Episode 12 artwork - fix your business finances with Claire Butler

Does getting your finances right bring you a lot of stress?

Not sure whether it’s best to be a sole trader or a limited company?

Wondering what’s the most tax efficient way to run your business?

Or what software accountants recommend?

Knowing what you can and can’t expense and what and how to run a spreadsheet or software for finances can be the difference between sleepless nights and the feeling that it’s all going to be ok. There’s no point stabbing in the dark and hoping for the best as getting your finances wrong can lead to being in trouble with HMRC and the last thing you want is stress and sleepless nights.

This episode with Claire Butler from C B Accounting, who specialises in working with small businesses, will answer all those question for you as well as give you real time advice about how to handle your business finances without it being a source of stress.

Are you ready to stop hiding from, and get confident with your business finances?

Episode Transcript

I'm Holly Christie, your host. I'm a website designer, mentor, and marketing strategist. I have two companies, This Demanding Life for small businesses who want to grow with flow, which means not running yourselves ragged, and Simply Sites for startups and micro businesses who want a stellar website and experience.

I'm here to help you to fall in love with your small business, to show you how to implement fabulous business practices, and how to turn those challenging moments into defining moments where you can find your strength. This is our very last episode of season one, and I wanted to take the opportunity to say a huge thank you to everybody who has listened, who's messaged, who's shared the podcast.

It has absolutely made my day. I have, um, been requested could I share how to start a podcast, and we will have an episode on that in season two. And what you're going to see is that starting a podcast is no mean feat. And I, for one, have certainly felt a real vulnerability about putting it out there. And you can't see who's liking it.

You can't see who's listening to it. And it's, it's very kind of different. So to have had all of your support, and even if you're listening for the first time, you are so welcome here, and a big, big thank you. So I could not wrap up this season having given you so much business advice and brought in the experts and that without absolutely going out with something that I just think is so important for small businesses and for small businesses to really get right I mean, wherever you are in your journey whether you're just starting out or whether you've been going for a while you're going to find that Business financials are probably the main thing that gives you sleepless nights.

And whether it's that you feel that it's, it's all just a bit overwhelming or it's really time consuming or it goes to the bottom of your to do list, whatever it is that just makes you think, Oh gosh, this is stressful. I have my absolute best business friend and my best life friend as well. Claire Butler from CB Accounting.

If you had told me. I would end up being best friends with an accountant. I would never have believed you. Um, but luckily Claire is not an accountant-y accountant as we call it. She has come along today to come help. I've got some set questions that we're going to ask, um, to really, really help you get organised with your small businesses.

So without further ado, welcome Claire. Thank you very much for having me. You are very welcome. What started your journey into accountancy?

[00:02:51] Claire Butler: I kind of fell into the role really. I um, had just had my third child and I actually got an admin role working in an accountancy practice that was local to me. I was working on the front desk, almost like a receptionist, because it was easy and it worked around the children.

And then one day I was called on to assist with some accounts work, and it kind of, I just found I had a natural talent, they recognised the natural talent for numbers, they, um, paid for me to qualify, and it kind of went from there really.

[00:03:19] Holly Christie: I love it. You know, one of the things I really love about kind of small and medium sized businesses is the ones who really invest in their staff.

And of course, I really work with people who are looking to make such a change to people and like really enhancing those skill sets. And I, for one, and this Demanding Life account are very glad that that was the skill set they decided. Now we don't have a huge amount of time because anyone who's listening to the podcast will notice that the episodes are all, you know, 10, 15, 20 minutes and the guest episodes are a maximum of 40 minutes because I find personally that I start to kind of lose it a little bit in 40 minutes.

time and actually Claire and I are together because we've been at a conference and all the speakers were speaking for half an hour and two of the speakers went over and I can tell you exactly by how many minutes because, you know, the attention goes. So before we lose your attention, um, I've got some, what I think are really good questions having been in business for a while.

