Accounting for a bank loan under FRS 102 Posted 11/22/2018 by Steve Collings & filed under Financial accounting and reporting. FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland deals with financial instruments in two sections: Section 11 Basic Financial Instruments and Section 12 Other Financial Instruments Issues. Most, if not all, reporting entities will have some financial instruments which are treated as basic financial instruments, such as: trade debtors and creditors; intra-group loans; directors’ loans; and straightforward bank loans. Effect of the triennial review The triennial review, which was completed by the Financial Reporting Council (FRC) in December 2017 gave rise to new FRSs being issued in March 2018. The March 2018 editions of UK GAAP are mandatory for accounting periods commencing on or after 1 January 2019. Early adoption of the triennial review amendments is permissible, provided all of the amendments are applied at the same time. There two exceptions in respect of the directors’ loan account amendment (see FRS 102 (March 2018) paragraph 11.13A) and the gift aid amendments (see FRS 102 (March 2018) paragraph 29.14A) which can be early adopted separately without having to early adopt FRS 102 (March 2018). The FRC included an additional paragraph 11.9A which provides a description of a basic financial instrument. Prior to the introduction of paragraph 11.9A, a financial instrument could only be classed as basic if it met all the detailed conditions in paragraph 11.9. The inclusion of a description of a basic financial instrument in paragraph 11.9A means that if the financial instrument fails to meet the detailed conditions in paragraph 11.9, but meets the description of a basic financial instrument, the instrument can still be classed as basic. This will result in a small number of financial instruments now being eligible to be treated as basic and accounted for under the amortised cost method rather than non-basic at fair value under Section 12. Accounting for a straightforward bank loan under FRS 102 One of the challenges faced by AAT Licensed Accountants is how to account for financial instruments such as bank loans under FRS 102. The amortised cost method was a new method for most accountants and the way it works in practice was initially unfamiliar. The ‘amortised cost (of a financial asset or financial liability)’ is defined in the Glossary to FRS 102 as: ‘The amount at which the financial asset or financial liability is measured at initial recognition minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount, and minus any reduction (directly or through the use of an allowance account) for impairment or uncollectability.’ A straight forward bank loan will fall under the scope of Section 11 and hence be accounted for at amortised cost. The accounting for this loan can be done using Microsoft Excel; in particular, the ‘Goal Seek’ function to calculate the interest in the loan which will be charged to the profit and loss account over the life of the loan. Using the Goal Seek function in Microsoft Excel can be an efficient use of time as (provided the payments or receipts do not change throughout the life of the loan), the same schedule can be used each year in the working papers file. Do watch out for loans which have a variable interest rate, which will be examined in a future article. FRS 102, paragraph 11.20 states: ‘If an entity revises its estimates of payments or receipts, the entity shall adjust the carrying amount of the financial asset or financial liability (or group of financial instruments) to reflect actual and revised estimated cash flows. The entity shall recalculate the carrying amount by computing the present value of estimated future cash flows at the financial instrument’s original effective interest rate. The entity shall recognise the adjustment as income or expense in profit or loss at the date of the revision.’ Conclusion Accounting for basic financial instruments can be complex under FRS 102 and it is important that AAT Licensed Accountants fully understand how the amortised cost method works. This will ensure that (a) the financial instrument is carried in the balance sheet at an appropriate amount and (b) the interest income or expense is reflected in the profit and loss account correctly.
Vernon Anderson – from AAT branch network to AAT President Posted 11/21/2018 by Laura Oliver & filed under Inspiring stories. Current AAT President Vernon Anderson FMAAT, is no stranger to positions of leadership and responsibility – before taking on the top job in September this year he was vice president and already an elected council member. As a qualified AAT accountant, he’s also been a managing director of his own business and worked as a responsible finance officer for several medium and large town councils in the UK. “Having been a council member for several years, I was aware of the role of the president, but never imagined I would be given the opportunity to take on the role one day,” says Anderson. Shaping the future of AAT “I have always wanted to make a difference and to help shape the future of the AAT as I believe it is an excellent organisation that really supports its members, and provides so many opportunities for students to change, not only their careers but often their lives.” But his commitment to representing the organisation and working hard for the benefit of members is perhaps best shown by his more than six-year participation in the AAT’s Bristol Branch, where he has been a committee member and chairperson. There are 50 local AAT branches covering the length and breadth of the UK and one internationally in Botswana. For Anderson, getting involved with his local branch was a chance to meet like-minded people and network and the enthusiasm of the branch’s committee was enough to convince him to join them. “It was not long before I took on the role of Chairman, which worked well as I was also a chief executive of a town council and had a similar role, working with committees, producing minutes, handling people, and giving presentations,” he explains. “I wanted to use my business skills to help the local branch grow and it also helped me personally to improve my networking and presentation skills.” The impact of AAT’s branch network His work with the Bristol branch involved meeting and greeting members, booking speakers and venues for them, preparing a yearly schedule of subjects, delegating roles to committee members, giving presentations at local colleges to encourage students to become involved and dealing with members’ questions. “Members can derive so many benefits from attending their local branch events,” says Anderson. “They can make new friends and swap knowledge and ideas, they can keep their CPD [continuing professional development] up-to-date by learning new skills, they can gain confidence by liaising with other accounting technicians and sometimes also employment if another member has a vacancy in their business.” As an unexpected perk, if you’re a member of the Bristol branch you might even get a full cooked breakfast for free on a Saturday morning courtesy of Bristol golf course – the branch moved its events here during Anderson’s tenure. “It [the change of venue] also encouraged more members to attend as events were held on a Saturday, which was more beneficial to members – they didn’t have to attend after a day’s work and were less tired and more attentive,” he says. I wanted to use my business skills to help the local branch grow Accommodating members needs To make events most effective branches must pick venues with great facilities, such as ample parking and at a reasonable distance, he adds, and pair these with great speakers covering subjects in which members have told the branch they are interested. A forthcoming event in Bristol will focus on wealth management, for example, with local experts discussing tax-efficient investment and pension and inheritance planning. Previous events had included talks on changes to VAT rules and charity accounting. For AAT members who haven’t thought of joining their local branch, Anderson thoroughly recommends it and suggests starting with an event that appeals to them personally or professionally. Branch officials can then introduce them to regular members to make them feel as welcome as possible. If, as he did, branch members or attendees want to take their involvement further Anderson suggests talking with the branch committee for more information: “I would explain that their involvement would give them so many opportunities both with their career and also personally. They would gain many new skills and hopefully also make many friends in the process.” AAT members can also find branch members local to them via the association’s online discussion forum. From AAT branch chairperson to AAT President Anderson hopes he can apply everything he’s learned from working with a branch to his role as AAT President. His experience of growing and running an organisation at the local level will prove invaluable, as will his hands-on approach, enthusiasm and commitment to innovation. Ultimately, however, as in Bristol, his focus will be on the members and their experience: “My priorities will be to ensure the new management structure runs well and to introduce the members assembly, a new group especially set up for all our members to have more involvement.”
