HORNBEAM
HIGHLIGHTS 21
Written by
Phil Needham
October
2003
Hornbeam Highlights is an
information newsheet for clients and associates of Hornbeam
Accountancy Services Ltd
Can
we help you make a £million?
This is a true story
with names altered and numbers rounded
About 18 months ago Steve rang me and asked me to spend half a day with him because his business was growing rapidly but making only modest profits and he wanted advice on how to improve profitability. To cut a long story short it soon became obvious that the large contracts that make up 70% of his turnover will only ever be modestly profitable but that the retail contracts which should be the icing on the cake were in fact barely breaking even. ‘Steve’, I said ‘You need to increase your charge out rate on the retail jobs from £ 6 per hour to £ 10 per hour’. ‘I can’t do that’ replied Steve ‘they would all leave’.
‘Well try it out on your new clients’. I suggested and Steve agreed doubtfully to give it a go.
When I spoke to him four months later Steve to me that he hadn’t lost a single job by quoting £ 10 per hour and that as a result he had after three months raised the rate on his existing retail contracts. He had lost between 5 and 10% of these contracts (less that 3% of the total business) and had been able to redeploy all of the staff affected onto profitable new jobs as the business continued to grow.
So this action alone had changed a business with £1 million turnover, making £ 100,000 profit,
into a business with £ 1,200,000 turnover, making £ 300,000 profit.
Steve now has an offer from a listed company to buy his business. So I reckon that my mornings work should help Steve to make an extra £ 1,400,000 (7 x £200,000) on the sale of his business and that has to be just about the best value for money Consultancy advice yet delivered by this firm!
Can our Consultancy services help you to make more money?
Our seminar was a great success. Particularly appreciated were the discussions on the hidden costs
of going for organic growth, the valuation of businesses and the key factors in
making a success of the acquisition. We
have notes of the seminar and would be happy to supply a set to anyone
contemplating a business acquisition.
We are delighted to welcome Gemma Oakley as our trainee receptionist and Matt Fitt as an accountancy trainee.
It is funny how things come in clusters isn’t it. Over the last few months we have taken on three nice business clients from other accountants in the locality. Two of them from one of the big firms locally, one from a sole practitioner. All of them had messy accountancy systems when they came to us. All of them came to us because they felt they were not getting value for money from their previous accountants. In all three cases we have been able to help the bookkeepers improve their systems, in all three cases we have found that the client has been paying too much VAT for several years and have helped them to obtain thousands of pounds of VAT refunds. In all cases the recovery was significantly more than our fees. All these three jobs were dealt with by Paul Estcourt.
Under current legislation we can only go back three years to recover overpaid VAT.
We have therefore decided to offer a new product - The reverse VAT inspection. This is mainly for businesses that are not already our clients.
· We will look for VAT that the business has overpaid.
· We will charge 1/3 of any VAT that we find that can be reclaimed – no up front fee.
· We will also advise of any underpaid VAT that we find, allowing customers to put things right before the VAT inspectors find it, and thus avoid penalties, but we won’t be looking for underpaid VAT.
Michael is a Chartered Accountant and Chartered Tax Adviser who has spent about 35 years as a tax specialist. This story will give you an idea of how special Michael is. Last month, in a training hall filled with well over 100 qualified accountants Michael was the only person apart from the lecturer who had read the recent government discussion paper on residence and domicile. I loved it.
So Michael has been working with Paul, Jane and myself on some of the more complex areas of tax avoidance. The following case is typical.
Our clients sent in their parents who are not clients for a bit of inheritance tax planning. We were able to advise them that by reorganising their investments they could make better use of the wife’s allowances and thus save over £600 per year of income tax. Following this up by rearranging their wills would save approximately £100,000 of Inheritance Tax. Starting a pattern of giving to charity or to descendants could save much more.
Michael has joined Hornbeam so that he can wind down to retirement (although there is little sign of this!) but with Jane and Michael at its head we now have a tax team as good as any in the county.
I am sure that most of you keep a careful file of Hornbeam Highlights because of all the useful information and advice that it contains, but even if you don’t need our consultancy services, if you aren’t VAT registered, and there is no chance of you paying inheritance tax, perhaps you have a friend or relative who could benefit from our services. So please pass the spare copy on to someone we could help.
If you want past copies of Hornbeam Highlights, they are all available on our website at ‘hornbeam-accountancy.co.uk’. If you are a new reader of Hornbeam Highlights and would like to discuss any of the services offered by this company please do not hesitate to contact Phil Needham or Jane Court on 01603 720424.