The ultimate guide to planning and running a business

Having a brilliant business idea is just the beginning of running and growing a successful start up. Turing passion into profit requires careful planning, knowing your industry and the associated rules and regulations and a bit of luck and skill as well. This guide will help you get ahead, stand out and even identify when it’s time to sell up or bring in some outside help.

We’ll look at some essential documents for starting and running a business, along with guiding you through the GDPR minefield. Use these links to skip ahead to the sections you need to read and contact the team at Black and White Accounting if you still need help.

Part 1 – The Business Plan
Part 2 – Record Keeping
Part 3 – Documents and Stationery
Part 4 – GDPR
Part 5 – Selling and Succession Plans

Part 1 – The business plan

All businesses need a plan as a lack of planning is one of the key reasons a business may fail. It may come as a surprise for some business owners, but for a business plan to be meaningful, it needs to evolve with your business.

To help ensure you’re on the right track with your planning, here are some key considerations whether you’re just starting out or you’re facing some internal or external changes.

Why have a business plan?

There are several reasons why taking time to write a business plan is a good investment of your time. If you commit to your planning process as an ongoing process and not a one-off activity and make business planning integral to your business it can:

Help prevent your business from stalling by providing a clear sense of direction. This clarity can in turn help keep you motivated, even during difficult times.
A well structured business plan with clear goals can keep you organised and being organised helps relieve stress.
Regularly reviewing what your business is achieving and comparing this against your business plan helps let you know how well you are doing and course correct as necessary.
If you want to expand the business or be more competitive, planning can help you define what goals need to be set and the actions needed to achieve them.
Business plans define goals and give you an opportunity to think about how these can be achieved. Without a clear path it’s easier to falter.

When should you update your business plan?

Regularly is the simple answer, but there are also more specific times when ensuring you have an updated business plan becomes particularly important. You should therefore take the opportunity to review your business plan:

At the start of each financial year. Business performance information provided by year end accounts help provide focus on interim targets when thinking about your longer-term objectives.
As your business transitions from its start-up phase to a more established state. If you have found success early it can be easy to forget about a business plan, but not having one could see your business stall or plateau.
When looking for investment or finance, to help demonstrate the long-term potential and a deep understanding of what you are doing.
When launching a new product or service, expanding into new markets or going through a period of change. The impact of Brexit is a prime example where businesses have had to revisit their business planning to ensure they are adapting to changes.
When there’s disruption in the market from changes in your competition or you see shifts in your customer behaviour. This will allow you to assess your business in the changing context and adjust accordingly.

Business plans shouldn’t be over complicated in their format and a one-page summary of key points can help to ensure your plan is something you refer to regularly. However, if you’re not confident in your plan, can’t remember when you last saw it or don’t have a document you are comfortable with showing to a potential investor, then your business plan probably needs work. We can help you sharpen up your plan and check that your finances are healthy at the same time.

Part 2 – Record Keeping for Success

“I broke two of my dad’s Queen records…now I want to break three.” Sorry but I am a Dad so please forgive the Dad joke.

Ok, wrong kind of record, but it might not sound like it, but Record Keeping is exciting because it can help you with the following…

Keep track of your expenses;
Ask for a bank loan or credit, if you need to;
See quickly what you are owed by others and how much you owe them;
Save time and accountancy costs;
Pay the correct amount of tax;
Receive the correct amount of benefits or credits; and
Avoid paying any extra tax or penalties.

The sooner you get a good system, the better. It will make your life easier and can avoid potential penalties due to inaccurate accounts and tax returns being filed.

The sort of records you need to keep depends upon the type of tax you have to pay and is detailed further in our downloadable guide.

How to keep your financial records

The law does not say how you must keep your records. You can keep them on paper, digitally or as part of a software program (e.g., Auto Entry, ReceiptBank, QuickBooks, Sage, Xero etc) as long as the method you use:

Captures all the information on the document (front and back); and
Allows the information to be presented to your accountant in a readable format, if we need to see it.

How long to keep your financial records for

Generally, you should keep your records for a minimum of six years. However, if you are:

an employer, you need to keep Pay As You Earn (‘PAYE’) records for 3 years (in addition to your current year);
a contractor in the Construction Industry Scheme (‘CIS’), you need to keep your CIS records for 3 years (in addition to your current year); and
keeping records to complete a personal (non-business) tax returns, you only need to keep them for 22 months from the end of the tax year to which they relate.