How small businesses can protect themselves from data breaches Posted 11/21/2018 by Nick Martindale & filed under Financial accounting and reporting. Recent high-profile data breaches involving the likes of British Airways, Equifax and Facebook have highlighted the very real threat to businesses from cyber-attackers and other parties with designs on the data they hold. But a statistic from the government’s Cyber Security Breaches Survey 2018 might have more impact for smaller firms, with 43% of all businesses admitting they have suffered a data breach or cyber attack in the last 12 months. The threat to small businesses The threat is extremely real and affects businesses of all sizes, including small entities. “Historically, the fact that options for small and medium businesses (SMBs) have been few and far between, coupled with IT resource issues, has made them easy pickings for hackers,” says Arne Uppheim, director of SMB at Avast. “While there are more cybersecurity options available to SMBs today, many smaller companies have not changed their approach to security. “According to our research, 45% of small businesses will only conduct a full health check of their IT infrastructure after a cyber-attack has occurred,” she adds. “This needs to change; security cannot be an after-thought.” Technology protection Technology is helping businesses of all sizes reduce their chances of falling victim to a data breach, and of being able to withstand one should it occur. Uppheim stresses the need to go beyond traditional anti-virus measures by adopting a multiple-layered approach which also includes firewalls and intrusion-detection systems. “Firms should be updating their firmware and software on a regular basis too, and implementing proper usage access rights for their employees,” she says. Many of the major data breaches reported in the past two years were due to website breaches, platform or web application vulnerabilities, or misconfigured cloud services, says Pascal Geenens, Radware’s EMEA security evangelist. “The first two can be protected by web application firewalls,” he says. “Known vulnerabilities in widespread platforms – such as the ‘Struts’ vulnerability that was leveraged against Equifax – can be blocked through negative (blacklist) security policies while unknown vulnerabilities and custom applications are better served through positive (whitelist) security policies.” The final category can be prevented through cloud workload protection, he adds, using machine and deep learning techniques to spot anomalies in configuration and use of resources. Control access privileges Technology can also help ensure businesses control who has access to hardware and software. “Some common failings that small organisations can be guilty of include a failure to identify and manage all of their software or hardware assets, whether shadow cloud solutions or servers bought on credit cards, says Colin Marden, chief operating officer of iDENprotect, which provides technology that uses inbuilt security features on a mobile device, such as thumbprint or facial recognition, to give people secure access to corporate files and servers. “It may be easier if everyone has admin privileges on the system or if passwords are shared, but it also may facilitate fraud or information breaches. There is also often a failure to manage endpoints, which means staff accessing their email or systems from insecure personal devices.” Monitoring systems for any weaknesses is also vital, and increasingly technology is helping this to be automated rather than relying on humans, says Sean Keef, technical product marketing director at Skybox Security. “In 2017, there were more than 14,000 new common vulnerabilities and exposures published – more than double the amount of the previous year – and 2018 is on track to surpass even that record-breaking figure,” he points out. “Add to that other security weaknesses, such as misconfigurations and overly permissive access, determining how best to minimise risk is an insurmountable challenge if relying on manual means alone.” Find alternatives to sending information There are other measures small firms can take using technology to help reduce the risk or lessen the impact of any data breach. Natasha Kobrak, senior product manager, tax and accounting, at Wolters Kluwer UK, stresses the potential of collaboration platforms such as its CCH OneClick product as an alternative to sending documents or other information over email. “Documentation can only be exchanged between the relevant contacts associated with that account, doing away with any risk of human error when sending information via email,” she says. Fraser Kyne, chief technology officer at Bromium, highlights a trend towards virtualisation-based technologies, which focus on mitigating the impact of any attack rather than detection. “By opening each web page, document or email in a micro-virtual machine, even if a user does click on something bad, it has no impact on the business as it is isolated from the rest of the device or network – the hacker has nowhere to go and nothing to steal,” he says. “Effectively, it’s like having a stack of multiple disposable PCs so when you close the browser or document, the malware is thrown away as well.” Up to now, this kind of technology has been used largely by governments, the military and large enterprises but it’s now possible to install this level of security on any laptop. “Many businesses still don’t know about virtualisation in a security context but this is changing and soon we will see virtualisation being built in as standard,” he says. “For instance, the latest HP laptops now come with SureClick which uses Bromium’s virtualisation-based security to provide browser protection.” Preparing for the worst Small businesses also need to have robust plans in place so they can access data should an event take place. “This includes ensuring that data backup and recovery processes are followed so that critical data is