many of the exemptions and reliefs and the increasing level of hostility towards its imposition; continuing with IHT in its current form for much longer is both unlikely and unwelcome.

For the same reasons, it’s no surprise that many have called for it to be scrapped altogether. However, this ignores the fact IHT raises well over £5bn a year and is expected to reach £6.3bn by 2023/24 according to the Office for Budget Responsibility. If scrapped, where is this much needed money for investment in public services going to come from?

There also remains a case for taxing wealth in this way as Winston Churchill stated, IHT serves as, “…a certain corrective against the development of a race of idle rich.” It might not be put in such strong terms today, but the need to provide some form of redistribution of assets accumulated over a lifetime is broadly accepted by most political parties.

In light of the above, AAT recommends that IHT be maintained but that reform is essential.

Halving the headline rate of IHT

Our response to the Office for Tax Simplification (OTS) in 2018 called for an end and reduction to many of the various reliefs and exemptions for IHT. Building on those recommendations, to increase the likelihood of acceptance amongst those who currently benefit from such exemptions, as well as making reform more politically acceptable and palatable to the wider public, AAT also recommends halving the headline rate of IHT from 40% to 20%. 

By halving the very high headline rate, incentives for avoidance or evasion will also be removed, which is likely to increase the likely tax take.

Exemptions and reliefs

As AAT highlighted in its submission to the OTS in 2018, Business Property Relief (BPR) and Agricultural Property Relief (APR) cost the taxpayer £1bn and lend themselves to encouraging assets to be held primarily, and often purely, for tax reasons.

For example, BPR, introduced in 1976 to make sure successful family businesses did not have to pay large tax bills to retain control of the business, was never designed as an avoidance measure or to promote AIM listed shares. There is no sound basis for allowing such an exemption to continue and that’s why AAT has long recommended this exemption be removed.

Charitable exemption

Likewise, the charitable exemption is an unnecessary complexity that adds little, if any, value. There is no evidence to suggest the exemption has led to an increase in charitable giving since it was introduced eight years ago. Although HMRC figures show that the cost of IHT relief for charitable donations rose by 79 per cent to £840m in the five years to April 2017.

This substantial additional cost to the taxpayer does not equate to any more charitable giving than would have otherwise been the case. It simply means that some estates are gaining substantial tax savings. That’s why AAT has long recommended this exemption be removed too.

The only exemption allowed should be for spouses and direct descendants up to a value of £500,000, including property, with 20% IHT payable on any amount thereafter.

Simplification

These changes would make the reservation of benefit rules and the POAT (pre-owned assets tax) code entirely redundant, removing considerable bureaucratic headaches for many – including HMRC.

By removing almost all of these exemptions and reliefs – as well as reducing the headline rate – the regime will be simple enough for all to understand and low enough for people to voluntarily pay, everyone would be treated equally and know exactly what their tax position is.

An additional benefit would be the substantial savings for individuals who will no longer have to pay large sums of money to solicitors, financial advisers or other professionals, to reduce their liability. Some in the legal and financial sectors may well oppose such reforms as a result.

Removing reliefs and exemptions will also mean that many more of the 500,000+ who die in the UK each year will be brought into the IHT tax base. Broadening the tax base in this way is also likely to increase the tax take.

In summary

Whether or not AAT’s recommendations would make IHT any less “hated” is open to debate but they would certainly ensure a much fairer and more effective tax, whilst still delivering significant sums of money to invest in public services and/or deficit reduction. Surely that’s an ambition most can agree on?

Further reading:

Step by step; how to set up an apprenticeship

Posted by & filed under Apprentices, Career-boost.

Recently there have been quite a few changes to the way that apprenticeships are designed, run and funded.

This apprenticeship reform has made them better for the employer, the apprentice, the industry and the economy. Whatever the size of your business, you will feel the benefits of setting up an accountancy apprenticeship scheme supported by AAT.

Why take on an apprentice?

There are no two ways about it, apprenticeships are good for business. Apprenticeship applicants tend to be extremely motivated individuals, committed to building a successful career with their employer. When you take on an apprentice you can nurture the talent and help it to grow with your business.

Apprenticeships are likely to lower your recruitment costs, reduce churn and the new levy puts the control of funding for apprenticeships in your hands. And employers get so much more than they would for simply putting students through an AAT qualification because it also covers the additional soft skills and behaviours that make a great employee.

