When does a payment become late?

In this guide:

  • When does a payment become late?

    The point at which a payment becomes late depends on whether you have agreed a credit period with the customer.

    You can agree any credit period you want with customers but you should agree the payment period before the transaction takes place. Don't assume your usual terms apply as the payment period should be part of your negotiation on pricing and is the period agreed between parties. This agreement can be verbal but it should preferably be in writing.

    Industry standards for payment tend to be net monthly - that is, payment at the end of the first full month following receipt of the invoice. These terms are standard as they allow a business to actively plan payments. However, you should negotiate your own terms and price your services accordingly.

    Where there is neither an agreement in place nor custom and practice in operation, the law sets a default period of 30 days.

    This period starts from whichever of the following is later:

    • the date on which the goods are delivered or the service is performed
    • the date on which the customer receives notice of the amount of the debt

    Purchasers cannot contract out of late payment legislation ie they cannot deny the supplier their right to, for example, charge statutory interest once a payment is overdue.

    Fair Payment Code

    The Fair Payment Code (FPC) is a tiered system of Awards aimed at driving best practice and improving payment performance. It replaces the Prompt Payment Code.

    The three Awards are:  

    • Gold Award – for businesses paying at least 95% of all invoices within 30 days
    • Silver Award – for those paying at least 95% of all invoices within 60 days, including at least 95% of invoices to small businesses within 30 days  
    • Bronze Award – for businesses paying at least 95% of all invoices within 60 days  

    Every business granted an Award agrees to abide by the Code’s principles of being Clear, Fair and Collaborative with their suppliers.  

    Find out more about how to sign up to the Fair Payment Code.

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  • Tips to ensure customers pay you on time

    Ways to actively reduce or eliminate bad debt among your customers.

    To reduce the chances of late or non-payment, you could:

    • Make credit terms and conditions clear.
    • State an intention to impose your rights under the late payment legislation in all contracts and invoices, eg "We will exercise our statutory right to claim interest and compensation for debt recovery costs under the late payment legislation if we are not paid according to agreed credit terms."
    • Don't supply any goods or services until you are satisfied with the credit checks.
    • Quickly issue invoices that are clear and accurate. Include only useful information eg order number, payment terms, due date, delivery date and method, unit cost and total payable etc. Email invoices or use first class post. You should reference the late payment legislation and the additional costs of paying beyond the agreed date.
    • Use a computerised credit management system, which will help you keep track of customers' accounts and generate reminders when payments are late.
    • Have a collection strategy eg telephone ahead of due dates to check that payment is in progress, or send reminder letters. Send emails/faxes if your telephone calls are being diverted or letters being ignored. If necessary, organise visits from sales staff and/or direct payment requests to more senior staff than normal.
    • Set monthly targets - put together a payment timetable and ensure that you have staff who can devote their time to collection.
    • Use an electronic payment tool.
    • Ensure your staff are properly trained in credit management and debt recovery.

    You could also take out:

    • credit insurance - to cover you if you have a bad debt due to a customer going into insolvency
    • legal expenses insurance - this covers the costs of recovering debts through the courts

    To improve cashflow, you could also use a debt factoring service. This is where you effectively 'sell' your invoices to another company - see factoring and invoice discounting.

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  • When to charge interest on late payments

    You have a statutory right to charge interest on any money owed to your business.

    You have a statutory right to claim interest on late payments, as well as a contractual right to claim interest if you have specified this in your terms and conditions.

    Should I charge interest on a late payment?

    You can charge interest on all late payments. However, even if you indicate in your terms and conditions that you will charge interest on all late payments, it is up to you whether you actually do so or not.

    You should address each debt on a case-by-case basis and:

    • consider the relationship with the customer
    • get the opinion of customer-facing staff
    • assess your credit management system

    What rate of interest should I use?

    Rates for calculating interest are called reference rates and are fixed for six-month periods. The Bank of England base rate on 31 December is used as the reference rate for debts becoming overdue between 1 January and 30 June of the following year. The rate in force on 30 June is used from 1 July to 31 December.

    You can calculate the interest payable on overdue bills by taking the relevant reference rate and adding 8%.

    Alternatively, you can set a contractual rate that may be higher or lower than the statutory rate. If you set a contractual rate, the statutory rate no longer applies.

    Interest should be charged on the outstanding gross amount inclusive of VAT. No VAT is chargeable on the interest itself.

    See how to calculate interest on unpaid invoices.

    Charging interest

    If you don't already charge interest, you may need to:

    • adapt your credit management and billing systems
    • amend invoices and terms and conditions so that they state you reserve the right to charge interest
    • notify customers of your plans and check that they understand the new terms and conditions
    • contact habitual late payers to discuss how they'll be affected

    Make sure invoices include an agreed payment date so customers know when interest will start being charged - let customers know if interest starts to accumulate. 

    Before charging interest, you could issue a letter stating that the payment is late and if it is not paid within, say, seven days, interest will be charged.

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  • Claiming debt recovery costs on debts and payments

    Your legal right to claim debt recovery costs from customers who pay late.

    As well as charging interest under late payment legislation you can also claim costs for the recovery of late payments. There is an automatic and fixed compensation charge shown below, but you can also charge any reasonable additional costs of recovery where they exceed the basic compensation rate.

    Amount of the debt Debt recovery cost you can charge
    Up to £999.99 £40
    £1,000 - £9,999.99 £70
    £10,000 or more £100


    However, before applying the charge, you should:

    • consider your relationship with the customer
    • get the opinion of customer-facing staff
    • assess your credit management system
    • find out the general industry practice

    If you decide to apply the charge, you should notify the customer in writing. You should also send them a new invoice with the charge itemised as an additional amount and the outstanding total debt adjusted accordingly.

    Purchasers cannot contract out of late payment legislation ie they cannot deny the supplier their right to, for example, charge statutory interest.

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  • Taking non-court action to collect debts

    There are a number of ways of collecting a debt without having to go to court.

    Court action should be seen as a last resort. Before you take court action, you should consider the alternative methods of recovering debt outlined below.

    While you consider the options, you should continue trying to recover the debt using the usual methods eg telephoning the debtor to remind them that the payment is now overdue.

    Involvement of one of the following may also assist:

    • An accountant - some offer debt collection services as well as advice on credit control and debt collection procedures.
    • A solicitor - some solicitors specialise in debt collection. They can issue powerful letters in a short space of time. Agree a fee for this service in advance.

    You could also use a debt collection agency - see advantages and disadvantages of using a debt collection agency.

    A further alternative is for you, your debt collection agency or solicitor to issue a statutory demand, promising an application to court for the formal winding up of the customer's business if payment is not made within 21 days.

    Finally, you could consider:

    • negotiation
    • mediation
    • conciliation
    • arbitration

    For more information see recover debt through court.

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  • Advantages and disadvantages of using a debt collection agency

    Using a debt collection agency could help your business but there are also some possible disadvantages to consider.

    Before taking court action to collect debts, you could consider instructing a debt collection agency.

    Advantages of using a debt collection agency

    • Debt collection agencies have the time, expertise and resources required.
    • Some agencies now offer a no collection no fee service.
    • Debt collection can be a fast method of recovering debts so could save you time.
    • If the debt collection agency is polite and professional, you may keep your customer - this is unlikely to be the case if you take legal action.
    • The agency can instruct solicitors on your behalf if your customer still refuses to pay.

    Disadvantages of using a debt collection agency

    • Using a debt collection agency can be costly - the commission on the money recovered is typically between 5% to 25% for commercial debts.
    • You may lose your customer if the agency has poor communication skills.
    • If the agency takes a heavy-handed approach, your reputation may be damaged.
    • Your business may not be a priority - you may be one of many businesses the agency works on behalf of.
    • The agency may not use legally trained employees.

    You should also check that your agency is registered with the Credit Services Association (CSA).

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    Online support from the Northern Ireland Courts and Tribunals Service
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  • Taking court action to collect debts

    Taking court action to collect debts.

    Taking legal action to recover your money should be a last resort. Therefore, consider all other alternatives before going to court.

    If court action still seems the best solution, consider whether making a claim is cost-effective. It might be cheaper to write off small sums. If a customer is likely to place large orders in future, it may be better to let things lie if only a relatively minor amount is in dispute.

    If you decide to take court action, make sure you have resolved any disputes over the goods or services you have provided. If you don't do this, the debt will be difficult to recover. You also need to make sure that customers have the means to settle. If they are bankrupt or in liquidation, your debt is probably irrecoverable.

    Debts of up to £3,000

    Debts of up to £3,000 are dealt with by the small claims track at your local county court. This offers a quick and inexpensive way of making claims for unpaid debts, as you don't have to employ a solicitor. Find your local county court with the Northern Ireland Court Service.

    Debts over £3,000

    Claims from £3,000 to £30,000 must be issued in a county court, while claims of more than £30,000 can be issued in the High Court. It's advisable to get legal advice about this - see choose a solicitor for your business.

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Employing staff for seasonal businesses

In this guide:

  • Top tips on managing seasonal business cashflow

    Using forecasts and improving your stock and credit control, and purchasing terms to help prevent cashflow problems.

    It is particularly important for seasonal businesses to manage their cashflow effectively as they are more likely to face irregular cashflow patterns.

    There are a number of steps a seasonal business can take to manage cashflow:

    1. Plan ahead

    By planning ahead, you can ensure you are able to cover any slow periods and avoid having to use quick but costly forms of finance such as credit cards.

    A cashflow forecast will highlight times when you're most likely to face financial pressure. This could simply involve drawing up two lists - for money flowing into and out of the business each month. Download our sample cashflow projection spreadsheet (XLS, 29K).

    See cashflow management and identify potential cashflow problems.

    2. Get paid quickly

    It pays to be organised about obtaining payment - this means sending out invoices promptly, chasing late payers and considering offering a discount for early payments - see ensure customers pay you on time.

    3. Keep stock levels down

    Carrying excess stock ties up money you could be using elsewhere. Keep records of stock levels so you can see patterns of what kind of stock you should build up - and when you need it. Estimate demand by asking your regular customers what their needs will be. Use sales or promotions to shift stock that hasn't sold well - see stock control and inventory.