saved should the worst happen,” says Florian Malecki, VP products at data management and protection firm StorageCraft. “In addition, many small businesses find that as they scale, the volume of data they send, receive and store grows exponentially, with existing storage systems unable to cope, becoming liable to crashes or failing backups, leaving systems vulnerable to attack as a result. If businesses fail to invest in scalable storage architecture or don’t work with managed service providers to scale as they grow, they are at risk of outgrowing their storage architecture, potentially leading to data loss and increased susceptibility to ransomware.” Being able to respond quickly to an incident is also vital, which means using technology to identify any attacks. “The goal of any organisation should be to reduce the ‘dwell time’ – the time from when the attack starts to when it is identified,” says Rashmi Knowles, field chief technology officer, EMEA, at RSA Security. “To meet this requirement organisations need to invest in monitoring technology such as Advanced SIEM (security incident and event management) to identify the attack as soon as it starts and improve response time after the attack is identified. SIEM platforms also offer behaviour monitoring solutions to combat the risk of insider threat.” Hackers exploit human error But technology alone is not sufficient to help protect from, and respond to, the increased threat of a data breach or cyber attack. “There are some great tools available to tackle the spread of cybercrime, but it’s also important to recognise the dangers associated with poor security practices at the employee level,” says Uppheim. “Humans make mistakes and hackers like to exploit human mistakes, so businesses should be discussing security best practices with their employees on a frequent basis. If employees know how to spot phishing links or an email with malicious intent, the company’s overall security posture will improve.” Perhaps the biggest danger of all for small firms is thinking that they are too small to be of interest to hackers or cyber-criminals. “Cyber-criminals very often target small businesses as they are rich pickings for personal and financial data,” warns Knowles. “They know that smaller companies have many vulnerabilities and open doors for the adversaries to compromise.”
Moving your business abroad – can you retain the same clients? Posted 11/20/2018 by Marianne Curphey & filed under Run your business, Students. A different lifestyle, better weather, interesting culture, or the opportunity to grow and expand – there are many reasons why accountants and bookkeepers might want to relocate. We talk to experts on how to manage the process and talk to a successful accountant who made the move nearly ten years ago, and never looked back. Making preparations Preparation is important, so the earlier the better. The amount of time you need will depend on whether you are moving wholescale, or just testing the water. “There are so many reasons for a business move – expanding markets, better distribution, easier access to appropriate staff, and, of course increasingly, remote working has become a lifestyle choice for many who don’t want to be tied to a desk, engaging with a widely dispersed workforce,” says Erica Wolfe-Murray, a leading business and innovation expert and founder of Lola Media . Research is the key to a successful relocation but you cannot just rely on desk research, she says. “You have to talk to as many people as you can find – both those who have done it successfully and those who have failed. You will often learn more from the latter. They may also be able to provide you with helpful fixers, legal teams etc. And don’t just start with one location – have options.” Should I keep my home in the UK? “It really depends on the nature of your business, whether you are closing down all operations here, starting a new smaller satellite office, or just remote working with your laptop,” she says. “The bigger and more complex your requirements at the other end, the longer the lead time needs to be.” Then there is the question of what to do with your home and business premises in the UK. “Decisions about property remaining here need to be made in context of what your longer term plans are, whether you own or rent, whether you are closing your operation here or mothballing it,” she explains. “Only you will know whether you want to burn your bridges or may want to return. Explore both scenarios fully before you make any decision.” What is your long term strategy? VHR Technical Recruitment have opened offices in Abu Dhabi, Valencia, and the Czech Republic, and as international recruiters, say you should only move abroad if it suits your business’ long-term strategy. “Can you cover costs, losses, manage disruption and staff turnover?” says Ryan Abbot, divisional director of VHR. “Consider the worst-case scenario where you are over the next three years, and compare that to the worst-case scenario where you’re considering moving to.” With Brexit, lots of businesses are uncertain, lots of smaller businesses that depend on their networks are feeling uncertain. One big company moving will have a ripple effect on the whole industry, so we may see more businesses cutting their loses and making a move. Carving out territory before all your competitors arrive is a smart move, and it’s vital to take that first step as soon as you’re sure it’s the option for you, he says. What factors affect a move? Mr Abbot says it is important to really research and understand what you will be facing in your new country. Don’t forget to think about: Schooling – how will your family cope with the new system, and will you have to pay? What is the admissions system and how far in advance do you need to apply? Tax – you need to understand exactly how much you’ll be paying, and how the tax system works wherever you’re going to. Culture: History, politics, and other factors can drastically alter how viable