And these are what comes up when I talk to my clients. So, so The first thing is, I work with small businesses and solopreneurs, entrepreneurs, whatever you want to call them. What is the difference between setting up as a sole trader and setting up as a limited company?

[00:04:32] Claire Butler: Yeah, this is a question I get asked a lot, actually.

It's one of the most frequent questions I get asked. Um, normally your accountant, if you're self employed and acting as a sole trader and just kind of standing alone, there's a point where your accountant might advise you to become a limited company. And the reason for that is basically, it'll be tax efficiency.

So often when you get to a certain level of turnover it's more tax efficient for you personally to become a director and a shareholder of a small limited company that is to carry on kind of just doing it for yourself so you keep yourself below a certain tax band because no one likes giving all of their money over to the government.

Now so the main reason for doing it will be tax efficiency but there are other reasons. You know, um, general consensus is that people take limited companies more seriously, often for branding purposes, and it just looks a bit more real and official. And it may, you know, be for a variety of reasons that you decide to trade through a limited company.

Often you need to think about it more carefully than just tax efficiency though, because as a sole trader and just self employed, you're very free to spend the money you earn in your business. As you want to do it. So there's, as long as the money's in the bank, you know, it might not be a business expense, but you can take as much money or as little money as you want from that bank account.

When you start trading through a limited company, that limited company, you have to think of it as they are a person in that their own right. So although you're the only person essentially earning the money for that limited company, you don't own that money anymore. It belongs to the limited company. And therefore you're restricted on how you can.

legitimately take money out of that business. And some people find that really restrictive, you know, they, they get themselves into all kinds of problems with it. So there's a lot of things to consider when you're thinking about moving away from just being self employed to being a limited company.

[00:06:22] Holly Christie: And that just leads us completely into my next question, which was, as small business owners, what can we expense and what should we be paying for ourselves?

[00:06:31] Claire Butler: Yeah, it's, there's a golden rule that anything you put through your account should be 100% Attributable to your business. So that means that you must, it must be earning you business revenue. So it's, to be a valid business expense, it's got to be contributing to you earning revenue. And most of the common things that people will try and put through, especially if you're self employed and you're kind of like DIYing your own accounts and things like that, is stuff that, you know, To be perfectly honest, you'll never get through with your account.

So a good example is clothing. Yeah. Now, unless you're buying branded clothing. So for example, a t shirt or sweatshirt has a logo on that, you know, and it's clearly identifiable as, you know, branding, advertising, completely allowable. Um, if you're in a construction role or something like that, and you're buying overalls, you know, something very specific that you require for the business, absolutely fine.

Again, you can have that. Workwear for meetings, client entertainment, even anything like that, you're not going to be able to put through the business. So when people ask me questions about what they can put through the business, I always say to them, if you were sat in front of an HMRC inspector, would you be able to form a good argument that that is 100 percent for your business and that you won't have any personal use out of it whatsoever?

And if the answer is no, don't put it through.

[00:07:56] Holly Christie: Where does that go on, like, mental health stuff if it was a, like, you know, personal development? Now, I appreciate that you can put coaching through a business, but what if it was more, say, a gym membership was important for mental health or physical health if you're trying to offset sitting at your desk all day?

Where does that leave you?

[00:08:17] Claire Butler: It kind of, it's a bit of a grey area to be honest, the answer generally is no, unless there's another valid reason why you've got the gym membership, and again it depends on how you're trading, so for example if you're a limited company and you've got other staff members and the gym membership is allowable to all staff members, then it's the case you're giving it to staff welfare.

Basically, it goes under that banner. As a self employed person, you're never going to get that through your books. It shouldn't be going through your books. You know, just flat out shouldn't do that.

[00:08:47] Holly Christie: Not going through the company. That's really useful. Mileage. Now, this is just something that always, always has me stumped.

Now, I know it's 45p per mile, but for me, I never kind of think, where is that physical money? Because it's not like the government go, here's your 45p, or you've done 10 miles, here's 4. 50. And, but I know that I need to put down mileage, and then you just go and do some magic wizardry with it, and off we go.