If you need to keep records for other reasons, for example the Companies’ Act requires limited companies to keep specific records and you also use those records for tax purposes, you need to be aware that there may be different time limits for retaining them. Be careful not to destroy any records you also use for tax purposes too early. Therefore, when considering how long to retain records for, you might want to consider the Enquiry window HMRC has available.

There are three-time limits here:

The ‘normal time limit’ applies for assessment, refunds and claims.
HMRC may go back and assess the previous 6 years if that taxpayer’s failure to self-assess correctly was due to ‘careless behaviour’; and
In cases of ‘deliberate behaviour’ (i.e., fraud) HMRC may raise assessments for the previous 20 years. A higher bar of evidence is however required to prove this.

Years	Normal time limit	Careless behaviour	Deliberate behaviour
Capital Gains Tax	4	6	20
Corporation Tax	4	6	20
Income Tax	4	6	20
PAYE	4	6	20
VAT	4	4	20

More Information

Has this given you a taste and you want to find out more? Please download our guide for more information.

Part 3 – Documents, Stationery and Correspondence

OK; perhaps not the most interesting section, but nonetheless something we need to cover, so you don’t receive unnecessary fines. Did you know there were certain details of your business which are requirements on certain documents and correspondence?

There are different requirements depending on the type of business (e.g., limited company versus a sole trader or partnership) and the industry in question, which we go into more detail on below.

Requirements for Letterheads and Order Forms

Starting with the most challenging of these, please see the table below for the requirements here:

Sole Trader

You can trade under your own name, or you can choose a different name (“trading as”). You therefore need to include:

– Trading As name;

– Your name; and

– Business Address

Partnership

You must include:

– names of all partners;

– the address of the main office

– If there are many partners then it is also acceptable to state where a list of partners may be found.

Limited Company (private or public) or a Limited Liability Partnership

– Your full registered company name;

– The company registration number and place of registration;

– The company registered address and the trading address (i.e., where it operates from), if different;

There is no need to include the names of the directors on the letterhead for a limited company, but if you choose to name directors all directors must be named.

Most letterheads also include a telephone and fax number, a url for the business’ website and an email address.

There are also additional requirements for investment companies (as defined by section 266 of the Companies Act 1985), for a company exempt from using the word ‘limited’ in its name and Charitable Companies.

For a company with share capital, it is not necessary to state the share capital on stationery but if the company chooses to do so, the paid-up share capital rather than the authorised capital must be stated.

These requirements apply to both printed and electronic formats.

What to include on Invoices

Now this is another more challenging one, so please see the table below for what information your invoice needs to include, based on the GOV.UK website:

Sole Trader or Partnership

– Your name and any business name being used;

– An address where any legal documents can be delivered to you if you are using a business name; and

– VAT amount, if applicable.

Limited Company (private or public) or a Limited Liability Partnership

– A unique identification number;

– Your company name, address and contact information;

– The company name and address of the customer you’re invoicing;

– A clear description of what you’re 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; and

– The total amount owed.

If your business is VAT-registered, there are further requirements, which are detailed here. HMRC will also expect to see sequential invoice numbers used, so they can track and check all the sales invoices are complete and included in your accounts and tax returns.

What to include on your Email Footer

If you are a Limited Company (private or public) or a Limited Liability Partnership, your email footer must include the following:

Company name;
Company registration number (you can ask your Accountant, or see this on Companies House website);
Place of registration (e.g., England & Wales, Scotland or Northern Island); and
Registered office address (as opposed to your Trading address, which may be different. This again you can confirm with your Accountant, or see this on Companies House website.

No matter your role, be it the Director or Apprentice, this applies to everyone in the organisation. These rules do not apply to Sole Traders and Partnerships.

Your Business Premises Sign

Just for completeness; Limited Company (private or public) or a Limited Liability Partnerships are always obliged to display a sign showing your name, unless you are running your business from your home address. This needs to be at both your registered address (i.e., what Companies House states) and your trading address(es) (i.e., where you operate from), if different. The sign must be easy to read and visible at any time; whether you are open or not.