a move might be, so take some time to research where you’re going, and make sure that everyone involved knows what part they have to play. “VHR have worked in the Middle East for over a decade, but setting up our first Middle East office (Abu Dhabi in 2015) meant reviewing our technology and communication methods to facilitate the best possible co-working between and across our offices. The 42° heat at the height of summer was the hardest adjustment to make!” he says. All of my clients are from the UK, and most of my work comes from word of mouth The pros and cons of relocation Mr Abbot says the potential advantages of a move could be better business rates, less tax, better access to candidates or client work, and greater certainty over the future. Drawbacks include the large initial cost of a move, potential language barriers, cultural differences and homesickness. “Start by appraising your business plan for the move, how it aligns with your overall aims and objectives, and whether it makes long-term sense.” Make sure it’s financially and legally feasible. Then look at your team. Who would move? Who would thrive in a new environment? Are there any language issues? There are so many things to consider, give yourself as much time as possible to cover all the bases. If you’re leaving for good, one option is to liquidate your UK property to help with overhead costs. Potentially keep it and rent it, so if you do ever need to return, you have that stable base of operations waiting for you. What if I want to return? A move back is probably much simpler than an outward move, says Erica Wolfe-Murray. “Unless of course some considerable time has elapsed – in which case you need to bear in mind how fast markets evolve and change. Have you taken this into consideration and researched what is happening here?” “First of all, keep your UK bank account open,” says Mr Abbot. “This gives an official line of communication that you can access whenever you feel like you might need to return. The only way you can officially move your company’s registration to another country is by dissolving it in the UK (closing it down) and incorporating it through the relevant registrar of companies in another country.” Alternatively, you could register a new company in a different country and use your existing company name. “This will be permitted because both companies will be part of the same group. These processes, however, can be time-consuming and costly. But it will mean you can simply return when you need to.” Case study – accountant Paul Smith Paul Smith FMAAT, 48, is a Licensed member of AAT and runs his own business Paul R Smith Ltd from Halifax and Florida. He set up his own business in 1999 and since 2008 has been based in Florida but working with UK SMEs, doing everything from book keeping, payroll, tax and income. He comes back to the UK four times a year for up to a month at a time to catch up with clients and attend training and CPD sessions run by AAT. For the remainder of the time, he uses AAT online resources and podcasts for information, and talks to clients by phone, Facetime audio or WhatsApp audio. “The time difference between the UK and Florida actually works well for me,” he says. “Clients appreciate being able to discuss tax matters with me at 8pm UK time, as it doesn’t interrupt their working day. I can also log onto their online accounting systems in my evening time, when I won’t be disturbing them.” He moved for the lifestyle and the weather, having had a serious motorbike accident in 2001 which meant he has titanium plates in his body and is likely to suffer from chronic arthritis as he gets older. He is now much more active and is training for a half marathon. He was one of the first to get a VOIP (voice over internet protocol) phone system which means that his phone is routed through the internet. This enables him to have a local Halifax number which clients can call without having to pay the cost of an international call. “I still keep my own house in the countryside in Halifax, and I come to the UK for three to four weeks,” he explains. “All of my clients are from the UK, and most of my work comes from word of mouth, so I don’t have to explain that I’m based in Florida, as people already know. My sister works for me in the UK, and she can visit clients if they need any face to face help.” He has a ten year old daughter who goes to school in Florida, and an American wife. He says being married to US citizen did make it easier in terms of settling and working in the US. “I find that I am more efficient working this way. I got my Green Card (which enables you to live and work permanently in the US) in 2013, that was five years after buying my first house in Florida. My wife is from California, but we decided on Florida because the eight-hour time difference between the UK and California wouldn’t have really worked, and it is a long flight back to the UK.” He did look into taking exams to qualify to be an accountant in the US, but decided he had enough UK-based work and the US tax system was more complicated and very difficult from that in the UK. “The only drawback of still being a UK resident is that I pay tax both in the UK and in the US. The advantage is that I am still able to use the NHS, and to visit my dentist in the UK. “I guess I am living a lifestyle that other people only dream of. Some of my friends have moved to France and work from there, but they have given up their homes in the UK. Another friend moved his business to the east coast of Yorkshire, having seen that I was able to continue working successfully after relocating to the US, the move for him across to the coast didn’t seem so daunting. “Technology makes this lifestyle possible. There is no way I would have been able to do this when I started my first job in Keighley in 1987. The office didn’t even have a computer and all work was done manually and written into books. I like having the freedom and I think I have the best of both worlds.”
