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Business software: five benefits companies can’t afford to miss out on

27 January 2023   |   9 minutes read
Business software

Business software solutions are now a vital part of the management and everyday operations of both growing and established organisations. Software can help streamline operations, automate your processes, reduce costs and give you deeper insights into your data. All benefits that have the potential to give businesses a stronger competitive edge in the market.

So let’s explore the benefits of using business software to drive success. We’ll cover:

Increased efficiency and productivity

Automation is the key to running a lean and efficient business. If there are tasks and processes that can be automated, this has the potential to transform your operational performance.

Automated systems perform faster and more accurately than manual ones. Automation is also better at completing complex tasks with minimal effort, reducing time, effort and cost. For example, you might use a digital payment gateway like Stripe to automatically reconcile your incoming payments with your finance system. Or you could use a voice AI assistant like Curious Thing to automate your tier 1 customer helpline and answer basic queries.

By working business software into every area of the organisation, you can increase your overall efficiency. You also free up resources and people, so they focus on other activities. With time-consuming manual tasks removed, your team can concentrate on higher-value tasks that require specialised skills, deeper expertise or human creativity.

Improved access to data and collaboration tools

Large or complex organisations generate untold amounts of data. But are you maximising it to help your decision-making? Business software solutions make it much easier to analyse this important data.

Let’s take your finance software as a starting point. Your finance platform records every expense, every sale and every transaction that goes on in the business. A cloud accounting platform, like Exact Online, can help you sift through this financial data to give you improved access to vital information. For example, you could monitor:

  • The company’s cash flow position and how much cash will be available in future periods
  • The profit and loss position and where the business is generating revenues
  • Which products are delivering the best margins and overall profits
  • Which branches or offices are spending the most on ad-hoc expenses

Having access to this data and management information in the cloud also makes it easier for teams to collaborate. Regardless of your location or your current workspace, the whole team and any key business advisers have 24/7 access to the relevant numbers online.

You’re always working on the same documents, the same reports and the same figures – removing the potential for confusion around document versions and data periods.

Business software that integrates with your finance platform

Enterprise resource planning (ERP) solutions help you manage every element of your data and resources. In the same way that cloud accounting provides you with deep data on your finances, this kind of business software gives a comprehensive overview of every element of your operations.

Your solution can offer you management information, financial breakdowns, supply chain management, customer relationship management and more. ERP solutions can also automatically track and report on the most important key performance indicators (KPIs) for each operational area. These metrics can be used to track progress and identify areas for improvement.

With all this information at their fingertips, companies have real-time access to the patterns, trends and drilled-down insights in their data. This gives the relevant stakeholders the specific information they need to make decisions that are well-informed, fast and based on clear, unbiased evidence.

Cost-savings and improved control over spending

Running a business is costly. Money flows out of the company on labour costs, utilities, IT infrastructure and investment in key assets and pieces of equipment. But business software can help manage these costs and identify opportunities to make a saving.

Using software automation and digital assistants helps reduce the labour costs associated with data-entry tasks and other manual operational processes. Cloud-hosted business software also eliminates the need for costly hardware investments. With all the software applications, data and documentation held securely in the cloud, there’s no need for expensive servers, storage systems, IT infrastructure and so on.

Expense management software like Soldo, which comes with connected company cards, also makes it much easier to manage your everyday costs and business spending. Employees can use plastic or virtual cards to cover their work-related expenses as well as to purchase essential equipment, supplies or services using company money. With spend limits on each card, and online reporting of all spending, the business is always in complete control of those costs.

How business software gives you the competitive edge

Business software, apps and integrations are evolving faster than ever before. And the sooner you embrace the benefits and opportunities they deliver, the bigger the return on your investment will be. If organisations want a clear competitive advantage, this is the way to do it.

Finding the most effective software tools for each area of the business makes good sense. With a business software platform at the centre of your app stack, you have the option to add your own choice of additional software modules, third-party apps and legacy solutions.

Adding your own custom stack of business solutions is one of the most effective ways to streamline operations and reduce costs. It’s also a proactive way to boost efficiency, increase access to data and make it easier for departments and teams to collaborate.