Other disclosure rules

There may be further requirements, depending on the industry you operate in. For example, if you are in Financial Services, you may have to state you are authorised and regulated by the Financial Conduct Authority. Please check with your regulator, trade body or association in case you have any further requirements and for guidance on best practice.

Penalties

If you fail to meet your legal obligations, you can be fined up to £1,000 for the offence itself and then for continued breach a daily penalty of up to £100 can be levied. Regulators in specific industries may also impose their own penalties.

Contact us today

If you are not sure how to navigate your way through this, or have any other questions about your obligations as a business owner, contact Black and White Chartered Certified Accountants today, or call us on 0800 140 4644.

Part 4 – GDPR for SMEs

There are huge numbers of businesses set up to make money from General Data Protection Regulations (GDPR), whether it’s offering to make your business GDPR compliant, or advising people how to sue you.

There’s a lot of information online trying to explain what it’s all about but in summary, if you handle a client’s personal data in the way you’d like your own to be handled, then you won’t fall foul of GDPR.

Here we’ve cut through the swathes of information available on GDPR to tell you how we’ve been answering our clients’ most frequent questions.

What is GDPR for?

The aim of GDPR is to give individuals more control over their personal data and to impose responsibilities on data collectors to ensure its security.

Although GDPR are EU regulations, they’re coming regardless of Brexit and replaced the Data Protection Act on 25 May 2018. They apply to any business that collects, uses and stores personal information for its operation.

They cover the processing of personal data by automated and non-automated means, that’s intended to form part of a filing system. This includes anything from invoicing records to marketing databases and more personal data that enables you to provide your services.

What is personal data?

GDPR broadens the definition of personal data to include anything relating to an identifiable person. As well as the usual (name, address, contact details), an identifier now includes physical, cultural, genetic or social information. A combination of data may be enough to identify someone even if they aren’t actually named.

What’s my responsibility?

No matter the size of your business, if you collect, use and keep data, you are a “data controller” which means you are responsible for how that personal information is used and for keeping it safe.

You must only collect and keep information for legitimate business needs and only for as long as is necessary. This may be for the time you’re providing a service or it may be as long as tax record regulations specify, there’s no upper limit.

Your responsibility for third party data processors

As the “data controller” you’re also responsible for the actions of any third party you employ as a “data processor”. This could be a sub-contractor or an outside agency, such as a supplier or a credit check agency. You need to confirm that they also have proper GDPR policies in place.

Who enforces GDPR?

In the UK, enforcement is the responsibility of the Information Commissioner’s Office (ICO), a non-departmental public body sponsored by the Department for Digital, Culture, Media and Sport.

What happens if I breach GDPR?

Where possible, you need to report certain types of personal data breach within 72 hours of becoming aware of the breach. If there is a high risk of adversely affecting someone’s rights and freedoms, you must also inform those people without undue delay.

The ICO can fine you up to 4% of your turnover (or £20 million, whichever is greater, though the ICO has promised that fines will be kept below £1-2 million!). You can also be sued by the data subject for compensation.

What should I do right now?

Here are my top five actions I’d advise sole traders and SME owner-managers to take to make sure you’re following GDPR:

Ask for consent. You need to ask existing and new clients for permission to collect, use and hold personal data. Include the following in your request:

Your name, company name, and the name of relevant third parties working on your behalf
Why you need to collect the data
How the data will be used
Whether, and why, any data needs to be passed to a third-party processors and how consent for that may be withdrawn

Make sure you keep a copy of your clients’ consent, preferably in written form.

Carry out a review of the data you already hold. Check all personal information that you currently hold, confirming:

Is it accurate?
Do you need it for your business?
How securely is it being held?
Do you still need to keep it?
How would you delete it securely?
Are you abiding by your own GDPR rules?

It’s a good idea to review the data you hold every year.

Create a privacy policy. You can send this to clients to inform them clearly how you collect and hold their personal data. Your notice to them should include:

What information is being collected
Who collects it, and how
Why it’s being collected
How it will be used
Who it will be shared with
How collected data will affect them

You should also make clear how the client can withdraw consent for you to hold and use their data in the future.

Review all third party data processors you work with. Make sure you don’t put yourself at risk because of bad practices by a third party; ask for a copy of their privacy policy to confirm that all personal data provided by you will be processed in accordance with GDPR. Keep a copy of their reply.

