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The Rise of the Digital Accountant

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The Rise of the Digital Accountant

In October we attended Xerocon London which is Xero’s annual conference in London.

By rights this should be one of the dullest experiences known to man – a conference on a piece of software that does bookkeeping.  It hardly sets the pulse racing.  But it turns out that Xero and it’s ilk are right in the crucible creating the future of technology and work.

In particular Xero is at the cutting edge of machine learning and what that will mean for white collar workers.

Xero is already a semi-automated bookkeeping system because can teach it how you want transactions recorded but the next step will be to get the system to teach itself.  If DeepMind’s Artificial Intelligence took only three days to master the game of Go and beat the world masters how long would it take to master bookkeeping?

Xero is already testing automated bookkeeping, the Ok button on the reconciliation page may eventually disappear.

So much for the bookkeeper, but what about the accountant?  Here too the landscape is changing.  Whilst HMRC’s Making Tax Digital delayed, no-one who really questions whether it will become a reality.  When it does the bookkeeping software will be connected directly to HMRC and potentially the information for the tax return could be taken directly from there without human intervention.

There is a lot of speculation about how far machine learning and integration can take us.  Could accountants become redundant for submitting tax returns and accounts?  Will business owners rely on a version of Amazon Echo or Google Home to get questions answered?  Might machines even give business advice?

There is also a lot of speculation on how long it will take.   Our feeling is that people underestimate the amount of engineering there is to get the whole thing to work.

Perhaps as accountants we should be nervous we are talking about a technology that could wipe out our business.  For some reason we don’t think it will quite work like that.  But if it does so be it.  As our accountants we have a choice to resist this change and cling onto ways of working that are increasingly inefficient or to embrace the change and find ways to add value to our customers.  At Crunchers we are committed to the latter.

Dragon’s Den Success!

Congratulations to our client Adelle Smith and BKD London Ltd whose success on Dragons Den was made public last Sunday on BBC2.

Multi-award winning children’s baking company, BKD  has secured investment from British entrepreneur and businessman Peter Jones CBE assisted by Crunchers in preparing for the bid.

Adelle Smith launched BKD from her kitchen in Shoreditch, London, in May 2015, after reigniting her passion for baking when making her son’s first birthday cake. The business has grown rapidly since then, with revenues of £151,000 in 2017 and over 30,000 units being sold.

The brand’s products are now stocked in retailers including John Lewis, Moonpig, Gousto and Arnotts throughout the UK and Ireland.

Adelle pitched to the five dragons, including new investors Jenny Campbell and Tej Lalvani, asking for £80,000 in return for 20% equity in the business. Dragons Peter Jones CBE and Jenny Campbell were both interested and offered the full amount in return for 35% and 30% equity stakes, respectively.  Adelle opted for Jones’ higher 35% offer due to the investments he has made in serveral food businesses, including Levi Roots and for his connections with key UK retailers including Sainsbury’s.

Adelle has been very generous in her acknowledgement of our role saying:

‘Thanks again for all your help, literally couldnt have done it without you.’

Of the investment Adelle Smith says, ‘I’m absolutely ecstatic to have Peter on board and the investment will allow us to massively escalate our growth. We plan to continue expanding within the UK and Ireland, via direct customer sales, retailers and supermarkets, as well as looking into European export opportunities. BKD has had a lot of interest from countries all over the world. We also intend to spend the investment on digital marketing, PR, website and technology improvements and extra machinery.’

Peter Jones CBE, says, “I’m absolutely delighted with my investment in Adelle and her company BKD.  I’m sure that both she and the business will benefit from the explosion in interest in the baking category over the last few years. I’ve already tried out the kits with my own family and we had great fun sharing the experience so I’m confident about the company’s future.”



Intoducing Vivienne Johnson

I am originally from New Zealand, a country which I adore and am lucky enough to travel back to regularly to see family and friends. Having been educated there and spent my formative years in New Zealand, I moved to the UK with my now husband in 2006 to work and travel.  Fast forward 11 years and we have now acquired a house, some goldfish and two beautiful young children, William and Lucy.
From a career perspective, following university I have worked in a variety of roles within client services in the Financial sector in New Zealand and in the UK. Once my youngest child Lucy came on the scene I took a career break and got involved in the world of nurseries, school playgrounds, PTA’s and the occasional school cake sale.
I love to travel and have been lucky to venture to many parts of the world. I also love food and cooking, especially sharing it with family and friends. 
So after a few years off work I have decided to plunge back into the world of work.  While working for large corporations I often felt that they were rather impersonal and you were but a number in a massive business. The ability to make change was rather restrictive and the variety of work very limited.   What really attracted me to accountancy and the Crunchers ethos is the ability to support small businesses and help them grow in their ventures.  I believe that small businesses are the backbone of the community and I hope that I can support and nurture your business in order for it to thrive.
I am looking forward to working with you.

Canvases – creating a Business Model that works

If your business is struggling, you might say you have not found a business model that works.  And even if a business is working, it is well worth understanding one’s business model because it can help to focus resources.