By investing in a reliable business software platform, management teams can make sure that the company remains competitive and productive – while saving time, effort and money.

Visit our blog for more articles like this one or subscribe to get them direct to your inbox. Find the right Soldo plan for your business here.

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Employment Allowance: everything you need to know

13 December 2022   |   8 minutes read
Employment Allowance

Payroll costs are likely to be one of your organisation’s biggest outgoings. Finding new ways to reduce this labour expenditure makes good financial sense – especially in the current economic climate. Employment Allowance 2022/23 is one of HMRC’s tax relief schemes that could offer your business, charity or amateur sports club a helping hand.

Up to £5,000 in Employment Allowance is available for the current tax year, and claims for previous tax years are allowed. If you’re eligible, this is a cash flow opportunity you shouldn’t ignore.

Our breakdown of Employment Allowance asks:

What is Employment Allowance 2022/23?

Employment Allowance 2022/23 is a government initiative that helps your organisation reduce its employers’ Class 1 National Insurance (NI) contributions.

If you’re eligible, and make a successful claim to HM Revenue & Customs (HMRC), you’ll reduce your employers’ Nl by up to £5,000 for the 2022/23 tax year. The allowance is easy to set up and is applied automatically through your payroll software.

With Employment Allowance applied:

  • You won’t pay any employers’ Class 1 NI contributions for the life of the allowance
  • You’ll automatically cut your payroll costs and free up cash
  • Once you reach the £5,000 upper limit, you’ll return to paying NI contributions as usual.

There’s a more detailed overview of Employment Allowance 2022/23 here.

Who is eligible for the allowance?

To be eligible for Employment Allowance you must be an employer and meet the threshold for your Class 1 NI contributions. Organisations that can claim the allowance include businesses, charities (including amateur sports clubs) and private employers of care or support workers.

To meet the eligibility criteria:

  • Your employers’ Class 1 National Insurance liabilities for the previous tax year must be less than £100,000
  • You must meet the de minimis state aid rules for your industry sector
  • You must only claim for one payroll, and one company, within your group structure
  • You must not claim for contractors who are paid ‘off payroll’ and fall within the IR35 rules

We’ve got more details on the eligibility criteria here.

How do you claim Employment Allowance 2022/23?

Thankfully, making a claim for Employment Allowance 2022/23 is a relatively straightforward process for eligible organisations. There are two main routes for claiming the allowance and cutting your Class 1 NI contributions.

The two options are:

  1. Claim through your payroll software – HMRC has a list of compatible payroll software that will allow you to claim the allowance. Ticking the relevant boxes in your software settings will automatically apply the allowance each time you submit a payroll return.
  2. Claim using HMRC’s Basic PAYE Tools – if you don’t use one of the payroll softwares on HMRC’s list, you can download the free Basic PAYE Tools. This Mac, Windows and Linux-compatible software lets you run a simple payroll. It also lets you claim for Employment Allowance each time your payroll is submitted to HMRC.

Follow our step-by-step instructions for making an Employment Allowance claim here.

Maximise this opportunity to cut your payroll costs

One of the main benefits of Employment Allowance is that claims for previous tax years are allowed. These retrospective claims can go back as far as the 2018/19 tax year, and will be calculated at the historic rate for that period.

Depending on your situation, you may be able to claim £3,000 for each of the 2018/19 and 2019/20 tax years. If you’re eligible, you can claim up to £4,000 for both 2020/21 and 2021/22. And that’s all in addition to the £5,000 threshold for the current tax year 2022/23.

Claiming for this tax year and the four previous years frees up a potential £19,000 in employers NI contributions. That’s money you can use to boost your cash flow, helping you reinvest in growth, expand your team or buy new assets.

If you’re an employer and meet the criteria, Employee Allowance is an opportunity you shouldn’t pass up.

Visit our blog for more practical tips for business owners and SMEs or subscribe to get them direct to your inbox. Find out more about Soldo here.