Find out if you need to register with the ICO. The law entitles landlords to ask for a reference and to share a tenant’s details with a third party for the purpose of making a contract of tenure, so small scale landlords probably won’t have to register.
If you plan to share details with a third party for any other reason, then you will need to register with the ICO.

What’s happened in the GDPR world so far?

In a report recently released, the ICO detailed their work over the last year, including their support for individuals, organisations and Data Protection Officers as well as the action taken.

Their actions have led to more awareness of privacy rights and they are holding organisations to a higher standard for the protection of personal data. However, in one example particularly, we have observed the standards slipping back to the old world.

Remember in the lead up how many organisations reached out to you with requests to opt-in to them providing you with marketing materials (as opposed to the previous opt-out regime)? However, as the deadline passed, even if you didn’t opt-in to receive those marketing materials, they still came. Worse still, they have increased significantly overtime. No, they are not the same levels they were before the change, and the gap is definitely decreasing.

The reality is that it is a marathon rather than a sprint. Rather than focussing on big fines, the ICO aims to:

Respond effectively to breaches;
Be proportionate in the application of sanctions;
Continue to support compliance with the law; and
Be proactive in identifying new risks from technological and societal change.

What have the Biggest GDPR Fines been so far?

That said, with fines of up to €20 million, or 4% of annual global turnover – whichever is greater, the focus was always going to fall on the size of the fines.

The first two headline grabbers have been:

British Airways: £183m for a security breach where approximately 500,000 customers’ personal data was compromised; and
Marriott International Inc: £99m when “a cyber incident” affecting its Starwood chain resulted in approximately 339m customer records (7m UK residents) being exposed.

Which leads you to ask, how much would Facebook’s fine have been had the data breach involving Cambridge Analytica taken place after GDPR had come into play?

Away from the headlines the ICO received around 14,000 personal data breach reports up to 1 May 2019, with over 12,000 closing during the year. Of those, 17.5% required action from the organisation and less than 0.5% led to either an improvement plan or civil monetary penalty. There has been a sharp increase in complaints from the public too with over 41,000 up to 1 May 2019, with subject access requests being the highest complaint category. In addition, the ICO has issued their first penalty notices for non-payment of the data protection fee.

How do I comply with GDPR?

Compliance with GDPR is an ongoing process and businesses should continue to focus on their accountability and demonstrating how they comply with the rules. For example:

Continue embedding privacy and information security in their general risk assessments;
Prioritise compliance with the core GDPR principles (including accountability, transparency and lawfulness of data processing e.g., notice and consent);
Watch-out for regulatory developments, including guidelines on specific areas;
Make the most of tools and resources which are made available to facilitate compliance; and
Continue to foster a culture of privacy in the organisation (including emphasis on training, data subject rights and requests, breach reporting, information security, and compliance documentation).

Part 5 – Exit and Succession strategies

Many small business owners choose the “burying my head in the sand” approach when their business is facing financial difficulty, which can be the nail in the coffin for a business that is struggling.

An alarming number of businesses fail every year, and the reasons for the failure are as many and varied as the businesses themselves. In some cases, recognising the early warning signs can help set in motion a plan for recovery or in the worst case scenario, plan an exit strategy for the business owner.

So what are the warning signs that you should be on the look out for?

Can you pay your suppliers when they are due?

Falling behind with payments and allowing supplier invoices to go overdue for payment is a sign of cashflow issues. A business in this situation must draw up a cash flow projection (we can help you with this) and identify the cause of the problem.

Will your business pass the balance sheet test?

If your liabilities (debts and money owed) are greater than your assets (cash, equipment, property and money owed to you) then your company may well be insolvent. This is a major issue that needs addressing immediately. Again, it is vital to understand the underlying cause of the problem and discuss this with us.

Do you know if your sales are going up or down?

Timely financial information is the lifeblood of a successful business and in most cases waiting until year end to see where your sales are is just too late. Regular management accounts should not only help you see sales patterns, but also identify which products or services are doing better than others.

What is your gross profit margin?

If you are selling products, you need to be confident that you are making a profit on every product you sell (unless of course it is a loss leader) to cover not only the cost you bought or made the product for, but also your business overheads. If you are selling a service you will no doubt have an hourly rate that you charge your clients for your time. If so, you will need to account for all of your time and ensure that your invoices are correct.

Are your suffering entrepreneur fatigue?

