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Are You Missing Out on an Immediate Cash Injection?

By Paul Rowbery on 06/10/2015 - 0 Comments

Businesses are continually in a state of flux. Ever changing and evolving to meet their customer expectations, and fighting a continual battle to protect their profit margins. On top of this, many businesses struggle with cash flow giving the business owner a constant worry and leading to a stressful life.

Business owners are typically focused on sales and marketing, ensuring they stay ahead of their competition in terms of finding and implementing the latest marketing technique or the latest systems to attract sales. However they often lack the same focus and enthusiasm when it comes to what is perhaps the quickest and easiest way to improve profitability and cash flow. One immediate way to remedy this is to see if your business is eligible for tax refunds. Many refunds remain unclaimed as business owners are not aware that they can claim. Sometimes, this can amount a significant cash boost. For example, one scheme allows SMEs to claim back every pound spent on R&D projects. This is a government backed initiative which as provided millions in rebates for companies to reinvest in further products and processes. This article sets out one such opportunity and suggests this should be part of an on-going strategy of cost management.

Many Business owners lack the correct level of focus on cost management, cost reduction opportunities, and cost avoidance and yet by making these areas a focus of their attention, many owners could quickly improve their cash position and ultimately improve their profit margins.
Just consider this for a moment…If a company secures a new sale for £300, typically the profit from this order may be around 30% or in other words £90. Now, if we compare that with a saving or cost avoidance, a £300 saving equates to a £300 improvement in the cash position of the business, and quite often, these improvements can be achieved in a shorter time frame than securing new sales.

Take a few minutes to consider the following three areas;
Cost Management - Do you know what you purchased this month? Did you really need to buy as much as you did? Perhaps you scrapped materials in production and had to purchase them again to fulfil a customer order?

All companies have some waste in this area, so spend some time looking into what you spent your money on and monitor the levels of scrap and rework in your business. By doing this you can actually make two savings. You reduce your material costs and improve your production times.

Cost Reduction Opportunities – When is the last time your prices were negotiated with your key suppliers? Do you have point of usage/point of sale agreements in place? Do your suppliers give you rebates linked to volume?
 
At ICON we have many strategies for achieving better purchase prices, improving supplier performance, and reducing your total acquisition costs

Cost Avoidance –
“Only purchase what you need” sounds quite an obvious thing to say however how many businesses still carry too much stock. So consider how you can improve this situation.
We would advocate that Businesses should also consider being tax efficient as a cost avoidance strategy, however the truth is very few actually do. By this we mean make sure you claim any tax relief the company may be entitled to.

A little known opportunity for this is R&D Tax relief. Around 150,000 UK SMEs are eligible however last year only 16,000 made a claim. This means around 90% of SMEs missed out probably because they were not aware they could qualify.

The scheme covers businesses involved in engineering, electronics, pharmaceuticals, biotech and communications systems, as well as more traditional methods of manufacture. The scheme also applies to businesses exploring new products or technologies, or niche markets. How it works is if you have any expenditure on the following areas then you may be able to claim a tax rebate. These areas include:

How Does it Work - Are you eligible for an R&D tax refund?
If you have carried out any of the following activities in the past two years, you may be eligible to a refund;

If you answered yes to one or more of these questions, you could be losing out on a major opportunity to claim an R&D tax refund. Many companies are still unaware they are eligible for such valuable tax refunds. Don’t assume that what you do won’t qualify as R&D. If you would like to know more about how you can claim your costs back for the last two years, then get in touch – the tax saving could amount to tens of £1,000’s. ICON works with R&D Tax Claims Ltd who achieved savings on behalf of their clients, of more than £20million over the last 6 years. An example of the kind of savings that can be achieved is Mini Gears (Stockport) Ltd who were able to secure tax savings of £342,310 over the last 5 years.

Conclusion
The good news in all of this is that in order to dramatically improve the cash flow position in your business, sometimes it only requires a few tweaks internally. If you would like to know more about how we help companies overcome these sorts of challenges please contact your local ICON Advisor for a no-obligation consultation.

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