Info Bank
Please click on the heading to see how Montpelier Chartered Accountants have helped clients approach these issues.
Managing Cash Flow
One of our new clients approached us with the following problem: they (joint owners of a business) had purchased an established business, two years ago; inexperienced in running a business they had made expensive mistakes in costing their product and are currently experiencing severe cash flow problems and creditor pressure is mounting.
Our approach
Working together with their Business Recovery Consultant we have, as a first step, applied for a CVA in order to deal with existing creditors. On our recommendation, the client has made three redundancies and will rely on subcontract labour (of which there is a surplus) job by job thereby cutting out non-recoverable wage costs.
The remaining non-administration employee has had his duties redefined and will use his experience to assist with job costing.
We have established fixed and overhead costs and calculated the turnover required to break even. This has been used as a basis to set targets for the coming year which have been discussed with and agreed by the directors.
Bookkeeping systems have been reviewed and refined in order to be more efficient and to provide the information required for monthly management accounts and KPIs.
Discussions have been held with a Business Link Consultant and grants have been applied for to assist with the cost of the financial review and also the cost of a marketing and website project.
The focus of the business marketing has been shifted to the "high end" market as the firm supplies a well made, quality product. This should help in the current economic climate.
This is an ongoing assignment as the client will receive monthly visits to discuss results, achievements and future targets.
As a result the business can now reposition itself and not only stay in business but should be able look to the future with a healthier order book, a greater focus on the bottom line and regular management information to help avoid a similar situation happening in the future.
Producing a Rescue Plan
A major second hand machinery dealership approached us as they were having difficulties due to the actions of a certain government department. In consultation with an Insolvency Practioner we created a pre liquidation plan, steered the client through the insolvency process and negotiated a refinance plan with their existing bank. A new trading company was created which has now been trading profitably for over 4 years, turnover is in excess of £3m and employs over 25 men across the group.
Financing a New Business
A sole trader approached us to advise on a new business proposal. We assisted in the negotiation of a joint venture deal with an external investor and a finance plan with their bank. Monthly management information is now produced and discussed with the client and we are also involved in the quarterly board meetings with the client/external investor directors. The company now has a turnover of £2m and employs 20 staff.
Selling Your Business
John Teece from our Preston office deals with business disposals from initial marketing of the business to completion of the deal from £0.5million to £100 million.
To achieve business growth through acquisition, or through venture capital and private investment, requires expert management. John and his team can advise on business plans, assist with the preparation of cash flow statements and the raising of funds, including management buy ins and buy outs.
If the existing owners of a business want to sell, the current management are often the people in the best position to buy them out and take the business forward. They know the business and are therefore in a strong position both to value it (to decide if it is worth buying) and subsequently run it. One may also take the view that they will work harder for themselves than for other people.
John can guide the client through the range of exit strategies available and help to determine whether a management buy out is the best solution for their business.
When the time is right to sell, John will use his network of contacts and industry specialists to ensure the most beneficial environment for the sale of the business.
He will then identify and assess prospective purchasers and design and draft the disposal information and co-ordinate the negotiations between the owner and the prospective buyer.
Expertise:
- Preparing the business for sale
- Providing business valuations
- Offering guidance and advice on the range of exit strategies
- Dealing with company acquisitions and mergers
- Negotiating management buy outs and buy ins
- Co-ordinating and negotiating the Business Sale
- Raising Finance and venture capital
- Refinancing and financial restructuring
- Carrying out the due diligence
- Offering post sale tax and warranty advice
- Organising confidential research
Developing a Business
We are currently assisting in the preparation of a development plan for a company in the food industry. Working with the directors to update their management information systems and produce a business plan. The next stage will be to explore options for grant finance towards the capital costs estimated at £250k.
Funding Expansion
Our knowledge of the local market, and contacts with funders, can get you access to the funding you require.
Firstly we would assess your plan, your structure and your options. Funding is very expensive-in terms of costs, constraints, management time and often equity. The choice of type of funding, amount of funding and timing of funding are therefore fundamental in the decision making process which we can assist you with through the planning process.
Funding Specialist Sectors
In the fishing industry we get involved in helping clients raise funds for the purchase of fishing vessels. To date we have helped secure up to £1.5m.
Rewarding Your Key Staff Who Want Shares
Our first question we would ask is why profit share? How much involvement do your staff have in decision making? Do you want to give them a share of proceeds on a sale?
Once this is determined we will work with you to develop the best strategy, always remembering that whatever is done should be capable of being undone. It is important to remember that motivating and retaining key staff is crucial to business success, but be prepared for a time when you have to deal with a situation where a manager is no longer delivering and you may wish to review their benefits package
Disposing of a Parcel of Farmland
From 6 April 2008 a taxpayer can no longer claim Business Asset Taper Relief (BATR) on capital gains (which normally meant an effective 10% rate of tax), and instead a flat rate of 18% tax applies to all gains. However a new Entrepreneurs' Relief (ER) is available which may under certain conditions allow an effective tax rate of 10%.
Under the old rules a farmer selling a parcel of farmland for development would likely have been eligible for BATR and therefore paid tax of 10% on the gain. However for the new ER to apply there needs to be a disposal of a business, not merely an asset within the business. This therefore means that disposals of excess farmland in the future are likely to be subject to tax at 18% rather than the 10% previously charged.
It is now likely that taxpayers may wish to make greater use of roll-over relief and hold-over relief.
Relief available for 'hobby' farm losses
A trader is normally entitled to set off his trading losses against his other profit in the year of the loss or in the preceding year. However there are special rules to restrict the relief for 'hobby' farms. The measure is aimed at say high earning individuals who dabble in farming and wish to claim tax relief against their other income.
Relief therefore becomes unavailable to a farmer if in each of the previous five years of farming he made a loss. For the purpose of computing a loss, capital allowances are ignored. The rules however do allow for the possibility that some forms of farming may need more than five years in which to become profitable.
Why might a farmhouse not be eligible for Agricultural Property Relief (APR)
Tax legislation quotes this:-
"APR is available on such cottages, farm buildings, and farm houses, together with the land occupied with them, as are of a character appropriate to the property."
- If the farmhouse does not have the same ownership as the farm land. This can be a problem if the land is gifted down the generations but the farm house is not.
- If the farmhouse is inappropriate by reference to its size, content and layout to the farm building and the area of the farm land being farmed.
- If the farmhouse is of an inappropriate size in relation to the nature of the requirements of the farming activities conducted on the land.
- If the property is 'a family home of some distinction'.
- If a rural layman would regard the property as a house with land, rather than as a farm.
- If the house has been associated with the agricultural property for a short period of time.
- If the farmhouse is not the dwelling of a person who farms this land on a day to day basis.
- If there has been little history of agricultural production.