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How to claim Employment Allowance 2022/23

6 December 2022   |   9 minutes read
Claim Employment Allowance 2022 23

Making a claim for Employment Allowance 2022/23 is an excellent way to boost your cash flow. This straightforward allowance for employers enables you to claim £5,000 against your employer Class 1 National Insurance (NI) costs. That’s a helping hand towards covering your payroll costs – and a means to invest money back into the organisation.

To qualify, your employers’ Class 1 NI liabilities for the previous tax year will need to be less than £100,000. And you’ll also need to meet HM Revenue & Customs’ (HMRC) strict eligibility rules. But with the right boxes ticked, your business, charity or amateur sports club is ready to make a claim and start maximising the benefits of this allowance.

In this article we’ll ask:

If you want to learn more about Employment Allowance, you can find everything you need to know here. We’ve also put together more detailed information about the eligibility criteria for the allowance here.

How do you make a claim for Employment Allowance 2022/23 through your payroll software?

The method for making an Employment Allowance claim will vary depending on the software you use to run your organisation’s payroll. You can either use an HMRC-recognised payroll software, or you can use HMRC’s free Basic PAYE Tools. We’ll start by looking at making a claim using your own choice of compatible payroll software:

1. Put ‘Yes’ in the ‘Employment Allowance indicator’ field
Do this next time you send an Employment Payment Summary (EPS) to HMRC. This tells HMRC that your organisation is ready to claim the allowance against any employers’ Class 1 NI contributions included in your next payroll run.

2. Select your business sector under ‘de minimis state aid rules’
This tells HMRC what industry or sector your organisation trades in. Your payroll software will apply the relevant de minimis state aid threshold for payments you receive. Once you exceed the state aid threshold for the current three-year period, you will no longer be eligible for Employment Allowance.

3. Select all business sectors that apply to your organisation
There are specific business sectors for agriculture, fisheries and transport. But most organisations will choose ‘Industrial/Other’ as their business sector. This gives you a de minimis state aid threshold of €200,000 for the period.

4. Select ‘State aid rules do not apply’ if relevant
If your organisation is a charity or amateur sports club, or if you employ a care worker, you won’t make or sell goods and services. If this reflects your trading status, you can tick the ‘State aid rules do not apply’ box to bypass the state aid threshold.

How do you claim Employment Allowance 2022/23 using HMRC’s Basic PAYE Tools?

If you’re not using one of the compatible payroll software packages on HMRC’s list, you can download the free Basic PAYE Tools software from the HMRC website.

The Basic PAYE Tools package is available for Windows, Mac and Linux platforms. Once downloaded, it gives your organisation a simple way to run payroll, share NI information and submit EPS or Earlier Year Update (EYU) to HMRC.

To make a claim for Employment Allowance through the Basic PAYE Tools software:

  1. Select the correct name in the ‘Employer’ menu on the home page.
  2. Select ‘Change employer details’.
  3. Select ‘Yes’ in the ‘Employment Allowance indicator’ field.
  4. If you sell goods or services, answer ‘Yes’ to the ‘Do state aid rules apply?’ question and then select the business sectors that apply to you. Otherwise, answer ‘No’ and select ‘State aid rules do not apply’.
  5. Send your EPS as normal.

It’s a relatively straightforward way to make a claim. HMRC will apply the allowance until your claim reaches the relevant threshold for Employment Allowance or state aid.

Can you claim for previous tax years?

A successful claim for Employment Allowance in the 2022/23 tax year will help you reduce your payroll costs. And, importantly, eligible organisations can make retrospective claims for previous tax years too. That’s a potential saving of up to £19,000!

Retrospective claims can go back four years. So, if you’ve never claimed Employment Allowance before, there’s an opportunity to claim against your employer Class 1 NICs going back as far as the 2018/19 tax year.

In total, this means you may be eligible to claim:

  • £3,000 for the 2018/2019 tax year
  • £3,000 for the 2019/2020 tax year
  • £4,000 for the 2020/2021 tax year
  • £4,000 for the 2021/2022 tax year
  • £5,000 for the 2022/2023 tax year

If you make a successful claim for all years, that potential £19,000 frees up cash that you can reinvest back into the growth of your organisation.