    4. Tighten your purchasing policies

    You can improve your cashflow by agreeing better terms when buying. This might involve looking for a bulk discount, agreeing a longer than usual payment period or arranging purchases on a sale and return basis - see developing supplier relationships.

    5. Put money aside

    Resist the temptation to take money out of the business during your peak times - put money aside so you'll be able to meet your commitments during quiet periods. It's a good idea to set up a business savings account but do some research before you decide on a finance provider.

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  • Finding finance for seasonal businesses

    Arrange repayment terms on overdrafts, loans, mortgages, leasing and factoring to suit seasonal highs and lows.

    Taking out finance to bridge shortfalls in cashflow during off-peak trading periods can be costly and is generally only advisable as a last resort. Before seeking further financing, take all the measures you can to ensure you maximise the money coming in and minimise expenses.

    The right funding options can help seasonal businesses manage their irregular cashflow and operate more efficiently.

    These include:

    • an overdraft facility - arrange this with your bank before you need it and agree on terms that suit your needs, eg the limit of your facility, a single fixed fee or interest only on what you use, a flexible period when the facility is available
    • bank loan - aim for a loan that can be adjusted according to your seasonal sales to allow flexible repayments to match up with cashflow; ie larger repayments when trading is good
    • asset finance - involves releasing cash tied up in physical assets of your business, such as equipment or vehicles, to improve cashflow - this facility type of finance can be tailored to the seasonality of a business to allow flexible repayments
    • bad debt protection - is a type of insurance that guarantees 100 per cent payment on invoices from all credit approved customers - will usually help your invoice finance agreement - often involves risk assessment of new customers

    For further information see business financing options - an overview.

    Factoring and invoice discounting

    Factoring and invoice discounting allow you to boost cashflow by raising finance against outstanding invoices. This may allow you to maintain a steady flow of income all year round. You will typically be able to borrow 80-85 per cent of the value of the invoice.

    Whenever entering a contract with a factoring or invoice discounting company check the termination notice period.

    See factoring and invoice discounting.

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  • Employing staff for seasonal businesses

    Seasonal businesses should use flexible working options and incentives to find and keep high-quality staff.

    It is essential to plan ahead to ensure you have the right number of employees with the right skills to meet demand at peak times.

    You can work out appropriate staffing levels by:

    • Looking at sales information and data - this will help you to work out the amount of activity at peak times and the basic level of work that is constant throughout the rest of a year.
    • Deciding on work that is crucial and needs to be consistent for the business to run on a daily basis throughout the year.
    • Deciding on who is best to perform crucial work - ie will you use permanent employees or will you need to train temporary staff?
    • Considering the local job market - is there an adequate temporary workforce available, and how quickly can new staff or previously hired staff be employed?
    • Planning cover for absence, illness and holidays to maintain staffing levels. One way to do this is to look at how many days have been lost in the past and to know how many staff are necessary for the business to operate.

    You need to find the right balance between permanent employees - the core of your staff who work all year - and temporary staff or staff on fixed term contracts who only work during the peak periods. Your core of permanent staff should be able to keep the business ticking over and make sure that everything is in place for busy periods.

    If it is difficult to predict how busy you will be, you can use a recruitment agency to take on suitable, temporary staff at short notice.

    There are other employment options that you can use to meet seasonal business needs, such as:

    • family and friends who may be able to help out at weekends and during school or college breaks
    • part-time workers who may be able to ease the pressure at particularly busy times
    • outsourcing some business activities

    For further information see recruiting seasonal staff.

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  • Boost your seasonal business all year round

    Diversify your activities and change your marketing to keep your business active during off-peak times.

    All seasonal businesses experience slow periods. You need to think creatively to get through these. Look for areas where small changes might keep your business active outside peak seasonal times.

    Diversify your business

    Most businesses can branch out from their core activity. If your business is seasonal, this may be essential to avoid inactivity during off-peak months.

    For example, a business making wedding dresses might make most of its sales during the spring - but by using its skills and equipment to make other special occasion dresses it might be able to move into a market that is busy in the autumn and winter months.

    You could consider expanding into international markets with opposite seasonal trends. This will create opportunities for you to counter the slump of seasonal sales through export sales, thus maintaining consistent production and profitability all year round - see basics of exporting.

    Market your business so it stays active longer

    Another strategy for seasonal businesses is to develop a marketing plan that makes sure the busy season lasts as long as possible. For example, discounts, sales and promotions can be used to bring customers in during off-peak months - this is the way many tourist accommodation businesses price the rooms they rent out. You may find ideas by looking at what your competitors do. See understand your competitors.

    Off-peak times also allow you to put your marketing plans in place for the next peak season. This is one of a range of tasks that can be completed out of season - see seasonal businesses: make the best use of quieter periods.

    You should also look at the media you use for your marketing. The internet can be a very cost-effective way of helping people to discover your business.

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  • Seasonal businesses: make the best use of quieter periods

    Ideas for exploiting off-peak periods to improve your business - from marketing to stock control.

    It's important to take advantage of off-peak periods to consolidate your business. While some owner-managers may take a second job to tide them over, many use the extra time to focus on aspects of their business for which there's little or no time during peak periods.

    Maintenance

    Maintenance is often top of the list. For example, a caravan park owner might close at the end of October and spend the next few months repairing broken equipment, renewing facilities such as the laundry room and carrying out necessary landscaping.

    Marketing plans

    The extra time may also come in useful for devising new marketing plans and sales initiatives - see create your marketing strategy and market research and market reports.

    Stocktaking and ordering

    Quieter periods also offer an opportunity to tackle time-consuming essentials such as stocktaking and ordering. Look at the stock you have in and compare it with the amounts you ordered over the year. Can you order smaller quantities in the future? Or could you place one large order for certain supplies rather than several small ones - perhaps benefiting from a bulk discount in the process? See stock control and inventory.

    Check whether you're getting the best deal from your suppliers. Shop around and get alternative quotes. You could dramatically save on costs and you may also benefit from volume discounts - see choosing suppliers for your business.

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  • Tax and benefits issues for seasonal businesses

    How to ease tax bill pressures and learn what benefits are available for low-income businesses.

    Careful financial planning and choosing the right VAT scheme for your business can ease the pressures faced by seasonal businesses. In order to ease tax pressure, you should consider:

    1. Year-end date

    Choose your year-end date to fit the nature and cashflow cycle of your business. When choosing the most suitable date to submit your annual accounts, you should aim for a date that will allow you to:

    • make the most of any allowances and reliefs available
    • make your first payment of tax on account at a time appropriate to your cash inflow
    • avoid having to prepare accounts during a busy period

    This can be a complicated area so you should seek professional advice before making any changes - see choose an accountant for your business and running a company or partnership.

    2. Corporation Tax

    Most companies pay Corporation Tax nine months and one day after the end of their accounting year. Seasonal businesses might find it useful to calculate their year-end date so that payment is due when cashflow is buoyant.

    3. VAT Accounting Schemes

    Seasonal businesses might also find it beneficial to use one of the VAT Accounting Schemes. HM Revenue & Customs (HMRC) provide guidance on the following:

    If you are a farmer, GOV.UK has a separate Agricultural Flat Rate Scheme, which is an alternative to registering for VAT.

    There are also VAT schemes for retailers, margin schemes for second-hand goods, art, antiques, collectibles and a Tour Operators' Margin Scheme.

    For further information see get started with VAT.

    4. Eligibility for benefits and tax credits

    Owners of seasonal businesses that shut down for certain periods cannot claim unemployment benefits or Jobseekers' Allowance. However, National Insurance contributions must continue to be paid. If your annual income is low, you may be able to claim tax credits.

    Applying early for these is important - any claims can only be backdated by three months. HMRC provides guidance to help you find out if you qualify for tax credits.

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Finding finance for seasonal businesses

In this guide:

  • Top tips on managing seasonal business cashflow

    Using forecasts and improving your stock and credit control, and purchasing terms to help prevent cashflow problems.

    It is particularly important for seasonal businesses to manage their cashflow effectively as they are more likely to face irregular cashflow patterns.

    There are a number of steps a seasonal business can take to manage cashflow:

    1. Plan ahead

    By planning ahead, you can ensure you are able to cover any slow periods and avoid having to use quick but costly forms of finance such as credit cards.

    A cashflow forecast will highlight times when you're most likely to face financial pressure. This could simply involve drawing up two lists - for money flowing into and out of the business each month. Download our sample cashflow projection spreadsheet (XLS, 29K).

    See cashflow management and identify potential cashflow problems.

    2. Get paid quickly

    It pays to be organised about obtaining payment - this means sending out invoices promptly, chasing late payers and considering offering a discount for early payments - see ensure customers pay you on time.

    3. Keep stock levels down

    Carrying excess stock ties up money you could be using elsewhere. Keep records of stock levels so you can see patterns of what kind of stock you should build up - and when you need it. Estimate demand by asking your regular customers what their needs will be. Use sales or promotions to shift stock that hasn't sold well - see stock control and inventory.

    4. Tighten your purchasing policies

    You can improve your cashflow by agreeing better terms when buying. This might involve looking for a bulk discount, agreeing a longer than usual payment period or arranging purchases on a sale and return basis - see developing supplier relationships.

    5. Put money aside

    Resist the temptation to take money out of the business during your peak times - put money aside so you'll be able to meet your commitments during quiet periods. It's a good idea to set up a business savings account but do some research before you decide on a finance provider.

    Actions
    learndirect online course on business finance
    Content category
    Finance

    Source URL

    /content/top-tips-managing-seasonal-business-cashflow

    Links

  • Finding finance for seasonal businesses

    Arrange repayment terms on overdrafts, loans, mortgages, leasing and factoring to suit seasonal highs and lows.

    Taking out finance to bridge shortfalls in cashflow during off-peak trading periods can be costly and is generally only advisable as a last resort. Before seeking further financing, take all the measures you can to ensure you maximise the money coming in and minimise expenses.

    The right funding options can help seasonal businesses manage their irregular cashflow and operate more efficiently.

