Pat Byrne Introduces his new accountancy practice…

Company: DCM Accountants
Website: www.dcmaccountants.ie
Founders: Pat Byrne
Age: 32
Staff Number: 2
Date Started: June 2011

Tell us what your business does?

DCM Accountants aim is to focus on the supply of accounting, taxation and associated services to small businesses and taxpayers.

Where did the idea for your business come from?

“I worked for two accountancy practices over the past seven years and the one thing that really stood out was the lack of communication with the clients. All too often the clients are not viewed as businesses; they are seen as a fee. At DCM we would like to get more involved with the clients business. We plan to run a number of different workshops including understanding accounting, social media for business and credit control for small businesses. Our belief is that if our clients succeed so will we.”

Have you always wanted to run your own business?

It is definitely something I have thought about for a number of years. It is a lot of hard work but the pay out could be great.

What planning did you do before you started up?

I had done quite a bit a research about what is currently on offer; prices, customer service etc. I also looked at how accountancy practices market themselves. Planning for the cashflow of the business for the first 12 months was very important.

Which entrepreneurs do you admire?

John Teeling – Cooley Distillery
James Farrell – Professional Development Ltd

What challenges have you faced and how have you overcome them?

A big challenge in setting up this practice was getting a loan from the bank. This was a long process but eventually with a lot of persistence and a well prepared business plan the finance was made available.

How have you promoted your business?

I have been doing a lot of networking. In the accountancy profession the vast majority of new clients come on foot of word of mouth. I don’t believe the cold calling will work.

Are you optimistic about the remainder 2011?

I would be very optimistic about 2011. I think with a lot of hard graft our business can overcome the difficult economic environment we are in.

What advice would you give a budding entrepreneurs?

Just get out and do it; stop thinking about it.

Best of Luck Pat we hope it goes really well for you – Startups.ie

There will be a free Start-Up Breakfast for Entrepreneurs and New Businesses in DCU Business School (3rd Floor), 27th July 2011 at 7.45-9.30am. This networking breakfast is in association with “McInerney Saunders Chartered Accounts” and includes

successful entrepreneur speakers such as Pearce Flannery; Author and Business Advisor and Jill Hincks; Entrepreneur and Managing Director for Passion for Creative, a successful award winning marketing agency. AIB will also be offering information on their new “Job Creation Fund for SMEs. For more details click here.

We all know the general consensus that people dread visiting their accountant like they dread visiting the dentist..

but it doesn’t have to be all pain and no gain…Here are some tips to take the sting out of a necessary business function, and using your accountant as a service provider to its maximum potential. Gone are the days when you only heard from your accountant when they were chasing cheques or an audit was due. In today’s difficult climate your accountant can play a pivotal role in your company’s success. So for those of you starting up a business, here is a checklist of what you should expect, and if your not getting it… its time to make some changes.

What is the Role of the Accountant?

• Operational – dealing with the day to day financial transactions of the business.
• Strategic – involved in long term investment decisions of the business.
• Advisory – as needed sounding board to bounce ideas off.
You should be able to go to your accountant with ideas, queries, thoughts and opinions. Their job is to advise and assist. Remember- a successful business is a successful client for them so they should be taking an active interest above the mundane details. Starting up a business from scratch is a tricky concept, and many ventures do not make it past the starting line because of certain technicalities. Your service providers are hired to take the weight off the creative centre of your business – you.

Understanding the Needs of Your Growing Business

Company structures change from year to year, and start-up companies often get bogged down by the legal aspects of the development stage. Your accountant should be on hand to take this burden off your shoulders, so you can get on with growing and prospering. This includes the statutory burdens of increasing legal responsibilities on directors and owner/managers as a company expands, taxation and reporting legislation, as well as the practical needs of real-time accurate financial information on business performance, costing and pricing of products & services, risk and return on incremental growth and investment.
People start up a business because they are passionate about an idea, product or service. Your accountant should take the headache out of your finances so you can focus on that great product and getting it to market.

What can the Accountant do for your Business?

Your accountant should provide you with monthly/quarterly accounts, detailed margin analysis, and comparisons against budgets. Timing is important, some businesses are seasonal and their accounts and budgets will reflect this. As well as these core documents your accountant should provide you with capital investment information, and deal with banks and other lenders on your behalf. And of course, dealing with the revenue and the CRO (company registration office) to ensure the smooth growth of your company.
Start to see your accountant as an integral part of the business, build working relationships with those that have the resources you need and don’t be afraid to question each and every aspect.