Automatic enrolment part 1: informing the employer Posted 11/20/2018 by Julie Hodgskin & filed under Employers, Pensions and payroll. The first article in our series on automatic enrolment, dealing with the setting up and ongoing duties of automatic enrolment. Automatic enrolment series part 1 – Informing the employer part 2 – Setting up a workplace pensions scheme This article covers the choosing and setting up of the pension scheme, and the costs involved. The next article will cover who needs to be enrolled, opting in, opting out, and postponement. Every new employer must now sign up for running a pension scheme from day one of employing their first member of staff. Many new employers will naturally be nervous about the whole process of choosing and setting up of a pension scheme. A confident and knowledgeable agent, bookkeeper or payroll employee will go a long way in helping with the process and thereby minimise the stress levels of the employer. It will also enable the process to progress smoothly and without any last minute panics. Additional contact It is of vital importance for the agent, bookkeeper or Payroll/Pension Administrator to be nominated as the additional contact on The Pension Regulator (TPR) website. It will enable the individual administering the pension to see where in the process the employer is, and what communications have been sent out. You can nominate a contact and an additional contact. Choosing the pension scheme The first step in setting up the pension scheme is to identify the most suitable pension plan for the staff. AAT members, unless FCA registered, are not allowed to advice on which pension scheme is most suitable. However, AAT members can guide the employer to the relevant section on The Pensions Regulator website all help define the issues that the employer may need to consider when choosing the pensions scheme. The employer will need to consider: the costs involved in setting up and maintaining the scheme a pension scheme that will accept all workers whether the method of tax relief is suitable will it work with the chosen payroll software The set-up costs Choosing a pensions scheme can be daunting and many employers will choose to use a Financial Advisor. Those costs will need to be budgeted for. Some employers may baulk at spending money in this way. For those employers, The Pensions Regulator (TPR) website has some useful information. However, whichever pension provider is chosen do make sure that the employer asks about set-up costs. Some providers charge more than others. Encourage the employer to do their homework, because once chosen, it could be difficult to change further down the line. Administrative costs can also vary. TPR website states that 61% of employers with 1 – 4 members of staff had no overall set up costs. However, that assumes that the employer has in-house staff capable of taking on the administrative task of running automatic enrolment. For those employers who outsource the payroll and accounting, then on average the costs for a small employer is £150. If engaged as an agent then do be upfront about the amount of time it will take to administer the pension process, and any costs incurred in dealing with the setting up the pension. On average, the TRP quotes fifteen hours work, depending on the need of the employer. The on-going costs For this tax year the employer contribution is 2% of pensionable pay, and from April 2019 this will increase to 3%. Employers will need to budget for this amount and make sure that contributions are up to date. A pension for all workers Some pensions providers will not take low paid workers, or workers who are employed in trades or professions that they consider unsuitable for their scheme. Any exclusions need to be identified before signing up to a scheme. Relief At Source or net pay arrangements? At first this seems an innocuous question to ask. However, for those on low pay it is of vital importance. A pension scheme that uses the Relief At Source (RAS) method will take the contribution from the employee from net pay, and then claim the 20% tax relief from HMRC. This ensures that the employee gets all the entitlement due. A scheme that uses the net pay arrangement will deduct the employee contributions before any tax is deducted. For those who do not pay tax, the pension will cost them 20% more as there will be no tax relief added to their fund. The Pensions Regulator has list of pension schemes by RAS and net pay arrangements. Payroll software compatibility Many payroll software packages have either an integral or add-on to enable pension contributions. However, for the new employer with only one or two employees HMRC’s PAYE Basic Tools (PBT) software may be the one to use. For this software, and some others that do not have an integrated automatic enrolment function, TPR has made available a spreadsheet for working out calculations for staff and employer. On the website is a step by step guide to setting up a pension scheme. What we have considered In this article, we have considered the choosing of the pension scheme, the setting up of the pension scheme and the costs involved in setting up it up, as well as the future financial commitment.. In part two, we will cover the steps involved with setting up the pensions, including the Declaration of Compliance, the initial enrolment of staff, postponement and opt ins and opt outs. It is hoped that this blog will help keep the employer happy. If not, keep calm and carry on automatically enrolling!
Setting up a productive home office Posted 11/19/2018 by Neil Johnson & filed under Run your business. Trades Union Congress (TUC) estimates put the number of people working remotely from home was around 1.6 million in 2017, driven by technological advancements making it easier to do so and the trend for flexible working. Thanks to advances in software and digital working, accounting is increasingly a profession that can be done from home – as a practice owner or a remote worker. And according to research, home workers feel more productive at home than in the office. But if you’re serious about working from home and achieving greater rates of productivity, whether to get your new business off the ground in style or to justify flexi-working to your line manager, it’s worth taking a close look at your home-working environment. A complementary working environment The home is full of distractions – family or friends wanting a chat or vacuuming around you; TV box sets you can’t switch off; fridges to open umpteen times a day; searching for the perfect place to work – bedroom, living room, kitchen or garden shed; the quest for the most comfortable chair in the house – couch or armchair, bed or hammock? For this reason, a first step to establishing a good home-working routine is to pick a complementary working environment. A room you can call your office is best. If space does not permit, then an area of a room that you can call your own, somewhere you can mark as your ‘office territory’. Once you’ve located your home office space, it’s time to think clearly about what you need in your office. Morgan Stewart Interiors’ Andrew Morgan, who has 30 years’ experience in the commercial and home office design industry, suggests asking yourself the following questions: What are the dimensions of the office or the office space? How is the space be used, i.e. Is it shared with others in the household? Does the space have a second purpose, such as a guest bedroom? Will the user have clients or colleagues visit? If so, do they require a separate meeting space from the desk? Does the proposed space have its own entrance? Where is the power and data within the space? What type of electronic devices are to be utilised, i.e. how many computer screens? Are any of the screens laptops? Where is the light coming from? What are the storage requirements? Does the user have any health issues to be taken into account, bad back etc? How many hours per day, per week will the user work at the desk? What makes a good home office? There is no one size fits all, but this is an opportunity to make a space that 1) reflects your needs as a business owner/remote worker, and 2) reflects you as a person, so get creative. “The most important point to remember is that this is the user’s office, and unlike in most commercial offices the choice of how and when you work is the user’s own, this gives much more opportunity for the user to utilise furniture and finishes that would not normally be available to them,” says Morgan. Morgan believes the most important factor is functionality with an understanding that this must reflect the individual’s particular circumstances regarding size and type of space available. “It must be a comfortable space in which to operate, with all the elements working together, the technology must be easy to connect, to link to the power and data (Wi-Fi), with the correct amount of light onto the desk and onto the screen.” Within this is the office chair deserves real attention, given you’ll be sitting in it for many hours a day. Your chair should match your frame and ergonomic specifications, just as your bed should match your desire for comfort and a good night’s rest – don’t scrimp here, it could lead to health problems warns Morgan. “All office chairs are not the same, quality ergonomic chairs are more expensive but will provide you with many years of comfortable and pain-free working – saving a fortune at the osteopath.” Expert help? Not always a reality given cost and requirements, but if you’re setting up a home office for your new business or you expect to work almost strictly remotely, seeking expert input could be a good idea. “When I need my accounts audited or advice on tax, I go to an accountant and it seems logical to me that when you need your office designed, go to a company that is an expert in that field,” says Morgan. An expert will have access to latest technology, innovative furniture and advances in design; you could even have furniture built bespoke to your requirements. They may also be able to save you money in the long run.