But, Talk us through it.

[00:09:17] Claire Butler: Yeah, so business mileage is something that's commonly claimed, especially nowadays. Now, HMRC haven't put the mileage scale, the mileage rates up for years and years and years, which is, um, slightly hypocritical given that everything, cost of everything's gone up, including fuel, but it's 45 pence per mile up to the first 10, 000, and then it's 25 pence a mile thereafter.

Now, the idea of it is, Nowadays, it's, it's not so attractive to have a car that is bought through your business. So this particularly applies if you're trading as a limited company, but can also be if you're a sole trader. So if you have a company car and you've bought it through the business, it's a really expensive way of doing it because you get, what they call a benefit in kind because you have personal use on it so you get taxed more.

Now the idea of the mileage rates is that it is, it's an allowance that you can offset in your business as an expense. And that 45 pence per mile is meant to cover fuel, insurance repairs. So it's for the business mileage.

[00:10:19] Holly Christie: It's quite ambitious isn't it?

[00:10:21] Claire Butler: So the idea is you could, you could like have a monetary value for it.

So you could put through your mileage every month and physically draw the money out. That's absolutely fine. You can also just take it as an expense at year end. So it goes through your accounts, you know, it's, it reduces the amount of tax you pay because it's a business expense. Those are miles that you've paid.

done in order to earn money for your business, um, but it, there doesn't actually have to be any physical money changing hands. And if you're trading through a limited company, the other side of it gets credited to your director's loan account, which is like a holding account. Now you can either take money in or out of your business as a small director.

So that credit just kind of sits there until you want to take it.

[00:11:07] Holly Christie: And speaking of director's loan accounts, this was something that I really didn't think know about until Claire painstakingly explained it to me when I asked her about my mileage. Um, and I would say if people always say to me, you know, when they're setting up a business, what is it that they should be spending money on and what shouldn't they?

And as someone who set up their business with just the cost of the license of the website software I was using, I really did do it all from the ground up. And luckily, the only thing for me that I said, I just, I, don't want to get involved in, I don't want to mess with and I don't really understand is the account side of it.

I never would have known about director's loans and things like that and I'm pretty sure most small business owners who haven't used an accountant, um, won't either. And so I would say if you are doing your accounts yourself and filing them yourself to save money, it actually could be that there's a false economy there because the way that An accountant can work it, and I certainly found this with you, is how, you know, you push things to a direct loan and did this, that, and the other, paid your fees and more because, you know, it was money that I wouldn't have known I could have credit there as well.

So I wanted to put that there. Um, let's go to VAT. Oh, lovely. What are the benefits of being VAT registered? And don't say none. Um, talk us through why someone would VAT register and what the threshold is.

[00:12:33] Claire Butler: Now if you're mainly working with corporates or even small interest companies who are VAT registered, now you're not going to win or kind of lose necessarily by being VAT registered.

So they're not going to, the fact that you're adding an extra 20 percent on your invoice isn't really going to matter to those other VAT registered businesses because they can offset it. Now in terms, there's not really any benefit to it because unless you happen to be doing something which they call zero rated sales, so this is a specific type of sales which are generating but there's no applicable VAT to them.

So being VAT registered essentially you put VAT on your invoices and then you offset the VAT. that comes through on your purchasing side of it. And then any residual amount that's either O2 or from HMRC, you have to sort out with them every three months and that kind of thing. So there, You, you don't want to rush into, unless there's an obvious benefit to it, you don't want to rush into being back registered.

You know, it's the, the threshold, well it's 85, 000 at the moment, it's going up to 90, 000. HMO, uh, the government announced that in the last budget.

[00:13:41] Holly Christie: Now that's, Turnover, isn't it? So you can't say, well, my turnover was 120, but my income from it, once I paid everything else was 90. So your business turns over that amount of money that goes into your account.

