Financial forecasting for small businesses

Sean Rustrick • 4 December 2023

Financial forecasting for small businesses: Why it's important and how to do it

Financial forecasting is all about being forward thinking. When you are running a small business you are so busy thinking about the next sale you tend to not think about the future and staying ahead of the competition. When you start thinking about forecasting you can use it as a guide for positive decision making and this will help your business grow.


What actually is financial forecasting?

 

Forecasting is needed for any size business. It is a planning process that revolves around uncertainties about the future. You use past and present numbers to identify trends and estimates about future outcomes to create projections about your business’s financial future (such as future sales and expenses). This allows you to look at things such as staffing and cash requirements for example, how much will my VAT bill be if sales increase by that amount?


How to do it


Top-down forecasting - you start with a picture of the future (dream big!) and zoom into the specifics of how you can achieve this. You use this for future performance (working with numbers and needs to focus on sales). This is the most useful type of forecasting for small businesses because you identify goals for the company and then identify what sales you want.


Bottom-up forecasting - you look at specific customers/products and their relation to estimated sales needed.

Hybrid - you use both of the above forecasting techniques in combination.

 

 

Why is forecasting important?

 

- Helps determine long-term vision - where do you want to be in in 1 year,3 years and 5 years? This could be a mission statement or the overall vision for the business. Put simply - it helps you figure out where you want both yourself and the business to be in 5-10 years’ time.

- Shows a pathway for achieving goals - the forecast helps create a roadmap for establishing short and long-term attainable goals and a pathway to reach those goals based on historical business data and market trends.


- Provides investors in the business (you, the bank, a family member, anyone) with information - people investing in the business (including you and your spouse or partner) will want to know financial health and projections for reaching profitability. This requires predictions based on solid data (market trends, past performance). If you are investing your own money and time you will want to minimise risk and a forecast will show where the business is going.


- It identifies risks and opportunities -  you always want to limit risk and increase opportunity to succeed in business. Forecasting flags up possible unforeseen risks (not having enough staff or hours in the day!) and identifies new opportunities because it allows you to understand your current customer base and attract new business. 


- You can plan and predict cash flow - you can look at multiple years of numbers and see at what time of year there is a cash flow problem (making increased profit will lead to higher tax bills….it’s life!) This allows you to investigate, understand the issue and find ways to limit future impacts.


At Rustrick Accountants, we help lots of clients with financial forecasting, cash flows and business plans.

If you want to pop along and, at no cost, have a chat to see what help we can give you to get your forecasting going, then contact us. Financial forecasting can help you grow your business from an acorn to an oak tree.


www.rustrick.co.uk  01622738165

Companies House update

by Sean Rustrick • 31 January 2025
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Email Etiquette

by Sean Rustrick • 28 January 2025
Email Etiquette What you write in your emails and how you write them really makes a difference! According to industry findings, these are the top ten most disliked email habits; 1. CC’ing people in unnecessarily 2. Long-winded emails 3. Using slang terms 4. Spelling mistakes/ no proofreading 5. Marking emails as “urgent” when they are not 6. Swearing 7. Poor grammar 8. Using emoticons 9. Passive aggressive language 10. Gossiping Whilst the top ten friendliest email sign-offs are; 1. Have a great day! 2. Many thanks 3. Best wishes 4. Cheers 5. Thanks/Thanks again 6. Warm regards 7. All the best 8. Let’s catch up soon 9. Best Regards 10. See you soon Avoid using tara/tata, sent from iPhone, may the Force be with you, to infinity and beyond and take it easy when signing off emails! So, when writing emails remember to keep it professional and succinct, avoid jargon, slang and emoticons and always proofread for any spelling mistakes. You can never underestimate the power of a professional, well-worded email when contacting new and existing clients!