Working With Your Accountant

How do you build these functional relationships so you can get the information you need?
Here are the steps you can take:

• Insist on full jargon-free explanations of all financial information no matter how small. There is no point leaving a meeting confused by the terminology, and it is far better to ask your accountant these details rather than admit to a prospective partner that you do not know the lingo!
• Be clear about what the key cost and income drivers are within the business and ask to have a simple financial recording system to monitor these key figures.
• Be willing to keep detailed records of all transactions in the business.
• Be willing to set annual / quarterly targets and monitor progress with your accountants help
• Provide the accountant with accurate stock/WIP figures for management accounts.

Include your accountant in the early stages of the decision making process to avoid later conflicts, and keep the accountant informed of all developments or changes within the business. Accountants know their figures and they know the rules, follow their advice but let them know your end goal and where you want the business to be. If you want an efficient system to continue into the successful growth of your company, invest time and resources now in a full recording systems for your financial information and have your costing and pricing structure reviewed regularly to adjust any changes.

By following these simple steps you and your accountant should be able to work together to ensure the success of your start-up business. An accountant can be a business partner for life; it should be a long-term collaboration so choose the right one for you and get the most from their services.

The question of whether a person should be classified as an employee or self employed is an important one, David from www.irishaccounts.ie explains the difference..

In a lot of cases, the business owner will want the employee to be treated as a self employed individual because:

1) There will be no liability to Employers PRSI. In some cases employer’s PRSI can be as much as 10.75% of the gross salary of the employee.

2) There is no exposure to unfair dismissal which means that the individual can be hired and fired without any issues arising. There is no obligation to pay a wage every month as it will be linked to performance.

3) There is no requirement to pay holiday pay, sick pay, etc

For the employees who are classified as self employed, not only is there no job security but also there is a lessor degree of social welfare benefits available to them should they become unemployed.

Employees pay tax under the PAYE system while self-employed subcontractors pay tax under the Self Assessment system.
Whether or not a person is classified as an employee or self employed is a question of fact.

He/she is an employee if some or all of the following apply:

Is under the control of another person who directs as to how, when and where the work is to be carried out
Works set hours or a given number of hours per week or month
Does not supply materials for the job
Does not provide equipment other than the small tools of the trade
Is not exposed to personal financial risk in carrying out the work
Receives a fixed hourly/weekly/monthly wage
Is entitled to extra pay or time off for overtime
Is entitled to sick pay
Receives expense payments to cover subsistence and/or travel expenses
Supplies labour only
Cannot subcontact the work
Does not assume any responsibility for investment and management in the business
Does not have the opportunity to profit from sound management in the scheduling of engagements or in the performance of tasks arising from the engagements
Will normally be covered under the employer’s public liability insurance
Works for one person or for one business

He/she is self-employed if some or all of the following apply:

Has control over what is done, how it is done, when and where it is done and whether he or she does it personally
(In the construction sector for health and safety reasons, all individuals are under the direction of the site foreman/overseer. The self-employed individual controls the method to be employed in carrying out the work.)
Controls the hours of work in fulfilling the obligations of the contract
Provides the materials for the job
Provides equipment and machinery necessary for the job, other than the small tools of the trade
Is exposed to financial risk, by having to bear the cost of making good faulty or substandard work carried out under the contract
Costs and agrees a price for the job
Receives an agreed contract payment(s) without entitlement to pay for overtime, holidays, country money, travel and subsistence or other expense payments
Is free to hire other people, on his or her terms, to do the work which has been agreed to be undertaken
Assumes responsibility for investment and management in the enterprise
Has the opportunity to profit from sound management in the scheduling and performance of engagements and tasks
Provides his or her own insurance cover as appropriate e.g. public liability insurance, etc
Owns his or her own business
Can provide the same services to more than one person or business at the same time

It should be noted that:

A worker paid by results (piece worker, commission, by share) is not automatically a self-employed contractor;
The fact that an individual has registered for self-assessment or VAT under the principles of self-assessment does not automatically mean that he or she is self-employed;
A worker who is a self-employed contractor in one job is not necessarily self-employed in the next job. Each job must be looked at separately.