    These include:

    • an overdraft facility - arrange this with your bank before you need it and agree on terms that suit your needs, eg the limit of your facility, a single fixed fee or interest only on what you use, a flexible period when the facility is available
    • bank loan - aim for a loan that can be adjusted according to your seasonal sales to allow flexible repayments to match up with cashflow; ie larger repayments when trading is good
    • asset finance - involves releasing cash tied up in physical assets of your business, such as equipment or vehicles, to improve cashflow - this facility type of finance can be tailored to the seasonality of a business to allow flexible repayments
    • bad debt protection - is a type of insurance that guarantees 100 per cent payment on invoices from all credit approved customers - will usually help your invoice finance agreement - often involves risk assessment of new customers

    For further information see business financing options - an overview.

    Factoring and invoice discounting

    Factoring and invoice discounting allow you to boost cashflow by raising finance against outstanding invoices. This may allow you to maintain a steady flow of income all year round. You will typically be able to borrow 80-85 per cent of the value of the invoice.

    Whenever entering a contract with a factoring or invoice discounting company check the termination notice period.

    See factoring and invoice discounting.

    Help
    UK Finance
    Actions
    learndirect online course on business finance
    Also on this site
    Bank finance
    Content category
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    Source URL

    /content/finding-finance-seasonal-businesses

    Links

  • Employing staff for seasonal businesses

    Seasonal businesses should use flexible working options and incentives to find and keep high-quality staff.

    It is essential to plan ahead to ensure you have the right number of employees with the right skills to meet demand at peak times.

    You can work out appropriate staffing levels by:

    • Looking at sales information and data - this will help you to work out the amount of activity at peak times and the basic level of work that is constant throughout the rest of a year.
    • Deciding on work that is crucial and needs to be consistent for the business to run on a daily basis throughout the year.
    • Deciding on who is best to perform crucial work - ie will you use permanent employees or will you need to train temporary staff?
    • Considering the local job market - is there an adequate temporary workforce available, and how quickly can new staff or previously hired staff be employed?
    • Planning cover for absence, illness and holidays to maintain staffing levels. One way to do this is to look at how many days have been lost in the past and to know how many staff are necessary for the business to operate.

    You need to find the right balance between permanent employees - the core of your staff who work all year - and temporary staff or staff on fixed term contracts who only work during the peak periods. Your core of permanent staff should be able to keep the business ticking over and make sure that everything is in place for busy periods.

    If it is difficult to predict how busy you will be, you can use a recruitment agency to take on suitable, temporary staff at short notice.

    There are other employment options that you can use to meet seasonal business needs, such as:

    • family and friends who may be able to help out at weekends and during school or college breaks
    • part-time workers who may be able to ease the pressure at particularly busy times
    • outsourcing some business activities

    For further information see recruiting seasonal staff.

    Actions
    learndirect online course on business finance
    Also on this site
    Employing part-time workers
    Flexible working: the law and best practice
    Content category
    Finance

    Source URL

    /content/employing-staff-seasonal-businesses

    Links

  • Boost your seasonal business all year round

    Diversify your activities and change your marketing to keep your business active during off-peak times.

    All seasonal businesses experience slow periods. You need to think creatively to get through these. Look for areas where small changes might keep your business active outside peak seasonal times.

    Diversify your business

    Most businesses can branch out from their core activity. If your business is seasonal, this may be essential to avoid inactivity during off-peak months.

    For example, a business making wedding dresses might make most of its sales during the spring - but by using its skills and equipment to make other special occasion dresses it might be able to move into a market that is busy in the autumn and winter months.

    You could consider expanding into international markets with opposite seasonal trends. This will create opportunities for you to counter the slump of seasonal sales through export sales, thus maintaining consistent production and profitability all year round - see basics of exporting.

    Market your business so it stays active longer

    Another strategy for seasonal businesses is to develop a marketing plan that makes sure the busy season lasts as long as possible. For example, discounts, sales and promotions can be used to bring customers in during off-peak months - this is the way many tourist accommodation businesses price the rooms they rent out. You may find ideas by looking at what your competitors do. See understand your competitors.

    Off-peak times also allow you to put your marketing plans in place for the next peak season. This is one of a range of tasks that can be completed out of season - see seasonal businesses: make the best use of quieter periods.

    You should also look at the media you use for your marketing. The internet can be a very cost-effective way of helping people to discover your business.

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  • Seasonal businesses: make the best use of quieter periods

    Ideas for exploiting off-peak periods to improve your business - from marketing to stock control.

    It's important to take advantage of off-peak periods to consolidate your business. While some owner-managers may take a second job to tide them over, many use the extra time to focus on aspects of their business for which there's little or no time during peak periods.

    Maintenance

    Maintenance is often top of the list. For example, a caravan park owner might close at the end of October and spend the next few months repairing broken equipment, renewing facilities such as the laundry room and carrying out necessary landscaping.

    Marketing plans

    The extra time may also come in useful for devising new marketing plans and sales initiatives - see create your marketing strategy and market research and market reports.

    Stocktaking and ordering

    Quieter periods also offer an opportunity to tackle time-consuming essentials such as stocktaking and ordering. Look at the stock you have in and compare it with the amounts you ordered over the year. Can you order smaller quantities in the future? Or could you place one large order for certain supplies rather than several small ones - perhaps benefiting from a bulk discount in the process? See stock control and inventory.

    Check whether you're getting the best deal from your suppliers. Shop around and get alternative quotes. You could dramatically save on costs and you may also benefit from volume discounts - see choosing suppliers for your business.

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  • Tax and benefits issues for seasonal businesses

    How to ease tax bill pressures and learn what benefits are available for low-income businesses.

    Careful financial planning and choosing the right VAT scheme for your business can ease the pressures faced by seasonal businesses. In order to ease tax pressure, you should consider:

    1. Year-end date

    Choose your year-end date to fit the nature and cashflow cycle of your business. When choosing the most suitable date to submit your annual accounts, you should aim for a date that will allow you to:

    • make the most of any allowances and reliefs available
    • make your first payment of tax on account at a time appropriate to your cash inflow
    • avoid having to prepare accounts during a busy period

    This can be a complicated area so you should seek professional advice before making any changes - see choose an accountant for your business and running a company or partnership.

    2. Corporation Tax

    Most companies pay Corporation Tax nine months and one day after the end of their accounting year. Seasonal businesses might find it useful to calculate their year-end date so that payment is due when cashflow is buoyant.

    3. VAT Accounting Schemes

    Seasonal businesses might also find it beneficial to use one of the VAT Accounting Schemes. HM Revenue & Customs (HMRC) provide guidance on the following:

    If you are a farmer, GOV.UK has a separate Agricultural Flat Rate Scheme, which is an alternative to registering for VAT.

    There are also VAT schemes for retailers, margin schemes for second-hand goods, art, antiques, collectibles and a Tour Operators' Margin Scheme.

    For further information see get started with VAT.

    4. Eligibility for benefits and tax credits

    Owners of seasonal businesses that shut down for certain periods cannot claim unemployment benefits or Jobseekers' Allowance. However, National Insurance contributions must continue to be paid. If your annual income is low, you may be able to claim tax credits.

    Applying early for these is important - any claims can only be backdated by three months. HMRC provides guidance to help you find out if you qualify for tax credits.

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Payment terms - commonly used invoice payment terms and their meanings

In this guide:

  • Information that invoices must contain

    A valid invoice must contain certain information which may include VAT number, company name, business name and address.

    When issuing an invoice, you must clearly display the word 'invoice' on the document. In addition to this, you must include the following information:

    • a unique identification number
    • your company name, address and contact information
    • the company name and address of the customer you are invoicing
    • a clear description of what you are charging for
    • the date the goods or service were provided (supply date)
    • the date of the invoice
    • the amount(s) being charged
    • VAT amount if applicable
    • the total amount owed

    If you are a limited company or a sole trader you must also provide certain information on any invoices you send.

    Limited companies' invoices

    Limited companies must have the following additional information on their invoices:

    • the full company name as it appears on the certificate of incorporation
    • if you decide to put names of your directors on your invoices, you must include the names of all the directors

    Sole traders' invoices

    A sole trader must have the following additional information on their invoices:

    • the trader's name or any business name being used
    • an address where any legal documents can be delivered to you if you are using a business name
    Actions
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    Invoicing and taking payment from customers
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  • VAT details to include on invoices

    VAT-registered businesses must include extra information on invoices, such as identifying numbers and VAT paid.

    If you are registered for VAT, whether the business is a limited company or a sole trader, you must put the following information on your invoices:

    • a unique and sequential identifying invoice number
    • the date the invoice is issued
    • your customer's name and address
    • your business' name, address and VAT registration number
    • date of supply to the customer (or tax point)
    • a description sufficient to identify the supply of goods or services
    • the quantity of goods or services, with a unit price excluding VAT, and the rate of VAT per item
    • the total amount payable without VAT added, and the amount of VAT charged

    If you are exporting goods or services, see exporting goods and services and VAT.

    It is best practice to set up records and invoice correctly for VAT from the time your business starts - you may find it useful to set up a pro forma invoice. A pro forma invoice can be an invoice drawn up by you and sent to the buyer to confirm the details of a contract, or a polite reminder to the buyer that a debt will be due for payment.

    Actions
    HM Revenue & Customs guidance on VAT sales invoices
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    Ensure customers pay you on time
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  • Setting terms and conditions

    How to set the terms of a contract between you and your customers.

    Terms and conditions - sometimes known as terms of trade - are the terms of the contract between you and your customers. They're designed to protect your rights, limit your liabilities and provide you with some security when you sell your goods or provide a service.

    Many businesses supply goods and services on the basis of informal, verbal arrangements. However, if agreements are clearly set out in writing then there is less chance of a dispute.

    It's important to get your terms and conditions right - if they're inadequate or incorrect, it can be difficult to pursue or prevent bad debt. You could use different terms and conditions for each order, but it can be beneficial to have standard terms for all transactions. If you decide to draft standard terms, it is a good idea to consult a solicitor. See find a solicitor for your business.

    Your terms and conditions should cover information on costs, delivery arrangements, data protection and your right to charge interest on late payments.

    You should also incorporate payment terms into your standard contract for all the payment options you offer.

    There are other terms and conditions you may want to cover, such as:

    • retention of title - allows you to retain ownership of goods already supplied until they are paid for
    • time limits for raising a dispute
    • circumstances in which the contract might be breached or come to an end
    • contra and offset deals against payables - where the buyer pays you in part or full with their products rather than in cash

    You may also want to include a clause in your contract regarding credit limits and credit periods. There is currently an automatic default period of 30 days if you do not account for this in your contract - see ensure customers pay you on time.