[00:13:55] Claire Butler: It's literally your sales that you make and it's in a 12 month period and where people get it very wrong and end up getting themselves in a very sticky situation and later discovering that maybe they should, they, they should have legally registered for VAT 12 18, sometimes they've even seen it 48 months ago, um, is that they don't realise that the VAT registration threshold, so that 85, it's becoming, is a 12 month rolling period.

So it's not standalone connected to your financial year. So a lot of people will look at it and go, well, from April to March, I've only done, you know, 82, 000. But if you look at it in detail, like March to the end of Feb, they went over that threshold. And that's when they should registered. So you need to be constantly looking at it and monitoring it.

And most software, um, I know certainly all of the ones that I use these days, if you go into the reporting section, you go to your profit and loss, you can run it across 12 months. And it's something everyone should be doing at least once a month. You know, as a guide with the 85, 000, obviously, if you're regularly seeing you kind of hitting about 7, 500 in sales, You should probably be that registered.

That's the guiding rule.

[00:15:04] Holly Christie: I like, I use free agent software and I like that I just log in and it's all there. There's just this constant reporting there and um, people know that I have to have like very colourful stuff to kind of keep engaged with this and I know that lots of accountants like Xero and QuickBooks and things like me but for me it's like that colour thing with free agent and just the layout is great and actually I'm I'm not an advert for free agent, but it does come free with quite a lot of accounts.

It comes free with NatWest accounts. So if you've not got any, uh, not got any accountancy software and you wanted to give something a try, that might be worth looking at as well. Let's stop it there and say thank you so much for joining us because I don't want to overwhelm everyone, you know, want to just to cover those key areas.

Yeah. I want people with numbers, but I am going to say, can you give us a finance tip of the, or. to which you think will really help small business owners?

[00:15:58] Claire Butler: Yeah, I think one of the most important things is, as painful as it sounds sometimes, organization is key. And if you're not, we just spoke about free agent, but if you're not using cloud software, Why not?

You know, it's so accessible, it's not overly expensive, you know, some of it's free, your agent is actually free with some bank accounts, and even other versions like QuickBooks, you know, it's quite low cost every month, you're talking about 8 a month, roundabout there, including VAT, so that would be a great, um, hidden, you know, just get started.

If you start it now, your life is going to become so much easier. Get a bit of help and advice and support from a tax specialist. That doesn't necessarily mean you need to use an accountant ongoing if you feel you're not at that level yet, but doing it alone is risky business. Um, keep an eye on your business expenditure.

Review it monthly. Review it annually. What are you spending your money on? Are you spending too much money on software subscriptions? Are you looking at those kind of things? You know, where are you losing your money? And if, again, not to hark on the same point, but if you are using software, you can run comparatives.

So you can look at it side by side and say, okay, hang on a minute. This last year, this month, I spent this much on software. This year, I've tripled it. You know, so it's immediately, the numbers are there on your face. They don't lie and they will tell you where you're overspending or again, underspending.

So for example, if you're not spending enough on marketing, you're not driving your sales. So it's a really useful tool to use.

[00:17:26] Holly Christie: And it's interesting because I think so many people, uh, set up with really small marketing budgets and think, oh, I'll just use social media and I can do that myself. And actually your marketing budget should be one of your biggest expenses because, you know, without the marketing, without the people coming in, you haven't got those sales.

[00:17:43] Claire Butler: Absolutely.

[00:17:44] Holly Christie: I am very big at looking at sales. subscriptions and the websites that I build, I like to use some really robust software, which means a lot of it's all bundled in there in that one lifetime license that gets regularly updated. So, um, it's always kind of really on point software, but it reduces those number of subscriptions as well.

But I do keep a spreadsheet of what subscriptions I have, what they're for, when they're due to renew, how much they cost and regularly review those as well. Definitely recommend that people do that as well. So Claire, tell us where we can find you online.

[00:18:19] Claire Butler: Online. I have a, an absolutely glorious website. So you can find me

at www.

cbaccounting. co. uk and I will be working on my LinkedIn profile at the weekend.