Note: During the 2018/19 and 2019/20 tax years, there was no limit on the employers’ Class 1 National Insurance liability, or how much de minimis state aid you could receive. If you make an Employment Allowance claim for 2018/19 or 2019/20, the thresholds for employers’ Class 1 National Insurance and de minimis state aid do not apply.

Part 4: everything you need to know

In the final instalment of this 4-part series, we’ll summarise all the information we’ve shared about Employment Allowance so far. Check back in for a complete guide that covers:

  1. What Employment Allowance 2022/23 is
  2. How to understand the eligibility rules
  3. The key steps in a successful claim

Visit our blog for more practical tips for business owners and SMEs or subscribe to get them direct to your inbox. Find out more about Soldo here.

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Employment Allowance eligibility explained

28 November 2022   |   10 minutes read
Employment Allowance eligibility

If you’re an employer, claiming Employment Allowance is a simple way to give your cash flow a boost. However, as with most tax relief schemes, wrapping your head around the Employment Allowance eligibility rules can be rather more complex.

A £5,000 allowance is available against your Class 1 National Insurance employer contributions for the 2022/23 tax year. And with retrospective claims allowed for the preceding four tax years (at the historic rate) there’s a potential £19,000 available for new claimants.

That sounds like good news for your payroll costs, but how do you know if your organisation is eligible for Employment Allowance? In this article, we’ll help you understand:

If you’d like to learn more about what Employment Allowance 2022/23 is and how it works before reading on, you can do that here. Alternatively, you can jump ahead and find out how to make a claim.

Who is eligible for Employment Allowance 2022/23?

An extra £5,000 in the kitty would surely help smooth out cash flow. But how do you know if your organisation is eligible for the allowance?

Under HMRC’s current rules for 2022/23, you can claim Employment Allowance if:

  • You’re a business and your employers’ Class 1 National Insurance liabilities for the previous tax year were less than £100,000 (the £100,000 threshold is the key test)
  • You’re a charity or community amateur sports club and you meet the £100,000 Class 1 NI liabilities threshold
  • You employ a care or support worker and you meet the specific Employment Allowance eligibility criteria for this scenario (find out more about these rules here)

So far, checking your Employment Allowance eligibility seems relatively straightforward. Are you a business, charity, sports club or the employer of a care/support worker? Do you meet the £10,000 NI test? If so, you could be one step closer to maximising this allowance.

But as with many HMRC allowances, there are additional criteria you must meet if you’re going to make a successful claim.

1. Groups can only make a claim against one company

If you’re a large group with several entities in your corporate structure, you might think you could make a claim per company. Unfortunately, groups can only make an Employment Allowance claim against one company in the group. Work out which company is most in need of a cut to its payroll costs and make your claim against this particular entity.

2. Organisations with multiple payrolls can only make one claim

Your organisation might run separate payrolls, each with its own employer PAYE reference. But within HMRC’s rules, you can only make a claim against one of these payrolls. It makes sense to make the claim against the payroll with the biggest labour costs.

3. You can’t include payments made to freelancers and contractors

Any off-payroll payment you make to contractors can’t be included in your NI calculations. Payments to people who fall within the IR35 rules are classed as ‘deemed payments’. Because of this, they can’t be included in the NI totals you claim. If you have a large number of IR35 workers on your payroll, this could undermine the benefits of claiming Employment Allowance.

What are the state aid rules and how do they affect your Employment Allowance eligibility?

So, you’ve battled your way through the Employment Allowance eligibility criteria and come out the other side. But there’s something else you need to factor into your decision-making if you’re thinking of making a claim for the allowance. And that’s de minimis state aid.

State aid is financial support that the Government provides to your organisation. Under the current rules, you can only claim a certain amount of state aid over a rolling three-year period.

If your organisation makes or sells goods and services, you can’t make a claim for Employment Allowance if it would bring you over the de minimis state aid threshold.

Here are the current state aid thresholds (which HMRC calculates in euros) for different sectors:

  • Agriculture products: €20,000
  • Fisheries and aquaculture: €30,000
  • Road freight transport: €100,000
  • Industrial sector/Other: €200,000

To check your Employment Allowance eligibility, you’ll first need to work out how much de minimis state aid you’ve received. Then you’ll have to make sure you’re within the de minimis state aid threshold.