Autumn Budget 2024 - Update

by Sean Rustrick • 26 November 2024
The Chancellor delivered her Autumn budget on Wednesday which included the following key tax announcements: Taxation • Rates of income tax and national insurance paid by employees to remain unchanged • Income tax band thresholds to rise in line with inflation after 2028 • Basic rate capital gains tax to increase from 10% to 18% and higher rate to increase from 20% to 24% (second property capital gains tax rate to stay at 24%) • Inheritance tax thresholds freeze to be extended for a further two years to 2030 • Minimum wage for over 21s to rise from £11.44 to £12.21 per hour • Minimum wage for 18-20 year olds to rise from £8.60 to £10.00 Business • From April employer’s national insurance rate to increase from 13.8% to 15% and the secondary threshold when these contributions are due will reduce from £9,100 to £5,000 • The employment allowance for small businesses will increase from £5,000 to £10,500 • The main rate of corporation tax, paid by business on taxable profits over £250,000 to stay at 25% Indirect Tax and Duties • 5p cut in fuel duty to be extended by a year to April 2026 • Stamp duty surcharge, paid on second home purchases, to go up from 3% to 5% • Single bus fares cap to increase from £2 to £3 from January • Tax on tobacco to increase by 2% above inflation and 10% above inflation for hand-rolling tobacco • New tax of £2.20 per 10ml of vaping liquid to be introduced from October 2026 As always, if you require more information or want to talk about how this budget may affect you or your business, please just give us a call.

How to get YOUR tax refund

by Sean Rustrick • 18 November 2024
Each year, HMRC reviews the income and tax paid by employees and pensioners who don’t need to file a self-assessment tax return. If you’ve overpaid or underpaid, they’ll send you a P800 letter or a Simple Assessment.  Remember- refunds are no longer automatic! So you now need to take action to claim your refund. But don’t worry—if you don’t claim right away, the refund will remain on your tax record until you do. It won’t be lost! It is very easy to claim and receive your refund, just: • Log in to your personal tax account • Use the online bank transfer service • Access the HMRC app • Contact HMRC to request a cheque If you claim online, your refund will arrive within 5 working days. If you need help claiming, get in contact with the team on 01622 738165 and we can do that for you today! Make sure to stay on top of your tax affairs and claim what’s owed to you!

New IHT rules benefit British Expats

by Sean Rustrick • 29 October 2024
Inheritance tax (IHT) applies to your estate if you reside in the UK. You are considered to reside here even if you live abroad but have strong ties to the UK. However, from 6th April 2025, where you reside will be more closely linked to your country of tax residence. So, even if a UK expat considers their permanent home to be the UK, they might be seen as residing overseas. Therefore, part or all of the estate may fall outside of IHT! If you reside outside the UK, current rules state that for IHT purposes you may be considered as residing in the UK if you have been a tax resident in the UK for 15 or more years out of the last 20. Therefore, you will have to move abroad for long enough to be considered as a non-UK resident for tax purposes! But from April 2025 where you reside will not define if your estate is subject to IHT. Instead, if you have been a resident in the UK for 10+ years, your estate (including worldwide assets) will be within the scope of IHT. If you are a resident abroad and your estate is ruled by both UK and the other country’s IHT, a double tax treaty may reduce/eliminate the UK IHT on foreign assets. So the key to escaping the IHT net will be establishing ten years as a non-UK resident!  If you haven’t been a resident for UK tax purposes for at least 10 years on the 6th April 2025, you can return to the UK for a further ten years without your estate coming into the IHT net, but your UK assets will remain liable so to reduce IHT, consider moving your assets out of the UK! Like always, the Rustrick Accountants team are here to help for any and all tax queries. Give them a call today on 01622 738165 and they will be able to advise on the best plan of action for you!

New Student Loan Thresholds!

by Sean Rustrick • 29 October 2024
The earnings thresholds for student loan repayment increases in April 2025 for Plan 1 and Plan 2 for undergraduate loans in England, Wales and Northern Ireland. Like usual, this will be automatically added to your employee’s pay when the payroll software is updated in 2025. The change for Plan 1; £26,065 (£2172.08 per month, £501.25 per week) The change for Plan 2; £28,470 (£2,372.50 per month, £547.50 per week) There will be no change to the repayment rate (which is currently at 9% of earnings in excess of your plan threshold). If you have savings and investment income that exceeds £2,000 in a tax year, you must take this into consideration when calculating your loan repayments. You must also inform HMRC on your self-assessment tax return.  If you think that you will be affected by this change, get in touch with the team at Rustrick Accountants on 01622 738165 and we will help you out today!