Employee
If the worker engaged by the principal contractor is an employee, the principal contractor must operate PAYE/PRSI on any payments to him or her. This can prove extremely costly is the revenue insist on emergency tax and grossing up the employee’s salary.

Self-employed
Where it has been established that a contractor in the construction, forestry or meat processing industry is self-employed, Form RCT 1 must be jointly completed.

If you are unsure of whether you should be classified as self employed or an employee then do get in touch with us at info@irishaccounts.ie.

The information contained in this blog is for general guidance on matters of interest only and should not be construed as professional advice or service.As such, it should not be used as a substitute for consultation with

AUDIT EXEMPTION
In Ireland, a company is deemed to be audit exempt if it fulfills all the criteria set out below in both the current and previous year;

* The company must be a Private Limited Company;
* The amount of turnover of the company must not exceed €7.3 million;
* The total assets of the company are less than €3.65 million at the end of its financial year;
* The average number of employees must not exceed 50;
* The company must not be a parent company or a subsidiary company;
* The company must not come within one of 19 classes of companies listed in the Second Schedule to the 1999 Act; (Generally banks and companies that are under the control of the Financial Regulator)
* The company’s annual return must not be late in either the current or the previous year;

Late Annual Returns
The condition which generally causes the most trouble is where a company is late filing of it’s annual return. This will result in the company loosing its audit exemption status for the current year and also for the next year. The CRO are very strict in this regard as they are unable to waive the exemption as a matter of law. There are also late filing fees of €100 and €3 per day for every day the return remains outstanding.

Ways to help you avoid loosing your company’s audit exemption status
1) Ensure that the company’s Annual Return Date is the maximum 9 months after the company’s year end.
2) Try to get the accounts of the company prepared as early as possible to avoid unnecessary delays.
3) Filing your annual return online gives an additional 28 days to file the company’s accounts.

Loss of audit exemption can prove to be expensive as a significant amount of additional time will be required to complete the accounts of an audited company as opposed to an audit exempt company.

If you wish to discuss any of the above do get in touch with us at info@irishaccounts.ie

In the current economic climate, businesses are finding it increasingly difficult to meet their current tax obligations to Revenue. Dave from Irishaccounts.ie discusses the options…

In the current economic climate, businesses are finding it increasingly difficult to meet their current tax obligations to Revenue. Delays in being paid for goods and services put an enormous strain on the ability of a business to survive.

Since the days of the Celtic Tiger, Revenue have softened their attitude to payment of tax arrears significantly and are now more sympathetic towards those businesses that have fallen into difficulty. This means they are willing to enter into instalment arrangements which stretch over longer periods then before and are more agreeable to reducing penalties where possible.

However the revenue will not accept a situation where the business is allowed to continue to run up revenue debts with no realistic basis or timeframe of payment.

It is also worth noting that revenue cannot waive the underlying taxes themselves as a point of law. Nor can they waive the interest arising. The only way such debts can be extinguished is by liquidation of the company.

So when you find that you are in difficulties with the revenue for unpaid taxes what is the best thing to do?

Find out what is causing the difficulties.

First you must figure out exactly what is the cause of the problem. Vague phrases such as “we are having difficulty getting paid” or “the sales are down from last year” will not be a sufficient basis for an agreement with the revenue.

You need to have definite facts and figures available and a reasonable plan to solve all of the issues you have uncovered. Most important of all, you need to be able to show that the business is viable long term.

Engage with revenue

Once you have all the facts, you then need to engage with revenue at the earliest opportunity with a proposal on how to clear all of the current taxes. This proposal needs to be a realistic one as if the agreement is not kept to, the amounts due will precede to enforcement immediately.

You should have management accounts, cash flow statements, debtors’ lists, company profile etc to support your case.

Instalment arrangements

Most arrears of tax are dealt with by entering into an instalment arrangement with revenue. A certain amount of the outstanding tax will always need to be paid up front. The upfront payment should be as large as possible to reduce interest costs.

Breach of the instalment agreement will have serious repercussions and will entail immediate enforcement measures. Part of the conditions of the agreement will also be that any current taxes arising are kept up to date and do not fall into arrears.

Remember if you are trading as a sole trader or you allow your company to be involuntarily struck off at the CRO you remain personally liable for all arrears of taxes.