Accounting and audit in a no-deal Brexit Posted 11/16/2018 by Steve Collings & filed under Brexit, Members. On 12 October 2018, the Department for Business, Energy and Industrial Strategy published some guidance on what would happen to accounting and audit if there is no Brexit deal. The idea of the guidance is to set out information which allows businesses and citizens to understand what they would need to do in a no deal situation to make informed plans and preparations. Currently, the UK follows the EU rules and regulations in the areas of accounting, corporate reporting and audit. This regime is mainly reflected in the Companies Act 2006 and the Regulations made under that Act. There are, however, some entities which have their own specific legislation and the guidance acknowledges that this will be of relevance to such entities also. No Brexit deal If, after March 2019, there is no deal, the government has stated that they will continue to have a functioning regulatory framework for companies and that the same laws and rules which are currently in place will continue to apply (by virtue of powers in the EU Withdrawal Act 2018 to correct deficiencies in law arising from Brexit). This will be done in conjunction with the governments in Scotland, Wales and Northern Ireland. Accounting and corporate reporting Certain exemptions may be withdrawn UK businesses with a branch in the EU will become a third country business UK companies listed on an EU market may need to provide more assurance Changes to systems may be needed The guidance confirms that UK incorporated subsidiaries and parents of EU businesses will continue to be subject to the UK’s corporate reporting regime. There are, however, certain exemptions in the Companies Act 2006 in respect of the individual accounts which will no longer be extended to companies with parents or subsidiaries incorporated in the EU. The guidance cites an example of a UK company which is exempt from the requirement to prepare individual accounts where it is dormant, and part of a group of companies with an EU parent company that prepares group accounts. This exemption will only continue to be available after Britain’s departure from the EU if the parent company is established in the UK. UK Companies If a UK business has a branch operating in the EU, then it will become a third country business and will be required to comply with specific accounting and reporting requirements for such businesses in the Member State in which they operate. Member States may no longer regard compliance with the accounting and reporting requirements of the Companies Act 2006 as sufficient. A UK company which is listed on an EU market may need to provide additional assurance to the relevant listing authority that their financial statements comply with IFRS as issued by the IASB, which will need to be done in accordance with EU third country requirements. The guidance confirms that in the short term, this could lead to changes to the compliance statements within the financial statements that are submitted to the listing authorities. There will be changes to reporting requirements which will impact on how UK accounting and company secretarial service providers interact with their clients. In this respect, systems may need to be changed to capture additional information for reporting purposes and obtaining additional agreements and assurances from the relevant listing authorities prior to their reporting date. Audit EU auditors will be provided with a transitional period EU auditors will have to pass an aptitude test Audits of EU businesses seeking to issue shares/securities on a UK market will need to be carried out by an FRC-regulated audit firm Audits of UK entities seeking to issue shares/securities on an EU market will need to be carried out by an auditor registered as a third country auditor UK audit qualifications may not be recognised in the EU (except Ireland) While AAT Licensed Accountants do not practise audit, some AAT members do work in audit practice, hence this issue will be relevant to some AAT members. The guidance confirms that the UK will provide individual auditors with EU qualifications with a transitional period, from the date of exit until the end of December 2020. During this transitional period, the auditor can apply to be recognised in the UK provided they pass an aptitude test. After the end of December 2020, EU auditors will cease to benefit from automatic recognition of their qualifications in the UK and may not be offered an aptitude test. This will not affect auditors with Irish qualifications as the Republic of Ireland uses audit qualifications granted by UK qualifying bodies. EU and UK qualifications Currently, those with EU qualifications count towards the required majority of appropriately qualified owners or managers of a UK audit firm. This will only apply during the transitional period. Post-transition, only owners or managers with qualifications recognised in the UK will count towards the majority of appropriately qualified owners or managers of a UK audit firm. EU qualified individuals that were recognised as part of the management body prior to exit will continue to be recognised. Audits of an EU business which is seeking to issue shares or debt securities on a UK-regulated market must be carried out by an auditor registered with the Financial Reporting Council (FRC). Such audits will be included within inspections carried out by the FRC who will visit the registered auditor in the EU Member State where the business is incorporated until that Member State is recognised in the UK as having an equivalent audit regulatory framework. Conversely, where a UK business is seeking to issue shares or debt securities on a regulated market in the EU, the audit will need to be undertaken by an auditor registered as a ‘third country auditor’ within the EU Member State in which the market operates. That audit will then fall under the remit of inspections by the recognised authority for that market. Where there is no deal, a UK audit qualification may not be recognised in an EU Member State (with the exception of Ireland). A UK audit firm that wishes to own part of, or be part of the management body of, an EU firm will no longer be recognised among the required majority of EU qualified owners or managers. Conclusion As the departure date from the EU moves ever closer, understandably more people are asking questions about what will happen. The guidance does state that a no deal scenario is unlikely given the mutual interests of the UK and the EU in securing a negotiated outcome and the guidance aims to prepare companies for a no deal scenario.