    Make your terms binding

    You need to make your customers aware of, and agree to, your terms and conditions. You can do this by printing them on the back of invoices, delivery notes and other documentation.

    Explain your terms and conditions to customers at the start of your relationship, before you raise an invoice.

    Also on this site
    Cashflow management
    Financial and management accounts
    Business-to-business sales contracts
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  • Setting suitable payment terms for your customers

    Payment terms are crucial to your cashflow and competitive position and should be explained clearly to customers.

    Some businesses offer certain levels of credit to customers - ie supplying goods or services to customers before taking payment. However, if customers do not pay promptly, it can place a considerable strain on your business as the income you need to run your business is delayed.

    To safeguard your cashflow, you should check up on your customer - by using information supplied by credit agencies, analysing company accounts or obtaining bank and/or trade references before you give credit.

    For more information on carrying out credit checks, see credit checking your customers and setting credit limits.

    Payment terms and conditions

    You should explain your terms and conditions to customers at the start of your relationship. You can send out a written confirmation of their order with a copy of your terms and conditions of sale. This lets them examine the terms and conditions and discuss any problems they have before you supply goods or services.

    You should also print the terms and conditions on the back of your invoices.

    You could consider encouraging electronic payment in your terms and conditions, eg via BACS or CHAPS. Read about BACS payment for businesses. The Bank of England also provides information on CHAPS payment.

    You could also consider providing other options for payment such as by credit card or PayPal. 

    Also consider sending your invoices electronically - with a copy of your terms and conditions - as it can be much quicker than the post. For more information, see ensure customers pay you on time.

    Early payment discounts

    You might encourage customers to pay early by offering a discount for early payment. The level of the discount should depend on the profits you are making on orders. This can help to speed up payment, improve cashflow and reduce bad debts.

    However, there can be disadvantages to early payment discounts, in particular the financial cost to your business.

    Also on this site
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  • Payment terms - commonly used invoice payment terms and their meanings

    Payment terms and conditions used on invoices including Bill of Exchange, CIA, CBS, COD, EOM, NET 30 and Net 7.

    Your invoice payment terms and conditions can impact the number of days it takes you to get paid. Without them, you aren't communicating when a payment is expected, as well as other conditions like your preferred payment method and any consequences of late payments.

    Invoice payment terms

    This list explains the payment terms most commonly used on invoices.

    Net monthly account Payment due on last day of the month following the one in which the invoice is dated
    PIA Payment in advance
    Net 7 Payment seven days after invoice date
    Net 10 Payment ten days after invoice date
    Net 30 Payment 30 days after invoice date
    Net 60 Payment 60 days after invoice date
    Net 90 Payment 90 days after invoice date
    EOM End of month
    21 MFI 21st of the month following invoice date
    1% 10 Net 30 1% discount if payment received within ten days otherwise payment 30 days after invoice date
    COD Cash on delivery
    Cash account Account conducted on a cash basis, no credit
    Letter of credit A documentary credit confirmed by a bank, often used for export
    Bill of exchange A promise to pay at a later date, usually supported by a bank
    CND Cash next delivery
    CBS Cash before shipment
    CIA Cash in advance
    CWO Cash with order
    1MD Monthly credit payment of a full month's supply
    2MD As above plus an extra calendar month
    Contra Payment from the customer offset against the value of supplies purchased from the customer
    Stage payment Payment of agreed amounts at stage

    When creating your invoice payment terms, bear in mind that if you have clear, concise and consistent payment terms, it is more likely that your invoice will be paid in time and this will have a positive impact on your business cashflow.

    For further information on contract terms and conditions see setting terms and conditions and credit checking your customers and setting credit limits.

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    Ensure customers pay you on time
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  • Get to grips with cashflow (video)

    A short video providing business tips for setting up payment plans, invoicing customers and monthly payment targets.

    This short video provides tips on setting up payment plans, monthly payment targets and invoicing customers.

    Also on this site
    Credit checking your customers and setting credit limits
    Financial and management accounts
    Content category
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    Source URL

    /content/get-grips-cashflow-video

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Managing the relationship with your accountant

In this guide:

  • Benefits of using an accountant

    An accountant can help you with business records, tax returns and auditing requirements.

    An accountant can help you with all or some of the following tasks:

    • Keep certain records, including PAYE (Pay As You Earn) records if you have employees, and VAT records if you're VAT registered. This will involve regular bookkeeping work.
    • Submit an annual tax return to HM Revenue & Customs. This will involve the preparation of financial statements.
    • Appoint an auditor to carry out an annual audit of your accounts, unless the company is exempt - the Institute of Chartered Accountants in England and Wales provides details of audit exemption in Northern Ireland.
    • If you're a limited company, you also have to file accounts with the Registrar of Companies - see file your Companies House information online.

    You could decide to do some of this work yourself, but many businesses prefer to employ an accountant for at least some of it. For example, you might not have the time or necessary skills available in-house to do all the accounting work yourself.

    In addition to basic accounting functions, many accountants also offer other services, such as start-up business and management systems advice.

    Chartered Accountants Ireland provides a directory of accountants that you can use to source the right accountant for your business.

    Help
    Companies House Contact Centre
    Also on this site
    Financial and management accounts
    Outsourcing
    Write a business plan: step-by-step
    Content category
    Finance

    Source URL

    /content/benefits-using-accountant

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  • How to find the right accountant for your business

    How to find an accountant that's right for your business.

    Qualified accountants usually have the word 'chartered' attached to their title, indicating that their body was incorporated by Royal Charter.

    You can search for a chartered accountant on a range of online directories including:

    Before choosing an accountant, consider the size and complexity of your business - you might need someone who understands a particular type of business. You should also consider what other services your business may need from an accountant.

    It's best to start looking for an accountant well before you need to use one, to give yourself enough time to make an informed decision.

    It is recommended that you look for someone who has professional accounting qualifications. It is also advisable to ensure that potential advisers have professional indemnity insurance.

    Accountancy is a complex area and there are many accountancy associations to choose from. You may wish to seek advice or recommendations from business associates, your bank or lawyer, or from professional or trade associations - particularly if you're looking for an accountant that specialises in your industry.

    Once you have identified some potential candidates, draw up a shortlist of about six accountants you'd like to contact.

    What to look for in an accountant

    You should speak directly to each accountant on your shortlist.

    Consider their:

    • Experience - eg do they have experience in your sector and of businesses of a similar size? Can they deal with your business' specific needs?
    • Costs and charges.
    • Size and personnel - eg how many partners do they have and who would look after your business? Sometimes smaller accountancy practices suit smaller businesses.
    • Efficiency - what response times do they work to?
    • Additional services - can they offer specialist business advice or help beyond basic accountancy services?

    If their experience and services match what you are looking for, the next step should be to arrange a visit with them to discuss your business needs in more detail. You should check whether you will be charged for this meeting - see what questions should I ask an accountant?

    Once you have chosen an accountant, let them know that you have selected them and they will issue a letter of engagement, which should detail:

    • your responsibilities
    • the accountant's responsibilities
    • their fees and how they will be charged
    Also on this site
    Financial and management accounts
    Content category
    Finance

    Source URL

    /content/how-find-right-accountant-your-business

    Links

  • What questions should I ask an accountant?

    A checklist of things that you should know about any prospective accountants.

    Different accountants can help your business in different ways, so think about what you are looking for before choosing an accountant.

    Once you have drawn up a shortlist of potential accountants who would be suitable, arrange to meet them to make sure they are the ideal choice for your business. You should take your business plan and other useful information about your business to the meeting.

    Questions to ask when hiring an accountant

    To make sure you get the best value for money, there are things you should find out about any prospective accountant:

    • what are your qualifications?
    • how many partners are there in the practice, and who will look after my business on a day-to-day basis?
    • have you dealt with businesses of a similar size and at a similar stage of growth, and how could you help develop my business?
    • what are your estimated response times?
    • will  your service be proactive eg will you remind me when I need to submit accounts?
    • do you offer any additional services eg inheritance planning or advice on information systems?
    • what services will you charge for and how and when do I pay for them?
    • will I have easy access to the data held about your business?

    Chartered Accountants Ireland have further information on the role of chartered accountants and provide a directory of accountants that you can use to source the right accountant for your business needs.

    Also on this site
    Financial and management accounts
    Outsourcing
    The employment contract
    Content category
    Finance

    Source URL

    /content/what-questions-should-i-ask-accountant

    Links

  • Managing the relationship with your accountant

    How to manage the relationship with your accountant and how to spot problems with the relationship.

    To get the best out of your accountant you should arrange to have regular contact with them.

    You should make sure that you always:

    • Keep agreed records or deadlines.
    • Inform your accountant of any changes to your business.
    • Discuss major issues with your accountant - such as tax implications of amounts you take out as drawings, salary or dividend.
    • Pay your accountant on time. If you don't, your accountant has the right to withhold your figures and other business data until payment has been made, except for limited company accounts that must be filed with Companies House.

    However, just like with any business relationship, there could be problems with your accountant. For example:

    • they may be difficult to contact
    • they could be failing to provide you with necessary information
    • you could be receiving unexpected fee invoices
    • you might need an accountant with different specialist skills and experience
    • the service offered may not be as proactive as your business requires

    Your accountant should be able to adapt as the needs of your business change. However, every three to five years, it is a good idea to review the relationship with your accountant. Questions to consider:

    • Am I still getting value for money?
    • Is my accountant informative and easy to contact?
    • Does my accountant still suit the needs of my business?

    Changing your accountant

    If you choose to change your accountant, you should manage the process carefully. You should bear in mind that you must terminate the agreement with your existing accountant before you sign any agreement with a new one.

    Before you do anything else check the terms and conditions that you have agreed with your accountant. You may find there is a notice period you must honour.

    You should then check that you have access to all the data relating to your business. You should make sure that these are transferred to your new accountant prior to the handover.

    If you need to complain about your accountant

    If for any reason you suspect your accountant of misconduct then you could raise this with them directly. If you are still not satisfied you can make a complaint to the professional body they are accredited with. However, the professional bodies will not help you get compensation for any funds lost as a result of the misconduct - to do this you will need to seek legal advice.