Small businesses are often a labour of love and it is difficult to establish a firm work-life balance. If you are finding it hard to switch off from your business, you are likely to become run down or feel increased levels of stress, which will in turn compromise your health and wellbeing. To give your business the best chance you need to protect it’s most valuable asset; you!

At Black and White accounting we can help you understand your year end accounts, prepare and talk you through regular monthly accounts or simply talk you through your options if your business is struggling.

One of the first things we ask business clients at Black and White accounting is “What’s your exit strategy?” which surprises most people. They’ve never been asked that by their accountants, or business advisors before, so they usually need a bit of time to reflect.

Quitting your business might sound negative when you’ve barely started but what you’re doing is setting your goals for your business. Your succession plan defines what success will look like and everything needs to be worked back from that point, including your business structure, organisational structure, vision and values etc. You also need to break your goals down into bite-sized chunks to ensure you get there.

That’s not to say you’ll have the same idea in five or ten years’ time, but if you have some goals, even if they change, you’ll know if you’re being successful or not.

Exit options

It’s important to know what exit options you have and to choose which will suit you best. Generally, owners have five ways to exit their business:

Close the business down. If your business comes to a natural end, you can sell assets (stock, property etc), settle liabilities and walk into the sunset. If it is a company and the net reserves are more than £25,000, a liquidator will need to be appointed otherwise an accountant can complete the process. Entrepreneurs relief will often ease the tax liability here.
Sell part, or all of your business, either by a trade and asset sale or a share sale. You need to talk to your accountant about which option is best for your circumstances, as it will not only impact the selling price but also your income/corporation tax, VAT, employment tax, and potentially capital gains tax position.
Management buy-out. If you have a good team in place, they can buy you out from within. This is good for continuity and both parties are dealing with known entities, so hopefully there will be fewer surprises.
Run as an investment. No one likes to think it but if you have the right team in place, you are replaceable. Why not get a great manager or management team in to run your business? You can then reap the rewards of your work but on an arms length basis so you can focus on your other interests.
Merger or acquisition. This can often be with businesses in a similar sector but potentially a different size to you. By combining you can unlock profitability by benefitting from economies of scale, complimentary skills or resources and efficiencies.

Please note: Larger companies can also take advantage of IPO’s but as these are not Black and White’s typical clients we have not focused on these here.

Whichever option you choose comes down to circumstances and personal preference, but they all require preparation planning. Waiting until the last minute runs the risk that your business is in the wrong shape and you won’t realise the best return for it.

Do you have a business to sell?

Is you business just “you”? When you walk away, there’s nothing left to sell, other than maybe a few small assets, so if you want to extract some value, you need to start handing over critical functions to others early on. Not only does this free up your time for other more important things, often to accelerate your growth, but it makes your business more sustainable after you’ve gone.

Don’t dilute your equity

If you plan to sell your business, you need to make sure you don’t give too much of it away beforehand.

A lot of start-ups, raise money by selling shares through the EIS (Enterprise Investment Scheme), which is a tax efficient way of investing money. Others offer share options for staff, for example through EMI (Enterprise Management Incentive) schemes which are a great way to motivate and reward staff. These can be a great way of unlocking funds and incentivising staff to accelerate growth. However, such actions can lead to the inevitable cycle of giving your company away and ultimately selling it.

Would you prefer to get £2million back in five years or £10million back in ten years?

You need to make decisions based on what you want, rather than be persuaded by other people’s desires.

Case study: how a business-savvy accountant can smooth your exit

A recent client of ours ran a high street hardware store in a market town. It’s a declining sector and they wanted to get out because it was increasingly tough to make the business pay. We worked with the owner to get the business in the best possible position before finding a purchaser. We then helped broker a deal to ensure the town retained a hardware supplier and our client received enough money to start a new life.

We were able to help this client, albeit at the last minute, the sooner we are involved the more we can do!

Another client only talked to us after buying a business that was to see them through to retirement. The result was they were tied into a four-year agreement by the seller that will cost them tens of thousands of pounds and won’t help them achieve their exit plan. We are working hard to find them refinancing options to improve their position but if we’d been involved before the purchase took place we could have done more!

If you need a team to help get your business set up, sold on or just running smoothly, then contact Black and White Accounting today or ring us on 0800 140 4644.