If you wish to discuss any of the above do get in touch with us at info@irishaccounts.ie

There has never been a better time to set up a company in Ireland. David Brannigan explains the new tax exemption for startups

The Irish Government has introduced a scheme whereby new start-up companies are exempt from paying corporation tax for the first three years of their operation.

In order to avail of the scheme the companies

1) must be incorporated on or after 14 October 2008,
2) commence qualifying trade in 2009 (now extended to 2010),
3) have corporation tax liabilities that do not exceed specified levels.

In order to qualify, the trade of the company must not have been previously carried on by another person or formed part of another person’s trade.

The relief also does not apply to “service companies”. These are companies which are controlled by five or fewer people who carry on a profession or supply professional services.

The maximum relief allowable is for a corporation tax liability of €40,000 per annum. There is also marginal relief where the corporation tax is between €40,000 and €60,000.

If you need any further advice and information about any of the above, do get in touch with us at info@irishaccounts.ie

David Brannigan gives his advice on choosing the right accountant!

Choosing the right accountant is a critical decision for your business as you need to be able to trust and rely on them to provide critical advice and information going forward.

But who should you choose? How much should you pay?

You first need to establish what services you actually need. Are you able to do any of the work yourself as this will have an important effect on the fee. If you do not have a head for figures then you will need a bookkeeping service. You will also need to prepare a set of accounts at the end of the year along with tax returns and other compliance work.

Just as important is to decide what type of practice is the “best fit” for your business? Not all accountants are the same. Some accountants specialise in a certain area and can be quite expensive when it comes to doing the bread and butter compliance work. Others may seem to be inexpensive but may not have the skills or resources to deal with your business needs in a way that suits your requirements. Your choice of accountancy firm will therefore very much depend on the size of your business and the level of work you require of them.

Larger practices are by their nature geared up to service larger companies and are generally not ideally suited for the needs of smaller SMEs or start ups. They don’t usually offer bookkeeping services. If they do, they will be relatively expensive.A larger firm of accountants will usually have a greater amount of resources and more qualified staff. But as these staff will command a greater level of salary so their fees will be higher and normal compliance work will be more expensive.

If you are a smaller business, a larger practice may not view your business as important to them. You may not be allocated all the resources you believe are necessary to properly prepare your accounts in an efficient way. Therefore if you only require a standard service, a larger firm will usually work out relatively more expensive. In that case you are essentially paying for a brand and a smaller firm can usually provide you with a better service and also value for money.

A smaller firm such as ourselves, can be very cost effective especially to smaller sized business trying to establish themselves in the market place.

We offer a personal and friendly service to all our clients. Our firm has a over 15 years experience in accounts, audit and tax and offers a wide range of services tailored to your needs.

If you need any further advice or information about any of the above, do get in touch with us at info@irishaccounts.ie

David Branigan has 15 years experience in practice and is accredited by the ACCA.
In the second of a series of Blogs for www.startups.ie David discusses the pro’s and con’s of setting up as a Sole Trader vs Limited Company

Setting up a new business can be a very exciting adventure and it is easy to get carried away by the early rush to make the sale and get the contract. But it is important your business structure suits your needs to avoid costly restructuring later.

Three types of business can be used each with its advantages and dis-advantages.

Sole trader

Setting up as a sole trader is simplicity itself. In many ways you can just open a bank account and away you go. There is no legal red tape to cut through or expansive legislation to deal with. Consequently the annual cost required to run a sole trader business is relatively cheap compared to other types of business of similar size.

However there are some major pitfalls. Firstly you have unlimited liability for all the debts of the business. This is not only to trade creditors but also to customers who would want to sue you as a result of a faulty products or service.

There are also tax issues to consider. A sole trader is taxable on the actual profits of the business and not just on the funds you withdraw. This can result in paying tax even if no money has been withdrawn from the business. There are also reduced options in relation to pension entitlements, the use of civil service millage rates and other issues.

Limited Companies

Setting up a limited company costs perhaps €500 between the registration and other professional fees. Once set up, a limited company is classified in law as a separate legal entity from its owners or shareholders. This effectively means in most circumstances, the shareholders of a limited company have limited liability from all the debts of the company.

Limited companies in general also tend to give a better impression of an established business.The owners of a limited company can be easily identified and some record of the performance of the company is usually publicly available from the Companies Registration Office. This does give a level of comfort to anyone who may wish to deal with the company.