    The Law Society of Northern Ireland provides a breakdown of solicitors by area that can be used if you need to seek legal advice.

    Also on this site
    Financial and management accounts
    Outsourcing
    Choose a solicitor for your business
    The employment contract
    Content category
    Finance

    Source URL

    /content/managing-relationship-your-accountant

    Links

How to find the right accountant for your business

In this guide:

  • Benefits of using an accountant

    An accountant can help you with business records, tax returns and auditing requirements.

    An accountant can help you with all or some of the following tasks:

    • Keep certain records, including PAYE (Pay As You Earn) records if you have employees, and VAT records if you're VAT registered. This will involve regular bookkeeping work.
    • Submit an annual tax return to HM Revenue & Customs. This will involve the preparation of financial statements.
    • Appoint an auditor to carry out an annual audit of your accounts, unless the company is exempt - the Institute of Chartered Accountants in England and Wales provides details of audit exemption in Northern Ireland.
    • If you're a limited company, you also have to file accounts with the Registrar of Companies - see file your Companies House information online.

    You could decide to do some of this work yourself, but many businesses prefer to employ an accountant for at least some of it. For example, you might not have the time or necessary skills available in-house to do all the accounting work yourself.

    In addition to basic accounting functions, many accountants also offer other services, such as start-up business and management systems advice.

    Chartered Accountants Ireland provides a directory of accountants that you can use to source the right accountant for your business.

    Help
    Companies House Contact Centre
    Also on this site
    Financial and management accounts
    Outsourcing
    Write a business plan: step-by-step
    Content category
    Finance

    Source URL

    /content/benefits-using-accountant

    Links

  • How to find the right accountant for your business

    How to find an accountant that's right for your business.

    Qualified accountants usually have the word 'chartered' attached to their title, indicating that their body was incorporated by Royal Charter.

    You can search for a chartered accountant on a range of online directories including:

    Before choosing an accountant, consider the size and complexity of your business - you might need someone who understands a particular type of business. You should also consider what other services your business may need from an accountant.

    It's best to start looking for an accountant well before you need to use one, to give yourself enough time to make an informed decision.

    It is recommended that you look for someone who has professional accounting qualifications. It is also advisable to ensure that potential advisers have professional indemnity insurance.

    Accountancy is a complex area and there are many accountancy associations to choose from. You may wish to seek advice or recommendations from business associates, your bank or lawyer, or from professional or trade associations - particularly if you're looking for an accountant that specialises in your industry.

    Once you have identified some potential candidates, draw up a shortlist of about six accountants you'd like to contact.

    What to look for in an accountant

    You should speak directly to each accountant on your shortlist.

    Consider their:

    • Experience - eg do they have experience in your sector and of businesses of a similar size? Can they deal with your business' specific needs?
    • Costs and charges.
    • Size and personnel - eg how many partners do they have and who would look after your business? Sometimes smaller accountancy practices suit smaller businesses.
    • Efficiency - what response times do they work to?
    • Additional services - can they offer specialist business advice or help beyond basic accountancy services?

    If their experience and services match what you are looking for, the next step should be to arrange a visit with them to discuss your business needs in more detail. You should check whether you will be charged for this meeting - see what questions should I ask an accountant?

    Once you have chosen an accountant, let them know that you have selected them and they will issue a letter of engagement, which should detail:

    • your responsibilities
    • the accountant's responsibilities
    • their fees and how they will be charged
    Also on this site
    Financial and management accounts
    Content category
    Finance

    Source URL

    /content/how-find-right-accountant-your-business

    Links

  • What questions should I ask an accountant?

    A checklist of things that you should know about any prospective accountants.

    Different accountants can help your business in different ways, so think about what you are looking for before choosing an accountant.

    Once you have drawn up a shortlist of potential accountants who would be suitable, arrange to meet them to make sure they are the ideal choice for your business. You should take your business plan and other useful information about your business to the meeting.

    Questions to ask when hiring an accountant

    To make sure you get the best value for money, there are things you should find out about any prospective accountant:

    • what are your qualifications?
    • how many partners are there in the practice, and who will look after my business on a day-to-day basis?
    • have you dealt with businesses of a similar size and at a similar stage of growth, and how could you help develop my business?
    • what are your estimated response times?
    • will  your service be proactive eg will you remind me when I need to submit accounts?
    • do you offer any additional services eg inheritance planning or advice on information systems?
    • what services will you charge for and how and when do I pay for them?
    • will I have easy access to the data held about your business?

    Chartered Accountants Ireland have further information on the role of chartered accountants and provide a directory of accountants that you can use to source the right accountant for your business needs.

    Also on this site
    Financial and management accounts
    Outsourcing
    The employment contract
    Content category
    Finance

    Source URL

    /content/what-questions-should-i-ask-accountant

    Links

  • Managing the relationship with your accountant

    How to manage the relationship with your accountant and how to spot problems with the relationship.

    To get the best out of your accountant you should arrange to have regular contact with them.

    You should make sure that you always:

    • Keep agreed records or deadlines.
    • Inform your accountant of any changes to your business.
    • Discuss major issues with your accountant - such as tax implications of amounts you take out as drawings, salary or dividend.
    • Pay your accountant on time. If you don't, your accountant has the right to withhold your figures and other business data until payment has been made, except for limited company accounts that must be filed with Companies House.

    However, just like with any business relationship, there could be problems with your accountant. For example:

    • they may be difficult to contact
    • they could be failing to provide you with necessary information
    • you could be receiving unexpected fee invoices
    • you might need an accountant with different specialist skills and experience
    • the service offered may not be as proactive as your business requires

    Your accountant should be able to adapt as the needs of your business change. However, every three to five years, it is a good idea to review the relationship with your accountant. Questions to consider:

    • Am I still getting value for money?
    • Is my accountant informative and easy to contact?
    • Does my accountant still suit the needs of my business?

    Changing your accountant

    If you choose to change your accountant, you should manage the process carefully. You should bear in mind that you must terminate the agreement with your existing accountant before you sign any agreement with a new one.

    Before you do anything else check the terms and conditions that you have agreed with your accountant. You may find there is a notice period you must honour.

    You should then check that you have access to all the data relating to your business. You should make sure that these are transferred to your new accountant prior to the handover.

    If you need to complain about your accountant

    If for any reason you suspect your accountant of misconduct then you could raise this with them directly. If you are still not satisfied you can make a complaint to the professional body they are accredited with. However, the professional bodies will not help you get compensation for any funds lost as a result of the misconduct - to do this you will need to seek legal advice.

    The Law Society of Northern Ireland provides a breakdown of solicitors by area that can be used if you need to seek legal advice.

    Also on this site
    Financial and management accounts
    Outsourcing
    Choose a solicitor for your business
    The employment contract
    Content category
    Finance

    Source URL

    /content/managing-relationship-your-accountant

    Links

What questions should I ask an accountant?

In this guide:

  • Benefits of using an accountant

    An accountant can help you with business records, tax returns and auditing requirements.

    An accountant can help you with all or some of the following tasks:

    • Keep certain records, including PAYE (Pay As You Earn) records if you have employees, and VAT records if you're VAT registered. This will involve regular bookkeeping work.
    • Submit an annual tax return to HM Revenue & Customs. This will involve the preparation of financial statements.
    • Appoint an auditor to carry out an annual audit of your accounts, unless the company is exempt - the Institute of Chartered Accountants in England and Wales provides details of audit exemption in Northern Ireland.
    • If you're a limited company, you also have to file accounts with the Registrar of Companies - see file your Companies House information online.

    You could decide to do some of this work yourself, but many businesses prefer to employ an accountant for at least some of it. For example, you might not have the time or necessary skills available in-house to do all the accounting work yourself.

    In addition to basic accounting functions, many accountants also offer other services, such as start-up business and management systems advice.

    Chartered Accountants Ireland provides a directory of accountants that you can use to source the right accountant for your business.

    Help
    Companies House Contact Centre
    Also on this site
    Financial and management accounts
    Outsourcing
    Write a business plan: step-by-step
    Content category
    Finance

    Source URL

    /content/benefits-using-accountant

    Links

  • How to find the right accountant for your business

    How to find an accountant that's right for your business.

    Qualified accountants usually have the word 'chartered' attached to their title, indicating that their body was incorporated by Royal Charter.

    You can search for a chartered accountant on a range of online directories including:

    Before choosing an accountant, consider the size and complexity of your business - you might need someone who understands a particular type of business. You should also consider what other services your business may need from an accountant.

    It's best to start looking for an accountant well before you need to use one, to give yourself enough time to make an informed decision.

    It is recommended that you look for someone who has professional accounting qualifications. It is also advisable to ensure that potential advisers have professional indemnity insurance.

    Accountancy is a complex area and there are many accountancy associations to choose from. You may wish to seek advice or recommendations from business associates, your bank or lawyer, or from professional or trade associations - particularly if you're looking for an accountant that specialises in your industry.

    Once you have identified some potential candidates, draw up a shortlist of about six accountants you'd like to contact.

    What to look for in an accountant

    You should speak directly to each accountant on your shortlist.

    Consider their:

    • Experience - eg do they have experience in your sector and of businesses of a similar size? Can they deal with your business' specific needs?
    • Costs and charges.
    • Size and personnel - eg how many partners do they have and who would look after your business? Sometimes smaller accountancy practices suit smaller businesses.
    • Efficiency - what response times do they work to?
    • Additional services - can they offer specialist business advice or help beyond basic accountancy services?

    If their experience and services match what you are looking for, the next step should be to arrange a visit with them to discuss your business needs in more detail. You should check whether you will be charged for this meeting - see what questions should I ask an accountant?

    Once you have chosen an accountant, let them know that you have selected them and they will issue a letter of engagement, which should detail:

    • your responsibilities
    • the accountant's responsibilities
    • their fees and how they will be charged
    Also on this site
    Financial and management accounts
    Content category
    Finance

    Source URL

    /content/how-find-right-accountant-your-business

    Links

  • What questions should I ask an accountant?

    A checklist of things that you should know about any prospective accountants.

    Different accountants can help your business in different ways, so think about what you are looking for before choosing an accountant.

    Once you have drawn up a shortlist of potential accountants who would be suitable, arrange to meet them to make sure they are the ideal choice for your business. You should take your business plan and other useful information about your business to the meeting.