The apprenticeship levy

Apprenticeships represent great value because they are funded through a levy or a 90-100% government contribution depending on the size of your business and the age of the apprentice.

Businesses with a payroll of over £3million have 0.5% collected by HMRC the same way as PAYE. All employers get a £15,000 allowance to offset against the amount they have to pay. The money gets put into an Apprenticeship Service account online and is topped up by 10% by the government. You can access this money to pay providers and colleges for your apprenticeship provision.

For smaller businesses (a payroll of less than £3million) the government will contribute 90% of the cost of delivering an apprenticeship. And for businesses with less than 50 employees, they will cover 100% of the cost if you take on a 16-18-year-old so you only need to pay their salary.

10 steps to setting up an apprenticeship

  1. First design a job specification and description for your apprentice to outline the type of person you’re looking for and what the role will entail.
  2. Find a local training provider who is offering AAT Accounting Qualifications and is registered as an End Point Assessment (EPA) venue.
  3. Decide what salary you will be paying your apprentice.
  4. Register for the Apprenticeship Service.
  5. Work with your training provider to advertise the apprenticeship vacancy.
  6. Conduct the interviews, bearing in mind that this might be the candidates’ first-ever interview and they won’t have much work experience. Make it as relaxed and informal as possible and let them talk about their life skills and passions.
  7. Select the successful candidate.
  8. Create an Apprenticeship Agreement which will state how long you’ll employ them for, the training you’ll provide, their working conditions and the qualifications they will get at the end. You can download an Apprenticeship Agreement template here.
  9. Deliver the apprenticeship in line with the agreed standards.
  10. There will be an End Point Assessment for the apprentice to aim for to make sure they have all the right skills.

Key takeaways

The main benefits of taking on an apprentice or developing an apprenticeship programme with AAT are:

  • To attract and grow talent in a flexible way.
  • It’s cost-effective – you are in control of the funding and the government will contribute to the majority (or all) of the cost.
  • You can design the way your apprenticeship is structured so that it meets your needs, the apprentice’s needs and that of the industry and the wider economy.

Summary

Apprenticeships are of great benefit to the individual, the company, the industry and the economy. They can be a great way to build a motivated and loyal workforce to give your business a competitive edge. The more you put into designing a great role, apprenticeship recruitment process and structured work experience with training, the better the candidate you will attract and the better the employee that they will turn into.

Next steps

AAT can support you with setting up your apprenticeships every step of the way. Answers to any questions and lots of useful downloadable free resources on turning an apprentice into an accountant can be found here. A regional account manager can also come into your business to discuss the best options for you.

Further reading:

Learn smarter – which learning style suits you best?

Posted by & filed under Study tips.

When it comes to learning we all apply a mixture of techniques, although the majority of us tend to have one preferred method.

Our learning styles are not fixed but can be defined. The key is to find what works best for you.

According to Dunn and Dunn’s learning styles model (developed in 1978), knowing your dominant learning style can lead to more efficient study, improved performance in tests and more rewarding learning.

There are several learning style models; the most coming is Fleming’s ‘VAK’, which categorises people as

  • visual
  • auditory
  • or kinaesthetic (tactile) learners.

Here are some of the traits commonly associated with the different learning styles so you can identify which is most like you.

Visual learners

Visual learners learn best by seeing and reading.

They tend to have a preference for visual aids, such as handouts, diagrams and images, and favour information presented in colour.

Visual learners often prefer quite solitary study.

Auditory learners

Auditory learners learn by listening to the spoken word.

They prefer to hear information in lectures, tutorials or group discussions and enjoy talking things through and reading aloud.

Auditory learners are good at explaining complex concepts, remembering names and learning foreign languages and they may use acronyms to remember facts.

Kinaesthetic learners

Kinaesthetic learners learn through touching and experiencing.

They prefer a more hands-on approach to study via active exploration, role playing, studying through memory games with others, making notes and memorising flash cards.

Kinaesthetic learners prefer studying with music on and they take frequent breaks.

In summary

It’s important to keep in mind that each style has advantages and disadvantages; there’s no right or wrong learning method.

Your individual style is not supposed to restrict you, but to help you get the most out of your efforts.

To find out which learning style works best for you, try completing a learning styles questionnaire online such as the free quiz at teachertools.

Jodene Murphy is a Qualifications Development Manager at AAT and an Education Consultant at True Volunteer Foundation. 

Read more on studying effectively;

Browse the full range of AAT study support resources here