A different perspective on tax planning

As we hit the 31 January we can sit back comfortably in the knowledge that all client tax returns have been submitted. However our minds quickly turn to the end of the tax year and helping clients identify any last minute tax planning opportunities. This year though I have been pre-occupied with a different problem that has prompted me to stress more heavily the importance of forecasting tax payments in projections, especially when trading is so volatile.

For some clients tax payments due include a balancing payment for the year end 5 April 2011. Due to the way our tax system works tax due could be for the period ended 30 June 2010 covering the period from 1 July 2009 and this is the problem. Trading has become more difficult for many business owners and cash flow particularly tight. A large tax bill now relating all the way back to 30 June 2010, or even May/ April 2010, may therefore be difficult to settle.

Of course trading might be more positive and tax bills might be growing.

Therefore when creating forecasts remember to consider the impact of tax payments. Ask your accountant to forecast your tax liabilities and the timing of payments so that you can accurately enter them into your forecasts and projections and don't get caught out.

Can you accurately forecast sales?

I have been working on two new projects over the last 7 days that have involved preparing forecasts around new business plans. Both of the forecasts are very different. One is a projection for a new business with no historical data to work from, and the other for an established business with historical accounts where sales data can be extracted from their Management Accounts.

It's generally pretty easy to put projections together until you reach sales, which are always difficult to forecast because you don't control your customers. You can't predict their buying behaviour but instead make educated best guesses and therefore there is always the temptation, because we're optimists, to over estimate our sales targets.

I remember a friend at school in my GCSE business studies class who realised his business plan for a tea shop in Cleethorpes didn't stack up and was forecasting a loss. His solution was to increase the sales figures until he realised the desired profit that would surely lead to an 'A' grade. The only problem was that the uplift in sales required a x.10 increase in cups of tea!

Unfortunately I've seen that approach taken in real life too. Sets of projections with sales targets that are simply unrealistic and better suited to fiction books than business plans. To ensure your projections are robust it's important to spend time trying to generate realistic sales forecasts.

If you have a sales pipeline or confirmed bookings these are an excellent starting point. If not you need to adopt a more logical approach. If you have historical data then you can review sales figures for the last 12 periods and set a target based on past performance. Using your knowledge of the industry you can then make upward or downward adjustments. Once you have identified your base annual target you can then fine tune this by looking at the profile of sales over each of the last 12 months against the last 12 months total sales. Re-applying this profile to your adjusted annual sales target then gives you a good base from which your initial forecasts can be based. Finally you can tweak the monthly figures for any specific promotions or plans you have or for any external events that might have either a positive or negative effect on sales, such as the Olympics or Diamond Jubilee extra bank holiday!

It's much more difficult to forecast sales when you don't have a history of sales to work from. As part of your business planning process you might have conducted some research with your target audience and have some market size statistics. The market research stage of your planning might provide an opportunity to generate some valuable information that could be used for sales forecasting.

Perhaps you could collect data on the size of the market and the percentage of target customers. Using your research you could then apply a percentage of target customers who said they would definitely buy the product or service and finally a percentage market share that you think you might win.

So for example your market could be 100,000 people. Within that market target customers could be 40%, a group of 40,000 people. Your research may have indicated that 20% of people will buy, 8,000 in this example and you feel you can win a 10% market share giving 800 customers.

You might then be able to use freely available data about which months people search for keywords associated with your products in search engines to profile these sales before applying your sales price.

Irrespective of which method you use to forecast sales in your projections it's important you re-visit them on a regular basis to compare with your actuals. By monitoring the sales figures and underlying drivers you can compare to the assumptions you made and if necessary adjust.

Will small steps assist me achieve larger goals...?

Now we're into another year and the shock of returning to work is over it's time once again to sit back reflect on resolutions for the year ahead. If I'm honest I don't have a great track record at keeping to the resolutions I spend so long over Christmas committing to. In 2011 I spent a lot of time working my own personal development and made a number of small changes to how I work.

This made me think that this year instead of BIG "life changing" resolutions that are very specific I would try something different.

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My BLOG in 2012... a new horizon

In 2011 I started to blog on a more regular basis. Over the Christmas holiday I reflected on the commercial value of my blog as a tool to communicate with clients, professional referral sources, and prospects. Whilst doing this I looked back at the content, some of which I thought was good some not so good!

Whilst reflecting I read an article about blogging which suggested that to be of value a blog today needed to offer a product that was different. For me reading this lifted the fog and after a period with the thinking cap on I realised to gain a following and create a blog people find interesting you need a good product, directed to a specific target with a strong message... good marketing!

Looking around most accountants blogs are the same, a summary of news and views most of which you could read on a good news site like the BBC.

So in 2012 my blog is going to be different.

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Webmarketing in 2012 ...the smart phone effect

Last week I was invited to speak to a group of around 100 accountants at a conference in London. The conference was aimed at looking into the future of the profession over the next 10 years.  

One of my main points was that the next generation of business owner is likely to be more mobile, using personal answering services and virtual offices to not only keep overheads down but to also be more flexible in where and when they work.

I suggested that they would store data in the cloud and access this using their smart phone which would become an important tool in their day to day business life.

My comments were based on the fact that more people are choosing smart phones to access data through apps that they download. However, with the increase in usage of QR codes and other offline tactics, that make the link between the offline world and the web, accessing websites on smart phones I feel will become more important as we progress into 2012.

I own a smart phone and I know that it can be really frustrating when I load a web page if it is not designed or optimised to run on a smart phone. Maybe as we enter into 2012 we should consider more carefully the way our websites look and feel on smart phones as well as through a more traditional browser. Maybe we should concentrate on substance over style!