David Cameron has made it clear that the success of small businesses in the UK is central to the government’s long-term economic growth plans. He pledged to make it easier for small businesses to succeed by announcing business rate measures with extra relief.
At the end of last year we also saw the implementation of The Small Companies Regulations 2013, which was intended to reduce the bureaucracy that so often diverts owner managers of small businesses from focusing on running their business.
It is clear the government is trying to stimulate business growth. However, red tape is continuing to have an impact on the UK’s 4.9 million small companies.
What red tape exists and how is it affecting business?
Over the last few years there have been regulatory and legislative changes that are still having an impact on small businesses.
The Small Companies Regulations 2013, which was implemented back in December with the aim of reducing red tape, is potentially causing small businesses to cut corners with paperwork due to a misconception that detailed information on a business’s financial health is no longer needed.
Similarly, Real Time Information (RTI) which was introduced by HMRC in April 2013 and required businesses to submit PAYE information electronically to HMRC “on or before” each payroll run, rather than annually at year end, was a major legislative change to the way businesses have to run payroll.
This was not just a change to the frequency at which information was being submitted, but also to the way it was being submitted. Due to HMRC wanting electronic submissions, businesses across the country had to either upgrade to RTI compliant payroll software, or implement new software if they used manual calculations.
While RTI was a major change, it did not cause our customers too much trouble. All IRIS payroll software was updated to be fully RTI compliant well before the official deadline, with a range of software options available to fit any size of business and budget. IRIS also offered training seminars across the country, helping to educate over 13,000 business owners and payroll professionals on the legislation and the steps they needed to take to prepare.
What can be done to help?
The rate of legislative change is speeding up and the best way for small businesses to manage these changes is to focus on:
• Improved collaboration — with their accountants
• Automation and standardisation — to help speed systems and processes up
• Compliance — to keep business watertight
What is ultimately needed is ongoing support for small businesses to ensure their finances are in order while allowing owner managers to focus on growing their business rather than suffering under the burden of red tape. Working with a reputable software provider can help businesses keep track of the many changes; not only does the technology help, but an army of UK accountants exist to help small businesses.
However, much of the expertise of accountants is not utilised as many spend up to 80% of their time looking back at transactions, documenting the financials and submitting to HMRC on behalf of their clients. This means just 20% of their time can be used to look forward. As a result the accountancy profession is quite simply not being allowed to add value to small businesses.
Accountants need to be acting as trusted advisers to their small business clients. This in turn will allow the business owner to focus on what they do best — growing their business. So, to allow accountants to do what they do best, they could consider incorporating online systems to free up their time and nurture more collaborative, online relationships with their clients allowing them to exchange the right information quickly and efficiently, enabling much faster filing of required information.
Looking ahead — what other things do businesses need to be aware of that is coming up?
The next major change facing businesses is automatic enrolment, which is being introduced as part of the government’s workplace pension reforms. Early feedback shows that automatic enrolment is a much larger, more complex change than RTI and needs much more preparation.
As with RTI, automatic enrolment doesn’t need to cause too much of a headache for businesses, providing they are properly prepared. By planning early, educating staff on the legislation and the changes it will bring and working with the right providers, achieving compliance can be a smooth and stress free process.
Something else that small businesses will need to think about is the forthcoming changes to accounting standards (known as FRS101 and 102), which will result in significant changes to the accounts of many UK businesses. These changes will appear both in terms of preparation and presentation, meaning accounts will look different when viewed and also in terms of accounting policy changes, which could affect a company’s stated profit or loss.
Many UK entrepreneurs will not understand the detail of these changes and why it has impacted their bottom line, hence expert advice will be required. UK accountants are having to consider this right now, with support from their software provider. By keeping on top of these changes and thinking ahead, accountants will be able to support their clients in streamlining accounting and tax processes to ensure optimum profitability for the business.