How to use email marketing to get more business Posted 11/16/2018 by Sophie Cross & filed under Run your business, Students. Email marketing involves sending messages about your business to a database of contacts via email. Email messages could be sales messages, offers, advice, news, blogs or events. The objective of the emails could be to increase sales, improve engagement with your business or brand, or to convert prospects into customers. The benefits of marketing via email One of the main benefits of email marketing is that you hold your own database and can contact the people on it when you want, without having to pay or go through a third party, like a social media channel, where your messages can get lost or their appearance can depend on the site’s algorithm. If Facebook were to end tomorrow, you’d lose touch with the people that liked your page, but your email list will always exist (bar people opting-out or moving away from using email as a channel over time). Email marketing is one of the quickest and cheapest marketing channels to use, but it requires some effort if you’re to do it well and you want to get good results. How to start email marketing First, you’ll need to decide what tool you’ll use to securely store and manage your database, and to send and track emails. MailChimp is one of the most popular free email service providers but many others exist like Drip, dotmailer and Constant Contact. You should take a look at the features and usability of each, have a trial, and decide which one best suits your requirements. You’ll need a process in place to capture data – the easiest way to do this is by connecting your email provider directly to your website with a sign-up form and you can also capture data offline with a form. Just make sure that the way you gain and use any data is GDPR compliant. This includes storing it securely, knowing which of the ‘six lawful bases’ apply to your holding of the data, having written consent that the owner of the data has opted-in for you to have and use it, and having a clear opt-out process. Don’t worry if your database starts very small. It’s better to have a clean database of people that really want to hear from you than a large one where nobody opens your emails. A smaller database also makes it easier for you to curate the best content for your emails for the audience. What should you send in your email marketing? It’s a good idea to let people know what sort of things you’ll be sending them before they sign up – as an incentive and so they know what to expect. People’s lives and inboxes are busy places so you need your emails to stand out. Firstly make sure the content of the email looks great and is of some value to the receiver, then make sure you also have an eye-catching subject line. The ‘value’ could be created by: offering them something that they want – a product, discount or invite making them laugh giving them something they want to share increasing their knowledge What your email looks like and what goes in it will very much depend on your target market – who is on your database and what do they want to know about that relates to your business? Put yourself in their shoes, the more desirable your content is to them, the more positive the association with your business and the more likely they are to tell other people about you. Create an email marketing calendar to plan and organise the content and the send dates of your emails. You might use national, seasonal or local events for inspiration. Decide how frequently you will send your emails which will depend on how often your target market wants to receive them and also what is realistic for you in terms of the time you need to put each one together. Tools like Canva (for design) and Unsplash (for stock free imagery) can really help make your emails look interesting and professional. How to know if it’s working? Your email service provider, e.g. MailChimp, will give you access to lots of stats for free. You can see what percentage of people opened your email, clicked on links within the email, and even exactly who did it and how many times. You can also use functionality called ‘split testing’ (also known as ‘A/B testing’) which lets you trial changing one thing on your email (for example your subject line) and sending one variation to half of your database and the other to the other half to see which one gets better results. By spending some time studying the analytics you can optimise what you send, to who, and when you send it.
Finding your first voluntary accounting role Posted 11/16/2018 by Hannah Dolan & filed under Sustainable Business. Have you always wanted to volunteer but are unsure where to start? Or maybe you’re keen to give back to the community but are overwhelmed by the number of options available? There are lots of ways to give your time to help others. Whether it’s litter picking, spending time with an elderly neighbour or organising a charity bake sale, giving back to a worthy cause not only helps someone else but makes you feel good too! Why volunteer? Volunteering can help you build upon skills you already have and enable you to use them to benefit the greater community. For instance, you may be looking to move into a management position but haven’t had much experience with leadership and communication. By taking on a voluntary role, this could help to improve your problem solving and public speaking skills, as well as giving you the opportunity to meet new people. Have you thought about combining your accountancy skills with some volunteer work? There are many NGO’s all over the world doing incredible work to tackle extreme poverty and inequality, but due to limited resources, are unable to access vital financial management training. Why do NGOs need help from an accountant? A non-governmental organisation (NGO) is a not-for-profit, voluntary citizens’ group, which is organised on a local, national or international level to address issues in support of the public good. The development and growth of each and every economy hinge on how resources are carefully managed and multiplied. Accounting is all about cost saving and management which is the backbone of economic development and growth. The need for support from accountants is largely driven by a lack of skills at a local level, combined with the complex reporting requirements of overseas donors. When you are a doctor, teacher or the founder of a small NGO trying to thrive with limited resources, it can be very difficult to keep accurate records and perform your everyday duties. With a different set of accounts, various formats and sometimes bank accounts required by each donor, having systems put in place to streamline these processes, can prove invaluable. Accounting for international development (AfID) AfID offers every type of accountant, from anywhere in the world the opportunity to use their skills to support a broad range of non-profit organisations globally. AfID pairs accountancy professionals with suitable assignments, based on their interests, skillset, dates available and preferred location. Volunteer assignments can be between 2 weeks and 12 months or longer depending on the assignment. The main focus of AfID assignments is to develop the skills, confidence, and potential of local people, enabling organisations to ultimately have the financial management capacity they need to deliver more sustainable programmes to their many beneficiaries, whilst maintaining good relations with their donors. Volunteers could be budgeting with a street child centre in Kampala (Uganda), coaching a hospital bookkeeper in Kigali (Rwanda) or financial reporting for a primary school in Kathmandu (Nepal). Qualifying criteria You will need to tick at least one of these to be able to volunteer with AfID: more than 3 years of accounting experience membership or affiliation to an accounting institute e.g. ICAEW, ICAS, ACCA, CIPFA, CIMA, CMA, CGA Canada; HKICPA; CPA, ICAA Australia; NZICA; CPA US part-Qualified or AAT Accounting Technician with more than 5 years’ experience. Below is an example of one of the volunteering opportunities currently available with AfID: CAMBODIA | Sponsored Education for Children Living in Slums | 1- 2 MonthsThis NGO sponsors families to provide the opportunity for their children to go to school instead of working in the slums and rubbish dumps. They have asked for help to streamline recording of restricted donations, improve and implement cashflow forecasting templates and help to prepare them for audit. This role would be perfect for an AAT qualified accountant with 5 years’ experience. Discover more volunteering opportunities with AfID here. Do you currently volunteer? We’d love to find out a little more about the type of volunteer work you do and the activities you undertake whilst volunteering so please take our 2-minute survey so we can find out more. Click here for members survey and here for the student survey.