Navigating VAT Across Borders?

by Sean Rustrick • 16 October 2024
Are you a UK-based business providing services to EU clients? Confused about VAT registration and compliance? 🤔 Don’t worry! Discover how the reverse charge mechanism works and what it means for your VAT obligations in our latest blog. From invoice requirements to VAT thresholds, we’ve got you covered. Simplify VAT Compliance for Your EU Clients with These Key Insights At Rustrick Accountants Limited, we’re dedicated to being your trusted experts for all things accounting and tax related. Our mission is to make VAT and tax compliance straightforward, so you can focus on what matters most growing your business. VAT Registration and Compliance: Essential Tips for UK Businesses If you’re a UK-based business providing services to clients across the EU, understanding your VAT obligations is crucial. Here’s what you need to know when dealing with EU clients: B2B Services (Business-to-Business) When providing services to an EU company (B2B), the reverse charge mechanism generally applies. Here’s how it works: No VAT Charge: You do not need to charge VAT on your services. Instead, the EU company (your client) is responsible for accounting for the VAT in their country. No Need for EU VAT Registration: Typically, you don’t need to register for VAT in the EU. However, you must include a statement on your invoice indicating that the reverse charge mechanism applies. Ensure your invoice includes your UK VAT number (if applicable) and the VAT number of your EU client. Conclusion: Whether you’re a UK-based self-employed professional or a limited company supplying services to an EU company, you don’t need to worry about VAT registration in the EU. The EU company will handle the VAT via the reverse charge mechanism. Just make sure your invoices are correctly formatted and that you comply with any UK VAT requirements. Outside the Scope Sales It’s also important to note that sales to your EU clients are "outside the scope" of UK VAT, so they don’t count towards the £85,000 threshold for VAT registration. However, any other UK-based sales within the scope of VAT will contribute to this threshold.  Why Partner with Rustrick Accountants Limited? Navigating VAT regulations can be complex, especially with cross-border transactions. That’s where we come in. At Rustrick Accountants Limited, we provide expert advice and hands-on support to ensure your business remains compliant without the stress.

Are you considering MVL (Member Voluntary Liquidations)?

by Sean Rustrick • 16 October 2024
There will be a new Budget on the 30th October 2024 and there is an anticipation of Capital Gains Tax rates increasing. This will mean that there will be an increase in voluntary liquidation. We are hoping that any changes made by the Budget will not take effect until the new tax year, but it is much better to be prepared now! Why would you consider MVL? Usually, it is used where a successful business owner intends to close a company to gain the benefit of a capital distribution from a liquidator and, often, Business Asset Disposal Relief too. If you feel like MVL would be beneficial for your business, then consider these points: - Your accountants will need time to prepare the final full set of accountants and then the directors will need to settle all creditors before liquidation. - When the company is in liquidation, you must advertise a notice to creditors for a minimum of 21 days before making a distribution to shareholders - MVL will be implemented quickly only if the company has no creditors and only cash! As you can see, it does take some time, so start thinking about it today and get in contact with us now to talk through the procedure and first steps. If you want your shareholder distribution to be made before the new Budget, the formal liquidation needs to be started by Friday 27th September. Of course, the Budget has not been announced yet and it is inevitable there will be delays so nothing is set in stone, but it is essential that we get the ball rolling to make the procedure as stress-free as possible!  Give us a call on 01622 738165 and talk to one of the team at Rustrick Accountants who will be more than happy to talk you through the steps and whether MVL would be beneficial for you!

Personalised Number Plates: VAT

by Sean Rustrick • 16 October 2024
Have you bought a personalised number plate?

Leaky loos losing you money?

by Sean Rustrick • 16 October 2024
95% of businesses are throwing money down the drain when it comes to utility bills- and water bills make up the majority of this! Did you know that an average person uses 1,000 litres per week? So, when you think about a whole business and how much water it would use, you can see how the money adds up! Thames Water suggests that up to 25% of water supplied to business customers could be leaks. When Thames Water visited businesses, it found that the average leaky loo in business properties loses over 2,000 litres per day and uncontrolled urinals lose approximately 1,800 litres per day! The cause of the leak is usually the mechanical flush valve- seal degradation, faulty fill valves and faulty dual flush valves. A leak needs to develop to 300 litres per day before it is visible, audible or leads to higher bills. This means that 215 to 400 litres of clean drinking water is wasted per toilet every day. What should you do today? Put a sheet of toilet paper on the back of the bowl (above the water) and if it gets wet then you might have a leak! If you can find the cause of the leak, fix it straightaway as it will be costing you money right now! Many water companies will come and fix leaky loos for free!!  Toilets are not the only area to look at when it comes to saving water. Start by asking yourself: do you know how much water you are currently using? Do you know how much this is costing you? If you can work out what your expenditure is, we can help you figure out how to cut that number down! Just give us a call on 01622 738165 and talk to the team today to find out more!
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