If the state aid you’ve received falls below the threshold for your industry, you’re in luck. You can still make your claim for the allowance. If your combined state aid over the three-year period exceeds the threshold, you won’t be able to make a claim.

It’s also worth noting that there are different Employment Allowance eligibility rules for organisations that cover more than one sector. In addition, connected companies must check that the total de minimis state aid for all of the companies in the group doesn’t exceed the threshold for your sector.

Who is not eligible to make a claim?

There are some organisations who won’t be eligible to make a claim. There may also be some people on your payroll who won’t count towards your overall total for Class 1 National Insurance contributions.

Here’s a more exhaustive list of the organisations and people who don’t meet the criteria for Employment Allowance eligibility:

  1. You can’t claim if your organisation is a public body
  2. You can’t claim if your organisation carries out more than half of its business in the public sector (unless you’re a registered charity)
  3. You can’t include employees who fall within the IR35 off-payroll rules in your claim
  4. You can’t include someone you employ for personal, household or domestic work (unless that person is a care or support worker)

Part 3: How to claim Employment Allowance 2022/23

In the next instalment of this 4-part series, we’ve put together step-by-step instructions for making an Employment Allowance claim. Your payroll software may be set up to make your claim directly to HMRC. Or you may be able to use HMRC’s Basic PAYE Tools to claim. Head there now for everything you need to know.

Visit our blog for more practical tips for business owners and SMEs or subscribe to get them direct to your inbox. Find out more about Soldo here.

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What is Employment Allowance 2022/23?

21 November 2022   |   8 minutes read
Employment Allowance 2022/23

Employment Allowance is a way to reduce your National Insurance costs as an employer, by making a claim with HM Revenue & Customs (HMRC). And it’s available right now.

Your payroll costs are one of the biggest outgoings as a business or charity. Typically, payroll can eat up between 15% and 30% of your gross revenue. So, wouldn’t it be nice if there was a simple way to reduce your costs every time you run a payroll? The good news is that there is.

Read on for the answers to these and other questions:

What is Employment Allowance 2022/23 for employers?

Employment Allowance is a way to reduce your organisation’s annual National Insurance (NI) liability. You’ll need to meet the eligibility criteria and make a claim to HMRC. But once the allowance kicks in, you’ll see a reduction of up to £5,000 in your employers’ Nl for the 2022/23 tax year. That’s a great way to free up cash to spend on other things.

You’ll need to be an employer, of course, and each time you run your payroll you’ll be paying less employers’ Class 1 National Insurance.

Once set up, your payroll software will automatically deduct the allowance from your employers’ NI. It’s a simple and straightforward way to reduce your payroll costs. And cutting your operational costs is a helping hand that most organisations will be glad to accept.

How does Employment Allowance 2022/23 reduce your employment costs?

UK wages are on the rise. This means your payroll is becoming more expensive to run. In the three months to September 2022, total pay in the United Kingdom grew by approximately 6%. And this rise isn’t the only drain on your operational cash flow.

Costs for materials, products and services are on the up. Late payments just a hit a two year high. Energy prices have gone stratospheric. And increases to the Living Wage are pushing up labour costs. So, it’s becoming more difficult to maintain a positive cash flow position and generate profitable margins. Making a claim for Employment Allowance helps you re-balance the cash flow scales.

With a successful claim in place:

  • You pay no employers NI for the length of the allowance
  • Your regular payroll costs are reduced
  • Your operational expenses become more affordable
  • You have more liquid cash in the business

Having more cash in the organisation opens up plenty of possibilities. You may be able to hire more staff to help drive your growth plans. Or you may be able to afford that new piece of equipment to begin scaling up production. What you do with the money is up to you. But having that extra liquidity and flexibility is likely to be invaluable over the coming year of trading.

Can you backdate Employment Allowance to previous tax years?