    Questions to ask when hiring an accountant

    To make sure you get the best value for money, there are things you should find out about any prospective accountant:

    • what are your qualifications?
    • how many partners are there in the practice, and who will look after my business on a day-to-day basis?
    • have you dealt with businesses of a similar size and at a similar stage of growth, and how could you help develop my business?
    • what are your estimated response times?
    • will  your service be proactive eg will you remind me when I need to submit accounts?
    • do you offer any additional services eg inheritance planning or advice on information systems?
    • what services will you charge for and how and when do I pay for them?
    • will I have easy access to the data held about your business?

    Chartered Accountants Ireland have further information on the role of chartered accountants and provide a directory of accountants that you can use to source the right accountant for your business needs.

    Also on this site
    Financial and management accounts
    Outsourcing
    The employment contract
    Content category
    Finance

    Source URL

    /content/what-questions-should-i-ask-accountant

    Links

  • Managing the relationship with your accountant

    How to manage the relationship with your accountant and how to spot problems with the relationship.

    To get the best out of your accountant you should arrange to have regular contact with them.

    You should make sure that you always:

    • Keep agreed records or deadlines.
    • Inform your accountant of any changes to your business.
    • Discuss major issues with your accountant - such as tax implications of amounts you take out as drawings, salary or dividend.
    • Pay your accountant on time. If you don't, your accountant has the right to withhold your figures and other business data until payment has been made, except for limited company accounts that must be filed with Companies House.

    However, just like with any business relationship, there could be problems with your accountant. For example:

    • they may be difficult to contact
    • they could be failing to provide you with necessary information
    • you could be receiving unexpected fee invoices
    • you might need an accountant with different specialist skills and experience
    • the service offered may not be as proactive as your business requires

    Your accountant should be able to adapt as the needs of your business change. However, every three to five years, it is a good idea to review the relationship with your accountant. Questions to consider:

    • Am I still getting value for money?
    • Is my accountant informative and easy to contact?
    • Does my accountant still suit the needs of my business?

    Changing your accountant

    If you choose to change your accountant, you should manage the process carefully. You should bear in mind that you must terminate the agreement with your existing accountant before you sign any agreement with a new one.

    Before you do anything else check the terms and conditions that you have agreed with your accountant. You may find there is a notice period you must honour.

    You should then check that you have access to all the data relating to your business. You should make sure that these are transferred to your new accountant prior to the handover.

    If you need to complain about your accountant

    If for any reason you suspect your accountant of misconduct then you could raise this with them directly. If you are still not satisfied you can make a complaint to the professional body they are accredited with. However, the professional bodies will not help you get compensation for any funds lost as a result of the misconduct - to do this you will need to seek legal advice.

    The Law Society of Northern Ireland provides a breakdown of solicitors by area that can be used if you need to seek legal advice.

    Also on this site
    Financial and management accounts
    Outsourcing
    Choose a solicitor for your business
    The employment contract
    Content category
    Finance

    Source URL

    /content/managing-relationship-your-accountant

    Links

Benefits of using an accountant

In this guide:

  • Benefits of using an accountant

    An accountant can help you with business records, tax returns and auditing requirements.

    An accountant can help you with all or some of the following tasks:

    • Keep certain records, including PAYE (Pay As You Earn) records if you have employees, and VAT records if you're VAT registered. This will involve regular bookkeeping work.
    • Submit an annual tax return to HM Revenue & Customs. This will involve the preparation of financial statements.
    • Appoint an auditor to carry out an annual audit of your accounts, unless the company is exempt - the Institute of Chartered Accountants in England and Wales provides details of audit exemption in Northern Ireland.
    • If you're a limited company, you also have to file accounts with the Registrar of Companies - see file your Companies House information online.

    You could decide to do some of this work yourself, but many businesses prefer to employ an accountant for at least some of it. For example, you might not have the time or necessary skills available in-house to do all the accounting work yourself.

    In addition to basic accounting functions, many accountants also offer other services, such as start-up business and management systems advice.

    Chartered Accountants Ireland provides a directory of accountants that you can use to source the right accountant for your business.

    Help
    Companies House Contact Centre
    Also on this site
    Financial and management accounts
    Outsourcing
    Write a business plan: step-by-step
    Content category
    Finance

    Source URL

    /content/benefits-using-accountant

    Links

  • How to find the right accountant for your business

    How to find an accountant that's right for your business.

    Qualified accountants usually have the word 'chartered' attached to their title, indicating that their body was incorporated by Royal Charter.

    You can search for a chartered accountant on a range of online directories including:

    Before choosing an accountant, consider the size and complexity of your business - you might need someone who understands a particular type of business. You should also consider what other services your business may need from an accountant.

    It's best to start looking for an accountant well before you need to use one, to give yourself enough time to make an informed decision.

    It is recommended that you look for someone who has professional accounting qualifications. It is also advisable to ensure that potential advisers have professional indemnity insurance.

    Accountancy is a complex area and there are many accountancy associations to choose from. You may wish to seek advice or recommendations from business associates, your bank or lawyer, or from professional or trade associations - particularly if you're looking for an accountant that specialises in your industry.

    Once you have identified some potential candidates, draw up a shortlist of about six accountants you'd like to contact.

    What to look for in an accountant

    You should speak directly to each accountant on your shortlist.

    Consider their:

    • Experience - eg do they have experience in your sector and of businesses of a similar size? Can they deal with your business' specific needs?
    • Costs and charges.
    • Size and personnel - eg how many partners do they have and who would look after your business? Sometimes smaller accountancy practices suit smaller businesses.
    • Efficiency - what response times do they work to?
    • Additional services - can they offer specialist business advice or help beyond basic accountancy services?

    If their experience and services match what you are looking for, the next step should be to arrange a visit with them to discuss your business needs in more detail. You should check whether you will be charged for this meeting - see what questions should I ask an accountant?

    Once you have chosen an accountant, let them know that you have selected them and they will issue a letter of engagement, which should detail:

    • your responsibilities
    • the accountant's responsibilities
    • their fees and how they will be charged
    Also on this site
    Financial and management accounts
    Content category
    Finance

    Source URL

    /content/how-find-right-accountant-your-business

    Links

  • What questions should I ask an accountant?

    A checklist of things that you should know about any prospective accountants.

    Different accountants can help your business in different ways, so think about what you are looking for before choosing an accountant.

    Once you have drawn up a shortlist of potential accountants who would be suitable, arrange to meet them to make sure they are the ideal choice for your business. You should take your business plan and other useful information about your business to the meeting.

    Questions to ask when hiring an accountant

    To make sure you get the best value for money, there are things you should find out about any prospective accountant:

    • what are your qualifications?
    • how many partners are there in the practice, and who will look after my business on a day-to-day basis?
    • have you dealt with businesses of a similar size and at a similar stage of growth, and how could you help develop my business?
    • what are your estimated response times?
    • will  your service be proactive eg will you remind me when I need to submit accounts?
    • do you offer any additional services eg inheritance planning or advice on information systems?
    • what services will you charge for and how and when do I pay for them?
    • will I have easy access to the data held about your business?

    Chartered Accountants Ireland have further information on the role of chartered accountants and provide a directory of accountants that you can use to source the right accountant for your business needs.

    Also on this site
    Financial and management accounts
    Outsourcing
    The employment contract
    Content category
    Finance

    Source URL

    /content/what-questions-should-i-ask-accountant

    Links

  • Managing the relationship with your accountant

    How to manage the relationship with your accountant and how to spot problems with the relationship.

    To get the best out of your accountant you should arrange to have regular contact with them.

    You should make sure that you always:

    • Keep agreed records or deadlines.
    • Inform your accountant of any changes to your business.
    • Discuss major issues with your accountant - such as tax implications of amounts you take out as drawings, salary or dividend.
    • Pay your accountant on time. If you don't, your accountant has the right to withhold your figures and other business data until payment has been made, except for limited company accounts that must be filed with Companies House.

    However, just like with any business relationship, there could be problems with your accountant. For example:

    • they may be difficult to contact
    • they could be failing to provide you with necessary information
    • you could be receiving unexpected fee invoices
    • you might need an accountant with different specialist skills and experience
    • the service offered may not be as proactive as your business requires

    Your accountant should be able to adapt as the needs of your business change. However, every three to five years, it is a good idea to review the relationship with your accountant. Questions to consider:

    • Am I still getting value for money?
    • Is my accountant informative and easy to contact?
    • Does my accountant still suit the needs of my business?

    Changing your accountant

    If you choose to change your accountant, you should manage the process carefully. You should bear in mind that you must terminate the agreement with your existing accountant before you sign any agreement with a new one.

    Before you do anything else check the terms and conditions that you have agreed with your accountant. You may find there is a notice period you must honour.

    You should then check that you have access to all the data relating to your business. You should make sure that these are transferred to your new accountant prior to the handover.

    If you need to complain about your accountant

    If for any reason you suspect your accountant of misconduct then you could raise this with them directly. If you are still not satisfied you can make a complaint to the professional body they are accredited with. However, the professional bodies will not help you get compensation for any funds lost as a result of the misconduct - to do this you will need to seek legal advice.

    The Law Society of Northern Ireland provides a breakdown of solicitors by area that can be used if you need to seek legal advice.

    Also on this site
    Financial and management accounts
    Outsourcing
    Choose a solicitor for your business
    The employment contract
    Content category
    Finance

    Source URL

    /content/managing-relationship-your-accountant

    Links

Online banking for businesses

In this guide:

  • Advantages of having a business bank account

    The advantages of setting up a business bank account for your business.

    If you operate your business as a limited company or partnership, you are required to set up a business bank account to ensure you report your taxes correctly.

    If you are operating as a sole trader, there is no legal requirement to have a business bank account. However, you may find it easier to keep your business and personal finances separate.

    Setting up a business bank account has several advantages:

    • Your personal bank account terms and conditions - Some banks won't allow you to use your personal bank account for business transactions, this will be included in the terms of your bank account.
    • Tax reporting to HMRC - You are required to file a tax return every year and to do this you'll need to keep records of your business's sales and expenses. If you're using a personal bank account, your business transactions will be mixed up with your personal transactions. This can make the process complicated - having a dedicated business account makes it easier to track business cashflow and complete your tax return.
    • Professionalism - Providing customers and suppliers with a dedicated business bank account can make your business look more professional than using personal bank details.
    • Business account benefits - Many banks will offer introductory offers on business accounts, meaning that you can get free banking for a certain timeframe. Some banks will also provide free or low cost electronic transactions, branch based advisers and competitive interest rates on business profits.