Five sectors will be hit hard by a no-deal Brexit. Here’s how Posted 11/15/2018 by Ian Fraser & filed under Brexit, Members. In September, Bank of England governor Mark Carney warned ministers that a no-deal Brexit would see a plunge in sterling, a squeeze on real wages, a surge in inflation, rising interest rates and as much as a 35% fall in UK house prices. The government’s own analysis suggests that a no-deal Brexit would cause a 7.7% reduction in GDP over the next 15 years. The chancellor, Philip Hammond, has warned this would necessitate additional government borrowing of £80bn a year, as tax rises would be infeasible. With only months to go before the 29 March deadline, negotiations having reached deadlock on certain critical points, and prime minister Theresa May facing a backbench revolt from Eurosceptics, the risk that the UK will plunge out of the bloc without a deal is intensifying. What would happen in the event of a no-deal Brexit With no deal, the UK would revert to ‘third country’ status overnight, without agreements in place on trade or any chance of a transition period. In its Cost of No Deal: Revisited report, the thinktank UK in a Changing Europe said a no-deal Brexit would be “chaotic and severe” and “wreak havoc on jobs and trade”. Certain sectors in the UK will feel the effects of a no-deal Brexit most acutely. While it’s impossible to predict exactly what will happen, we have a fair idea of how they’ll be affected. Automotive speed bumps The European single market, introduced in January 1993, has been pivotal to the growth of UK car manufacturing, encouraging companies such as Toyota, Nissan and Honda to set up plants here. But, if tariffs and customs delays interfere with the finely tuned, pan-European supply chain, many of these companies – which together employ 856,000 people and turn over £82bn in Britain – are likely to shift some or all of their production to the Continent. Speaking at a zero-emission-vehicle summit in Birmingham, Jaguar Land Rover chief executive Ralf Speth said: “Brexit is due to happen on 29 March next year. Currently, I don’t even know if any of our manufacturing facilities in the UK will be able to function on the 30th.” Finance fears Mark Carney has warned that the chances of a no-deal Brexit are “uncomfortably high” and has called for UK banks and other financial institutions to bolster liquidity and capital ahead of a likely storm. The EU has so far ignored a warning from the Bank of England that contracts may become invalid in a no-deal Brexit, causing financial chaos. Most UK-based financial players that want to continue selling into the EU after 29 March now accept they are going to need a physical presence in the EU that extends beyond a perfunctory ‘letterbox’. Most City-based banks are already in the process of transferring jobs and employees to EU finance centres including Dublin, Frankfurt, Luxembourg and Paris. Chemical instability Without continued participation in the European Chemicals Agency and adherence to its REACH regulation, UK chemicals manufacturers will be frozen out of the EU market. To regain access, firms, which last year exported £17bn of chemicals and plastic to the EU, could re-register their products on the EU’s system via an affiliate or representative based in an EU member state. But that will take time and cannot commence until the UK’s departure, according to the National Audit Office. One danger, highlighted by the environmentalist Bruce Lourie in The Guardian, is that the UK could opt for a laxer regulatory regime than REACH, which could make it a dumping ground for dangerous toxins. He fears the government may opt for such a regime, leaving “UK citizens and ecosystems more at risk of exposure to toxic chemicals”. Food fights Brexit secretary Dominic Raab insists that, even in a no-deal scenario, Britain’s food supply isn’t a concern, but that is in stark contrast to what industry insiders are saying. According to UK in a Changing Europe’s Cost of No Deal: Revisited report, a no-deal Brexit would cause significant disruption to food imports and a hike in food prices. UK-based food firms would, for example, need to register with a new, still non-existent, UK authority that would replace the EU’s TRACES system for tracking the movement of animals, food, feed and plants across Europe. But it could be nine months before such an entity is up and running. Some major food companies are already putting contingency plans in place, in case of no deal. In September, Cadbury’s parent, Mondelēz International, said it was stockpiling ingredients and products. The Brexit Notices The government has published ‘technical notices’ detailing the likely impact of a no-deal Brexit on a range of sectors. These contain a few practical initiatives, such as a plan to change how VAT is levied on imports, but not much reassurance or any sign that additional, costly processes can be avoided. The financial services notices make no bones of the fact that much will depend on the EU’s willingness to take steps to alleviate the likely chaos in cross-border finance: “Without EU action, EEA clearing members and trading venues will no longer be able to use UK central counterparties to provide their clearing services.” There’s also a warning that the cost of making cross-border payments is likely to rise substantially. This article first appeared in the November/December 2018 issue of AT magazine.