You can carry on benefiting from Employers Allowance until you’ve used up the £5,000 maximum limit for the 2022/23 allowance. You don’t have to reach the £5,000 limit if your employers’ Class 1 NI contributions wouldn’t usually amount to this total. But once the maximum limit is reached, you’ll return to paying employers’ NI contributions at the usual rate.

You can also make backdated claims for Employment Allowance in previous tax years. You can claim Employment Allowance for the previous four tax years, dating back to the 2018/2019 tax year.

So, if you’ve never made an Employment Allowance claim, this could be positive news for your cash flow situation. You can only claim the allowance at the rate that it was paid during each tax year, meaning you could still potentially claim:

  • £3,000 for the 2018/2019 tax year
  •  £3,000 for the 2019/2020 tax year
  • £4,000 for the 2020/2021 tax year
  • £4,000 for the 2021/2022 tax year
  • £5,000 for the 2022/2023 tax year

That’s a total of £19,000 that could be ploughed back into your cash flow! A very welcome bonus as you navigate the current economic climate.

Part 2: eligibility explained

In the next instalment of this 4-part series, we look at who’s eligible for the Employment Allowance. Some kinds of employment are excluded, so make sure you check it out to find out more.

Visit our blog for more practical tips for business owners and SMEs or subscribe to get them direct to your inbox. Learn more about Soldo here.

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Late payments just hit a two year high for small businesses in the UK, says new data

14 November 2022   |   11 minutes read
Late payments

Late payments for small businesses hit a two-year high in September, according to new data published by Xero. Any increase in late payments is always concerning news for business leaders. But this is especially true in the current economic climate, where maintaining positive cashflow is such a delicate balancing act for SMEs across the country.

When your customers don’t pay invoices on time, it puts additional strain on your working capital and your cash position. With less cash flowing into the business, keeping your finances in good shape becomes a challenge.

So, what can you do to minimise the impact of late payments? And how can being in better control of your numbers help you spot potential debt issues before they arise? Read on for the answers to these and other questions including:

What is the current state of late payments in the UK?

According to Xero’s Small Business Index, small businesses waited an average of 30.6 days to be paid by their customers in September. This is the longest wait time in two years and the sixth month in a row that payment times lengthened. The rise in payment times left small businesses waiting an extra 8.2 days beyond agreed invoice payment terms – the highest late payment time since August 2020.

And that’s not the only sign of late payments becoming a growing issue for the UK’s small business owners.

A recent Federation of Small Businesses (FSB) study of 1,200 business owners found that close to one in three (30%) had seen late payment of invoices increase over the last three months. Another 8% had experienced other forms of poor payment practice and only 6% had formally agreed a change to their payment terms over that period.

This is a trend that’s adding to the existing pressure on UK small businesses. But what’s causing this jump in late payments? And what can you do to reduce the impact?

What are the main causes of late payments?

There are many reasons why your customers might not be paying your invoices on time. In an ideal world, getting paid should be a smooth and seamless process – especially in the digital age. But there are hurdles that can fall in the way of good payment practices.

For example:

  • Their accounts payable team may have been instructed to delay payment
  • Your customer may not have received your invoice at all
  • You may have misquoted the purchase order number, or input other details incorrectly
  • Bank details may be incorrect, or payment may have been refused by the bank

But by far the biggest reason for late payments will be the prevailing economic situation. The UK is already in recession, interest rates are increasing and costs are on the rise. And these challenging conditions mean your customers have less liquid cash to pay their bills.

Faced with this economic reality, what can you do to stay on top of late payments?

How you prevent and manage late payments?

With so many accounting tools, forecasting apps and credit control solutions available, staying in control of late payments should be a breeze. But if you want to get paid on time, it’s also important to know your customers and build trusted relationships that lead to better payment.

We’ve highlighted five ways to reduce your late payment worries:

1. Stay on top of your accounting

if you’re not up-to-date with your bookkeeping and bank reconciliation, you might not even know that payment is late. It’s also important to invoice on time, so you begin your payment terms as early as possible. A flexible cloud accounting package, like Xero, QuickBooks or Sage makes it easy to view your cashflow, accounts receivable and aged debtor reports.