    UK Finance provide further guidance on opening a business bank account.

    Also on this site
    Financial and management accounts
    Content category
    Finance

    Source URL

    /content/advantages-having-business-bank-account

    Links

  • Choosing a business bank account

    The different types of accounts and key factors to consider when choosing a business bank account.

    The type of account/s you choose will depend on your business' needs.

    Depending on your business, you may require:

    • a business current account for daily transactions, payments and receipts - eg one that pays interest on credit balances (though not all banks offer this)
    • an instant access deposit account for cash sums not needed for daily operations but can be accessed as required
    • a term deposit account for funds not needed immediately or at short notice
    • a foreign currency account if you trade overseas and if you receive and make payments in foreign currency
    • a loan account for any loans you take out
    • a merchant account to accept and process debit and credit card transactions - see using payment cards for your business and accepting online payments.

    Compare accounts

    Before choosing a business account, you should compare the different services and costs. For example:

    • facilities - eg automatic money transfers, debit and credit cards or telephone or internet banking
    • interest rates - particularly if you're usually in credit
    • overdraft charges - particularly if you're often overdrawn
    • monthly fees
    • additional account charges - eg for statements, cheques and cash payments
    • additional services - eg small-business advice

    UK Finance provides guidance on opening a business current account .

    Improving your current deal

    You should review your bank accounts at least once a year and compare them with others available.

    If you compare your current bank's service with others on the market you will know how competitive your deal is, or if there are better options. But you don't have to switch banks to improve your deal, you could instead see if you can agree better terms with your existing bank. If you have a history as a good customer, your bank may be willing to negotiate with you.

    Using more than one bank

    You could also consider using different banks to fulfil different financial requirements. This allows you to pick and choose the most beneficial parts of various deals.

    However, it may also be more complicated and time consuming to keep track of your financial affairs and to build a relationship with each bank.

    Also on this site
    Bank finance
    Tailor your business plan to secure funding
    Commercial mortgages and lenders
    Content category
    Finance

    Source URL

    /content/choosing-business-bank-account

    Links

  • Opening a business bank account

    What financial, personal and business information you'll need to give to a bank to set up a new business account.

    Once you have decided which bank to use and which type of account you need, you may need to set up a meeting with the bank to open the account. Alternatively the bank may allow you to open a business bank account online. In each case, the bank will require certain information from you to open a business account, including:

    • details of your business and business activities
    • where the start-up finance for the business has come from - eg from you or other investors
    • a business plan - see write a business plan: step-by-step and tailor your business plan to secure funding
    • information on your credit history
    • bank statements for the business if you already have a business account
    • if you are a limited company - a certificate of incorporation

    You will also have to provide the following information and documents:

    • a driving licence, passport or other acceptable form of ID
    • proof of address, such as a recent utility bill for you and for any other person involved in the management of the business - if you are a limited company, this information will have to be provided for any directors and company secretaries so that the bank can check your identity as required under money laundering laws
    • an account opening mandate - the bank will give you this
    • a list of the persons who can sign on the bank account and a sample of their signature - the bank will ask you to specify in what combination people will sign on the account eg cheques may require two signatures
    Also on this site
    Bank finance
    Acquire assets and borrow money tax efficiently
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  • Managing a business bank account

    How to build a good relationship with your bank and manage your bank account carefully.

    As your business grows and changes, you may find that the terms and conditions attached to your business bank account are no longer best for your business. It is important to regularly review the situation so that if this is the case, you can switch to a different account or negotiate to change the terms and conditions of your current account.

    It is important to build up a good relationship with your bank. You should always try to keep to the terms and conditions attached to each of your business accounts.

    Your relationship with your bank will also be improved if they understand your business. You can help them to improve their understanding by:

    • talking to the person managing your account on a regular basis
    • sending your accounts to the bank every year, if requested
    • providing the bank with updated copies of your business plan when you need new loans or increased overdraft facilities - see tailor your business plan to secure funding
    • letting your bank know if you plan any unusual transactions - eg significant capital expenditure

    If you are unhappy with any the service you have received from your bank, in the first instance complain to your bank. If you remain unhappy, the Financial Ombudsman can provide details about complaining or resolving a dispute with your bank.

    Beyond maintaining a good relationship with your bank, you can also manage your bank account more easily by:

    • ensuring only appropriate persons are authorised to make payments from the bank account
    • keeping records of all transactions in the bank account
    • keeping and checking through your bank statements
    • using your bank statements to check the financial position of the business
    • cross-checking your statements with your business records to ensure that all transactions are correct

    Online banking can make it quick and easy to check balances and payments - see online banking for businesses.

    Actions
    Lending Standards Board complaints procedure
    Also on this site
    Acquire assets and borrow money tax efficiently
    Tailor your business plan to secure funding
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  • Advantages and disadvantages of switching business bank accounts

    The benefits and issues involved around changing your business bank and how to switch accounts.

    Changing the bank your business uses can be time-consuming and disruptive.

    However, the Financial Conduct Authority (FCA) Banking Conduct of Business Sourcebook (BCOBS) can help make the transfer of bank accounts quicker and simpler for customers.

    If you are changing banks, you can ensure the process runs smoothly by:

    • contacting your new bank and obtaining application forms in advance - check the terms and conditions of your new account carefully and discuss any concerns before returning the forms
    • having business information ready for your new bank
    • completing the mandate from your new bank to allow them to deal with your old bank on your behalf and request details of regular payments
    • checking whether the bank will notify those who make payments to you, or whether you need to - the new bank will arrange for these payments to be switched
    • monitoring both accounts carefully to check for irregularities - eg payments being made twice
    • if possible, keeping your old account open until you're sure the new bank can deliver the required service

    The new bank will notify you once they have completed their responsibilities for the transfer.

    Advantages of switching business bank accounts

    There are several advantages to switching business bank accounts:

    • a new account could offer more attractive interest rates or lower charges
    • a new bank might understand your requirements better than your current bank
    • many bank accounts come with introductory offers eg free banking for an initial period
    • your current bank may not offer 24-hour telephone or internet banking services

    Disadvantages of switching business bank accounts

    However, switching bank accounts can also have a number of disadvantages:

    • if you have security or your accounts are complex, it can still take time and there's no guarantee of avoiding problems altogether
    • using one bank for several years can demonstrate financial stability, which can be important for applying for a loan or other sources of finance
    • you will lose the benefits of the relationship you have with your current bank
    • you may need to assess the possible impact of switching on other arrangements you might have with the bank eg loans or credit cards
     
    Actions
    Financial Ombudsman bank dispute resolution procedures
    UK Finance business bank account information
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  • Online banking for businesses

    How online banking can reduce costs and improve control of your finances, and how you can switch to online banking.

    All major banks offer online banking, and most businesses can benefit from using it. Online banking allows you to:

    • check your balances and view statements online
    • move money between accounts
    • make payments to suppliers
    • set up regular payments such as salaries
    • order chequebooks and statements
    • download account information to analyse on your computer

    Online banking allows you to manage your business bank account more efficiently, but it can also be very cost effective. Charges are often lower than for ordinary accounts and accounts may offer higher interest rates. Banks usually offer online banking services at no extra cost.

    Larger businesses may also be offered 'PC banking' - this requires installing special banking software on your computer to manage your account. It allows you to directly link your accounting systems to your bank and can offer a more effective solution if you have a large volume of banking transactions.

    Take Five provides important information on safe online banking.

    Switching to online banking

    Before you go ahead and switch to online banking for your business, make sure you:

    • identify your objectives eg you might simply want to reduce costs, or online banking may be part of an integrated IT system for handling accounting and payments
    • check what services your bank offers and whether they meet your needs
    • investigate what services other banks offer
    • find out about transaction charges, interest rates and any standing charges
    • estimate how your banking costs will change with online banking
    • talk to your suppliers and customers about the kind of electronic payment options they would like
    • assess whether you would need any additional equipment and whether any specialist set-up is required
    • estimate the costs and timescales of switching
    • identify which employees will be affected by the change and organise suitable training in the new system or procedures
    • ensure that you have proper security ie anti-virus software, firewalls and password protection - and ensure you include security measures as part of your staff training
    • plan the introduction and testing of online banking
    Actions
    UK Finance business bank account information
    Also on this site
    Accepting online payments
    Content category
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    Source URL

    /content/online-banking-businesses

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  • Business bank account charges

    Take care in controlling your bank charges and find out when they will be taken from the account.

    Banks will provide you with information about their charges, but make sure you understand this information and are aware of the terms and conditions. Brochures and leaflets will highlight the standard charges and you will be advised of some of the non-standard fees before the service is provided.

    Checking bank charges

    Bank charges are usually taken monthly or quarterly. A statement detailing a breakdown of all fees is sent to the customer before the fees are taken. You should check this statement regularly to ensure that no other fees are being imposed.

    If you do not keep to the terms and conditions of your account, the charges can be high. For example, banks may charge a referral fee if your account goes overdrawn without permission and if you accept a cheque that is returned unpaid by the debtor's bank, your bank could charge you an administration cost and you will not get the money due to you.

    Keep bank charges to a minimum

    There are ways to keep your bank charges as low as possible. These may include:

    • negotiate for better interest rates and lower charges
    • automate as many transactions as you can by using standing orders, direct debits and electronic payments
    • use your bank's online services if any are available
    • avoid unauthorised overdrafts
    • minimise the amount of cash you pay into your account and the cheques you write out
    • open a foreign currency account to make and receive foreign currency payments - you will avoid making exchange fees on each transaction and it allows you to hedge against foreign currency exchange rate fluctuations, however, you should check set up and transaction charges carefully
    • find out what other banks would charge for the same services
    Also on this site
    Acquire assets and borrow money tax efficiently
    Ensure customers pay you on time
    European banking services
    Content category
    Finance

    Source URL

    /content/business-bank-account-charges

    Links

Business bank account charges

In this guide:

  • Advantages of having a business bank account

    The advantages of setting up a business bank account for your business.