[00:18:32] Holly Christie: We've just been to a LinkedIn focus conference. It was absolutely amazing. So if you suddenly see our profiles skyrocket, you know why. Um, and you're Claire Butler on LinkedIn, and anyone who's LinkedIn with me can search her through my contact, she'll come up with that.

Um, you are also on Facebook as well, CB

[00:18:51] Claire Butler: Accounting.

[00:18:51] Holly Christie: UK,

[00:18:52] Claire Butler: yep, I'm there. Um, often I do long rambling posts, so you'll have to excuse those, but there's lots of vital information in them, so please do read.

[00:19:00] Holly Christie: Absolutely, and I would say as well, you'll see on Claire's website, Claire offers lots of different levels of packages for small businesses.

You also do empowerment hours, don't you?

[00:19:11] Claire Butler: I do, I do, yeah. It's, I always find the, often people just get a bit lost with their accounts, and especially setting up software, or just not understanding expense categories are actually how the best way to manage it is, and I love that. Training people to do that, you know, that's kind of what I'm about.

So people can jump on, you know, just for an hour here or there, get some advice, get some support. And it just gives you that extra step to manage things a bit better.

[00:19:35] Holly Christie: And the feedback I've had from your empowerment hours is amazing. And that's even from people who don't know that we're friends. So that's great.

That is us. I just want to say a huge thank you to Claire for coming on and a huge thank you to you, my listeners. It has. It's been a journey. I'm going to take some much needed time off. I'll be back with Season 2 on Monday the 22nd of April. So if you get an opportunity, please will you go and rate and review the podcast.

It really helps push it up the Apple charts, get it into the shows you might like. I really, really want to be able to help as many small businesses as possible with this free resource. So please do go and do that. You can also follow the show. If you're not doing that right now, you can press the little three dots, go to follow, and you will see me again on Monday, the 22nd of April.

So until then, have an amazing Easter, and I'll see you in Season 2!

It’s a great podcast Holly, you’ve covered some really useful topics and had fantastic guests. It’s like your topics were written with me in mind…

Natalie Trembecki

Small Business Growth

I’m so excited to have your podcast alongside me as I grow my business. Looking forward to taking action on your steps and learn from someone who knows what they are talking about. Thanks Holly – you’re a star!

LisaJaneYork

Just listened to your first podcast episode and it’s absolutely brilliant! Good work Holly!

Mike Cottam

Brilliant first episode!!

The first episode of “Your Business, Your Way” is a refreshing take on the entrepreneurial journey I needed to hear this morning . I felt reassured hearing Holly emphasise a crucial point: you don’t need to know everything to get started. This approach is a game-changer, especially for those new to the business world, breaking down the barriers of perfection and complete readiness that often hold us back.

What I loved about this first episode of the podcast is its blend of practical advice with an undercurrent of motivation. It reassured me that starting with what I know and learning as I go is not just okay, but a smart way to grow. The podcast feels like a supportive friend, nudging you to take those first steps while keeping the mood light and approachable.

For anyone at the crossroads of starting or scaling a business, this podcast could be the push you need. It’s a promising mix of insights, stories, and encouragement. I’m eager for the next episodes and recommend it to anyone looking to embark on a business venture in a way that’s true to them. It’s an exciting start, and I’m genuinely looking forward to where this podcast will take its listeners next.

wmbaggs

Small Business Growth

I love listening to each new episode of Holly’s podcast. It feels like she has read my mind and understands the challenges I find myself up against when running my business. Her advice and insights are fantastic and I’m looking forward to hearing her future episodes. This is a great resource for any small business owner trying to establish a successful business in the online (and/or offline) world.

Fay Wallis

Feeling inspired

Would definitely recommend this podcast. Aimed at those small business owners, but for someone who has recently started a new role in my company, this definitely motivated me on this cold wet Monday morning to not be afraid of being vulnerable in the workplace and putting myself out there!

Can’t wait for the next episode

izagoo9067

Really Refreshing

Looking forward to the next episode, I’m hooked already. Really easy to listen to and definitely strikes a chord with me. 

MrsH68