Work closely with your accountant to talk through these numbers and look at your financial reporting at least once every month. These frequent chats with your adviser help you spot the slow payers and take action to get payment back on track ASAP.

2. Delegate your invoice chasing to an expert

If you’re currently managing the entire finance workload, it may be time to delegate this responsibility. Think about hiring an in-house finance manager for the business. Or see if your accountant offers an outsourced finance service, where they can manage the books and chase up the outstanding debts.

If you have the budget, there’s value in hiring a full-time or freelance credit-control professional. Someone to manage your accounts receivable, debt management and chasing of late or aged debt.

3. Get to know your customers

When you have a great relationship with your customers, this puts you top of mind when it comes to payment. If an invoice does miss the due date, it’s easier to chase up payment when you know a customer contact by name and have an existing rapport.

It’s also a good idea to track the financial health of customers – both before you take on new customers and regularly for your existing base. By checking a customer or prospect’s business credit score, you can make informed decisions about who to work with and what kind of payment terms to offer. You’re also more likely to spot a late payment problem on the horizon so you can get ahead of that risk before it becomes a threat.

4. Review your invoicing processes

It might be tough to hear but the problem doesn’t always sit with the customer. If you have messy or inconsistent invoicing procedures this can also lead to late payments.

Are you sending out invoices on time, without errors, to the right people? Are your company bank details up to date? Have you automated the sending out of recurring invoices, or are you reliant on someone remembering to press send on the invoice? Always follow up on the invoice to make sure it’s been received and that the email hasn’t ended up in someone’s junk folder.

5. Tighten up your payment terms

If you haven’t already, make sure you’ve agreed formal payment terms with every customer. These payment terms should set out when you expect to be paid (usually 14, 30, 60 or 90 days from the invoice date, depending on the benchmark for your sector).

Your terms should also set out your procedures for late payment and how much you’ll charge as a late-payment fee. This will generally be 8% of the invoice value – read HMRC’s guidance for charging interest on late commercial payments to find out more about this.

It’s also sensible to have an agreed process for when you contact a late-paying customer, and how the debt will be escalated if they don’t pay.

The value of great financial management

At Soldo, we know how important it is to stay in control of your company and employee expenses as well as your costs and cashflow. When it comes to late payments, the ideal mix is having the right accounting and finance tools, alongside a big focus on nurturing trusted customer relationships.

If you’re looking for more small business news and expert advice, subscribe to get all our latest blog posts, free resources for ambitious business owners straight to your inbox.

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How to do a spend analysis in three easy steps

11 October 2022   |   11 minutes read

Are you doing a spend analysis at least once a quarter? Have you ever done a spend analysis before?

Not to worry if you haven’t – it’s never too late to build a new healthy habit into your company spending strategy. And, as the cost of living crisis continues to put pressure on your pocket, a good company spending strategy has never been more important.

Doing a regular spend analysis is essential for making sure the rules you set out in your expense policy on paper, are actually being followed in practice. Some people find spend analysis easier than others – their eyes seem to find patterns in spreadsheets, and meaning in piles of crumpled receipts. Others find the range of numbers disorienting and stressful, which is why the task is so often neglected.

The good news is that there are three simple steps you can follow to find meaning – and savings – in your list of business of outgoings:

Spend analysis step 1: see it

The first step of your spend analysis is all about visibility. If you can’t see it, you can’t analyse it. At this stage you’ll want to focus on unearthing everything you possibly can about the money your business is spending.

If you haven’t done this before, it can be quite overwhelming. Fortunately, your second spend analysis is almost never as gruelling as your first.

Round up the data

If you want to analyse your spend you have to know where to find the data.

Depending on how your business is structured, you may need to source information from a few different teams, so make sure you leave yourself enough time to do that during this first step.

For smaller businesses, rounding up the data might just mean opening a box of receipts in your desk drawer, or doing a search for invoices in your email inbox. Be thorough and always double check that you haven’t missed anything.

If you’re using Soldo, this step won’t take long at all. Just log in to the admin dashboard and download reports for the period you’re analysing.

Assess the round up process

Before moving on to the next step, take some time to reflect on how easy (or difficult) it was to round up the data. If it was difficult, this is a great opportunity to tweak your expense process so step one of your spend analysis runs smoothly next time.