However all companies are subject to extensive Company Legislation which imposes significant responsibilities on how the company is run. Banks often ask for personal guarantees before giving loans which effectively gets around the company’s limited liability status.

Accountancy costs are higher as a company’s accounts generally require significantly more disclosure then a sole trader’s. In some cases a statutory audit of a company is required which will further increase the costs.

There are many tax advantages to a company. For example, money not withdrawn in the form of wages, is subject to corporation tax currently at 12.5%. There is also incentive schemes where new start up companies are exempt from corporation tax and very large tax savings for corporate pension schemes.

Partnerships

Forming a partnership is popular amongst those who are precluded from forming limited companies.

Partnerships can be very messy and it is vital that a partnership agreement is set up from the start so that each partner knows what is expected of them in terms of capital contributed and profit share.

The most significant problem with partnerships is that each member is jointly and separately liable for the debts of the partnership. This means that if one partner runs up any debts, the other partners are all liable for them. For this reason I always recommend that partnerships are avoided at all costs for this reason. A limited company is almost always the better option.

Summary

If you are happy to remain a small business and you are not particularly worried by the thought of unlimited liability, then I would recommend operating as a sole trader initially. It is always possible to incorporate at a later stage and the benefits of a limited company may not measure up to the costs.

When you have been trading for a while and you find yourself earning more money then you need to live on, you may then need to consider whether the savings as a limited company will outweigh the costs.

If you need any further advise and information about any of the above do get in touch with us at info@irishaccounts.ie

www.irishaccounts.ie

David Branigan has 15 years experience in practice and is accredited by the ACCA.
In the first of a series of Blogs for www.startups.ie David tackles the basics of VAT…..

www.irishaccounts.ie work with small SME and Start Ups Companies. They explain accounting and taxation issues in plain English.

When one is in the early stages of setting up a business, it can be very hard to get your head round such complicated ideas as VAT. But in its simplest form, when you become VAT registered, you effectively become a collection agent for the revenue. You agree that you will pay over the correct amount of VAT to them together with a VAT return every 2-3 months. You promise the revenue that you will keep proper books and records which they can inspect at their request.

Once registered, you get to charge your customers an additional amount called “VAT” on all your sales invoices. You are also entitled to re-claim VAT on the cost of goods and services you incur. You pay the net difference over to revenue at the end of each VAT period. If there is more VAT on your sales, you get to pay VAT, and if there is more VAT on purchases you get a refund of VAT.

Most importantly though, you need to remember that this additional money you collect does not belong to you, it belongs to the revenue. You only get to hold it for a short while as a loan.

Does it apply to me? Should I register for VAT?

Generally speaking this will depend on the nature of your business and your expected level of sales in the year. If you are engaged in the supply of services then if your turnover is going to be greater then €37500, you are obliged to register for VAT and charge VAT on these services. If you are supplying goods then this limit is €75,000.

If you are below this limit, then you do not have to register for VAT although you may opt to do so. If your customers are themselves VAT registered, they are entitled to claim back the VAT you charge them against the VAT that they owe. Thus they will not be too overly concerned by this extra VAT charge. However if your customers are end users, the additional VAT amount will be a cost to them and may make your product or service uncompetitive.

Factors which you should consider before you opt to register are

■Additional administrative costs required.
■Whether or not your customers are able to recover the VAT you charge.
■The ability to claim back VAT on purchases.
■The increased risk of revenue audit.
■Giving your business the impression it is more established or larger then it is.
So it is very important that if you are opting to register for VAT voluntarily, that you consider all the repercussions and think it through carefully. Often times I come across situations where a small perceived advantage is wiped out by a massive disadvantage or large or significant cost. While it is possible to de-register, it is generally not possible to do this retrospectively.

Rates of VAT

There are generally two rates, 21% and 13.5% currently in operation and it is critical that you establish the correct rate you charge from the start.

Some types of business are zero rated which means they do not have to charge VAT but can reclaim VAT on purchases. This is totally different from a VAT exempt business where no vat is allowed to be charged or reclaimed whatsoever.

If you need any further advice and information about any of the above do get in touch with us at:
www.irishaccounts.ie
49 Foxfield Road
Raheny
Dublin 5
Phone: (01) 8512423
Mobile: (087) 9673689
E-mail: info@irishaccounts.ie