    If you operate your business as a limited company or partnership, you are required to set up a business bank account to ensure you report your taxes correctly.

    If you are operating as a sole trader, there is no legal requirement to have a business bank account. However, you may find it easier to keep your business and personal finances separate.

    Setting up a business bank account has several advantages:

    • Your personal bank account terms and conditions - Some banks won't allow you to use your personal bank account for business transactions, this will be included in the terms of your bank account.
    • Tax reporting to HMRC - You are required to file a tax return every year and to do this you'll need to keep records of your business's sales and expenses. If you're using a personal bank account, your business transactions will be mixed up with your personal transactions. This can make the process complicated - having a dedicated business account makes it easier to track business cashflow and complete your tax return.
    • Professionalism - Providing customers and suppliers with a dedicated business bank account can make your business look more professional than using personal bank details.
    • Business account benefits - Many banks will offer introductory offers on business accounts, meaning that you can get free banking for a certain timeframe. Some banks will also provide free or low cost electronic transactions, branch based advisers and competitive interest rates on business profits.

    UK Finance provide further guidance on opening a business bank account.

    Also on this site
    Financial and management accounts
    Content category
    Finance

    Source URL

    /content/advantages-having-business-bank-account

    Links

  • Choosing a business bank account

    The different types of accounts and key factors to consider when choosing a business bank account.

    The type of account/s you choose will depend on your business' needs.

    Depending on your business, you may require:

    • a business current account for daily transactions, payments and receipts - eg one that pays interest on credit balances (though not all banks offer this)
    • an instant access deposit account for cash sums not needed for daily operations but can be accessed as required
    • a term deposit account for funds not needed immediately or at short notice
    • a foreign currency account if you trade overseas and if you receive and make payments in foreign currency
    • a loan account for any loans you take out
    • a merchant account to accept and process debit and credit card transactions - see using payment cards for your business and accepting online payments.

    Compare accounts

    Before choosing a business account, you should compare the different services and costs. For example:

    • facilities - eg automatic money transfers, debit and credit cards or telephone or internet banking
    • interest rates - particularly if you're usually in credit
    • overdraft charges - particularly if you're often overdrawn
    • monthly fees
    • additional account charges - eg for statements, cheques and cash payments
    • additional services - eg small-business advice

    UK Finance provides guidance on opening a business current account .

    Improving your current deal

    You should review your bank accounts at least once a year and compare them with others available.

    If you compare your current bank's service with others on the market you will know how competitive your deal is, or if there are better options. But you don't have to switch banks to improve your deal, you could instead see if you can agree better terms with your existing bank. If you have a history as a good customer, your bank may be willing to negotiate with you.

    Using more than one bank

    You could also consider using different banks to fulfil different financial requirements. This allows you to pick and choose the most beneficial parts of various deals.

    However, it may also be more complicated and time consuming to keep track of your financial affairs and to build a relationship with each bank.

    Also on this site
    Bank finance
    Tailor your business plan to secure funding
    Commercial mortgages and lenders
    Content category
    Finance

    Source URL

    /content/choosing-business-bank-account

    Links

  • Opening a business bank account

    What financial, personal and business information you'll need to give to a bank to set up a new business account.

    Once you have decided which bank to use and which type of account you need, you may need to set up a meeting with the bank to open the account. Alternatively the bank may allow you to open a business bank account online. In each case, the bank will require certain information from you to open a business account, including:

    • details of your business and business activities
    • where the start-up finance for the business has come from - eg from you or other investors
    • a business plan - see write a business plan: step-by-step and tailor your business plan to secure funding
    • information on your credit history
    • bank statements for the business if you already have a business account
    • if you are a limited company - a certificate of incorporation

    You will also have to provide the following information and documents:

    • a driving licence, passport or other acceptable form of ID
    • proof of address, such as a recent utility bill for you and for any other person involved in the management of the business - if you are a limited company, this information will have to be provided for any directors and company secretaries so that the bank can check your identity as required under money laundering laws
    • an account opening mandate - the bank will give you this
    • a list of the persons who can sign on the bank account and a sample of their signature - the bank will ask you to specify in what combination people will sign on the account eg cheques may require two signatures
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  • Managing a business bank account

    How to build a good relationship with your bank and manage your bank account carefully.

    As your business grows and changes, you may find that the terms and conditions attached to your business bank account are no longer best for your business. It is important to regularly review the situation so that if this is the case, you can switch to a different account or negotiate to change the terms and conditions of your current account.

    It is important to build up a good relationship with your bank. You should always try to keep to the terms and conditions attached to each of your business accounts.

    Your relationship with your bank will also be improved if they understand your business. You can help them to improve their understanding by:

    • talking to the person managing your account on a regular basis
    • sending your accounts to the bank every year, if requested
    • providing the bank with updated copies of your business plan when you need new loans or increased overdraft facilities - see tailor your business plan to secure funding
    • letting your bank know if you plan any unusual transactions - eg significant capital expenditure

    If you are unhappy with any the service you have received from your bank, in the first instance complain to your bank. If you remain unhappy, the Financial Ombudsman can provide details about complaining or resolving a dispute with your bank.

    Beyond maintaining a good relationship with your bank, you can also manage your bank account more easily by:

    • ensuring only appropriate persons are authorised to make payments from the bank account
    • keeping records of all transactions in the bank account
    • keeping and checking through your bank statements
    • using your bank statements to check the financial position of the business
    • cross-checking your statements with your business records to ensure that all transactions are correct

    Online banking can make it quick and easy to check balances and payments - see online banking for businesses.

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  • Advantages and disadvantages of switching business bank accounts

    The benefits and issues involved around changing your business bank and how to switch accounts.

    Changing the bank your business uses can be time-consuming and disruptive.

    However, the Financial Conduct Authority (FCA) Banking Conduct of Business Sourcebook (BCOBS) can help make the transfer of bank accounts quicker and simpler for customers.

    If you are changing banks, you can ensure the process runs smoothly by:

    • contacting your new bank and obtaining application forms in advance - check the terms and conditions of your new account carefully and discuss any concerns before returning the forms
    • having business information ready for your new bank
    • completing the mandate from your new bank to allow them to deal with your old bank on your behalf and request details of regular payments
    • checking whether the bank will notify those who make payments to you, or whether you need to - the new bank will arrange for these payments to be switched
    • monitoring both accounts carefully to check for irregularities - eg payments being made twice
    • if possible, keeping your old account open until you're sure the new bank can deliver the required service

    The new bank will notify you once they have completed their responsibilities for the transfer.

    Advantages of switching business bank accounts

    There are several advantages to switching business bank accounts:

    • a new account could offer more attractive interest rates or lower charges
    • a new bank might understand your requirements better than your current bank
    • many bank accounts come with introductory offers eg free banking for an initial period
    • your current bank may not offer 24-hour telephone or internet banking services

    Disadvantages of switching business bank accounts

    However, switching bank accounts can also have a number of disadvantages:

    • if you have security or your accounts are complex, it can still take time and there's no guarantee of avoiding problems altogether
    • using one bank for several years can demonstrate financial stability, which can be important for applying for a loan or other sources of finance
    • you will lose the benefits of the relationship you have with your current bank
    • you may need to assess the possible impact of switching on other arrangements you might have with the bank eg loans or credit cards
     
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  • Online banking for businesses

    How online banking can reduce costs and improve control of your finances, and how you can switch to online banking.

    All major banks offer online banking, and most businesses can benefit from using it. Online banking allows you to:

    • check your balances and view statements online
    • move money between accounts
    • make payments to suppliers
    • set up regular payments such as salaries
    • order chequebooks and statements
    • download account information to analyse on your computer

    Online banking allows you to manage your business bank account more efficiently, but it can also be very cost effective. Charges are often lower than for ordinary accounts and accounts may offer higher interest rates. Banks usually offer online banking services at no extra cost.

    Larger businesses may also be offered 'PC banking' - this requires installing special banking software on your computer to manage your account. It allows you to directly link your accounting systems to your bank and can offer a more effective solution if you have a large volume of banking transactions.

    Take Five provides important information on safe online banking.

    Switching to online banking

    Before you go ahead and switch to online banking for your business, make sure you:

    • identify your objectives eg you might simply want to reduce costs, or online banking may be part of an integrated IT system for handling accounting and payments
    • check what services your bank offers and whether they meet your needs
    • investigate what services other banks offer
    • find out about transaction charges, interest rates and any standing charges
    • estimate how your banking costs will change with online banking
    • talk to your suppliers and customers about the kind of electronic payment options they would like
    • assess whether you would need any additional equipment and whether any specialist set-up is required
    • estimate the costs and timescales of switching
    • identify which employees will be affected by the change and organise suitable training in the new system or procedures
    • ensure that you have proper security ie anti-virus software, firewalls and password protection - and ensure you include security measures as part of your staff training
    • plan the introduction and testing of online banking
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  • Business bank account charges

    Take care in controlling your bank charges and find out when they will be taken from the account.

    Banks will provide you with information about their charges, but make sure you understand this information and are aware of the terms and conditions. Brochures and leaflets will highlight the standard charges and you will be advised of some of the non-standard fees before the service is provided.

    Checking bank charges

    Bank charges are usually taken monthly or quarterly. A statement detailing a breakdown of all fees is sent to the customer before the fees are taken. You should check this statement regularly to ensure that no other fees are being imposed.

    If you do not keep to the terms and conditions of your account, the charges can be high. For example, banks may charge a referral fee if your account goes overdrawn without permission and if you accept a cheque that is returned unpaid by the debtor's bank, your bank could charge you an administration cost and you will not get the money due to you.

    Keep bank charges to a minimum

    There are ways to keep your bank charges as low as possible. These may include:

    • negotiate for better interest rates and lower charges
    • automate as many transactions as you can by using standing orders, direct debits and electronic payments
    • use your bank's online services if any are available
    • avoid unauthorised overdrafts
    • minimise the amount of cash you pay into your account and the cheques you write out
    • open a foreign currency account to make and receive foreign currency payments - you will avoid making exchange fees on each transaction and it allows you to hedge against foreign currency exchange rate fluctuations, however, you should check set up and transaction charges carefully
    • find out what other banks would charge for the same services
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