If it was easy, don’t rest on your laurels – you should still look for other ways to make the process even better.

Spend analysis step 2: sort it

Now that you’ve sourced your data, you’ll need to sort it in a way that makes sense. That way your spend anaylsis won’t leave you feeling dizzy. The goal at this stage is to be systematic, so that like can be compared against like.

Say yes to tech

This is where technology comes in to your spend analysis (if you haven’t been using it already).

Excel is still the most widely used tool for expenses but spreadsheets can get messy pretty quickly and mistakes can slip in unnoticed. There are some great alternatives out there to help you manage and analyse company spend, including accounting software such as SageQuickbooks and Xero.

Although you might not consider yourself tech savvy, don’t underestimate how much you’re already doing on a normal day with your smartphone. From checking work emails or messages on the go to using your business banking app and maybe even tracking your morning run.

A spend management platform like Soldo brings these two kinds of technology together. You and your employees can use our mobile app to snap a picture of a receipt right at the point of purchase so you always know who spent what. And because our platform integrates with your accounting software, you’re never left with hours of month-end reconciliation or time wasted on tracking down missing receipts.

Sort purchases into spend categories

The best way to be systematic about your spend data is to organise it by category.

Your business will have specific categories depending on where you and your team need to spend money but here are some of the most common ones:

  • Travel
  • Food
  • Accommodation
  • Software
  • Office supplies
  • Marketing
  • IT
  • Telephony/internet

It’s really important to get the categorisation step of your spend analysis right. It’s even more important that you make categorisation a central part of your company spending strategy – if you haven’t already done so.

If you’re a Soldo user, you can create your own categories in the admin dashboard, and add the relevant category to every purchase – it only takes a couple of seconds. If you’re using accounting software such as Xero, you can add categories when you upload your expenses, or review and accept the software’s automatic suggestions.

Spend analysis step 3: study it

Ironically, analysis is the final step of the spend analysis process. Making your expenses visible, and then sorting them into categories, often takes longer than studying them for patterns and opportunities to save your business money. But if you’ve done the seeing and sorting steps properly, the studying step should be relatively straightforward.

Search for patterns

Start with one category, such as travel, then try to zoom out and look at your company spend with fresh eyes. You’re looking for patterns and trends in your company spending that you might not have noticed otherwise.

Finding patterns is not an end in itself. Instead, patterns are a means to spotting opportunities to cut costs or shift budget from one spend category to another. Patterns often highlight old habits that your business has taken for granted as ‘just the way things are.’ Challenge this. Why are you spending in this way? How could you do things differently?

Patterns can also show an over-reliance on a small range of suppliers. Challenge this, too – especially now as you’re faced with weathering an economic storm having just traded through a global pandemic.

Your suppliers may have had no choice but to increase their prices but, if you’re a loyal customer, could you negotiate a bulk discount? Is there a way you could organise your buying over the year to make better use of existing bulk discounts? Are you over-reliant on one supplier for a crucial regular item? What would happen if they folded or were unable to fulfil an order? Would it be safer to explore your options?

Study the outliers

The other reason to seek out patterns in your company spending is so that you can easily identify outliers.

  • Are there any expenses that stand out? Why do they stand out?
  • Has your business paid twice for something in error? Or have you overpaid?
  • Has your company spend unexpectedly increased in certain categories?
  • Should you adjust your budget to align with new needs, or adjust your spending to realign with your budget?
  • Are all of your employees or teams adhering equally to your expense policy? What can you do to ensure that everyone is sticking to the rules?

Studying the outliers is not about being picky for the sake of it. It’s about checking that everything makes sense – that every expense can be tied to a relevant business need.

The bottom line

Once you’ve analysed your company spend, it’s worth dedicating some serious thought to the time it took you to make sense of all the outgoings. If you manage your company’s spend well, seeing it and sorting it will be condensed into just a few clicks. And, once everything is in order, studying it should be fast, accurate and stress-free.

Find out how Soldo can make your next spend analysis a breeze or subscribe for more articles like this one.

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