Wikipedia defines them thus: A business model describes the rationale of how an organisation creates, delivers and captures value.

In practice a business model ties together a conceptual framework (who your customers are, what they are looking for, what you will provide them with, how you’ll provide it) with some financials (cost structure and revenue streams).  In essence it is a planning tools and as with much planning the value comes from the clarity of action that emerges in the process. There are many different ways to approach defining your business model but the tool we like most of all here at Crunchers is something called a Canvas.

A canvas is a way to put the business model on a one page document and it has the advantage of making something that could be very complex relatively simple.  Obviously it will not have the rigour of a full business plan but it is a way to rough something out quickly, like sketching the house you are building vs doing architect’s drawings.

What is great is that it allows you to clarify some basics quickly that can massively help in focusing action.

There are different types of canvases that we can use each with slighly different sections to complete but our favourite is the Lean Canvas, developed by a business coach Ash Maurya.  As you can see above the canvas consists of the following sections to complete:
  • Customer Segements
  • Problem (the customer has)
  • Solution (the business is providing)
  • Unique Value Proposition
  • Unfair Advantage
  • Channels
  • Key Metrics
  • Revenue Streams
  • Cost Structure
As Ash Maurya says in his excellent video coaching you through the Lean Canvas:, this process can be done in 20 minutes and he advises do one quickly because the point is not have a perfect business model but to get to one before your resources run out.

We find this tool so useful we have built it into our Improving the Numbers software GoalDriver.

Company Director Responsibilities

Many of us in small business have signed up for being Company Directors.  It would be interesting to know how many of us found out our legal responsibilities before taking on the role.  I’m prepared to wager that it is a small percentage.

In practice this lack of knowledge is rarely a major problem, but it does crop up and our sense is that it lurks as an answered question in many Company Director’s minds.  Therefore we attempt to answer the question – ‘What are my responsibilities as Company Director?’.

The fundamental duties of Directors are set out in the Companies Act 2006 and are set out below:

1.  Promote the long-term success of the company
Top of the list is a responsibility to act in the interests of the company’s long term success.  This could be against the interest of the majority shareholder or the employees or of other directors.  The success of the company is measured by increase in value over the long term and therefore will be in the interests of the shareholders over the long term, but not necessarily the short term.

2.  Act according to the company’s constitution
All companies are governed by a constitution set out in the Memorandum and Articles of Association.  This is a set of rules that everyone in the company must play by.  So what this requirement means is to know the rules and abide by them.  In small business where the Directors and Shareholders are the same people there is little likelihood of dispute because rules were not followed but occasionally it comes up in transactions with tax consequences eg transfer of shares and HMRC may dispute transactions that are not backed up by the correct minutes etc.

The specifics of each company’s constitution will vary but there are not many that do not include the following:
  • Maintaining records of Directors, Shareholders, Members, Board Meeting Minutes, Resolutions
  • Maintaining statutory records at Companies House (submitting the annual Confirmation Statement and other ad hoc filings)
  • Keeping accurate accounting records
  • Paying Corporation Tax and other liabilities by given deadlines
  • Submitting accurate accounts to Companies House
  • Providing shareholders with Annual Accounts
3.  Exercise reasonable skill, care and diligence
This is not to say Directors must be expert in their duties and running the company, it simply means that they must take reasonable care to get it right.  For example Directors are not required to know Company Law or to accounting standards when compiling statutory accounts but they are expected to employ appropriately qualified people and provide some level of scrutiny of the work done.

4.  Make decisions independently
Obviously this is much more of a problem in the corporate world where constituents such as employees and shareholders may be lobbying for conflicting actions.  The idea here is that company directors should be impartial in evaluating what is in the long-term interests of the company.

5.  Avoid conflicts of interest, decline inducements from Third Parties and declare personal interest
Directors are required to avoid situations where their decision making is compromised by self-interest and specifically to decline offers of gifts or other benefits from Third Parties.  Finally they if they do find themselves with a personal interest in a proposed transaction they are required to declare that interest.

6.  Special responsibilities in the case of insolvency
If a company’s assets are smaller than its liabilities it is said to be insolvent.  In this situation special duties start to become important if Directors wish to avoid being personally responsible for debts.  This is a complex area and one where specialist advice should be taken but a basic concept to understand is that the decision to continue trading in this circumstance can mean Directors end up personally liable for others losses.  In other words, in this circumstance there are responsibilities to creditors (those to whom the company owes money) as well as the company itself.

As well as Company Law, Directors may have some personal responsibilities for business decisions that are illegal – for example under the Health and Safety at Work Act.   Whilst these are too varied to go into in effect it is important that Company Directors comply with the following areas of legislation:
  • Employment
  • Health and Safety
  • Insurance
  • Tax

Everything you ever wanted to know about P11d

It’s tempting to leave it there because we are not sure anyone ever wanted to know anything about P11d –  surely one of the least comprehensible and most mind numbing pieces of reporting required for running a company.

The trouble is that there are really quite large penalties attached to failing to do them – £100/month.  And so with the 6th July deadline approaching we give you our guide and hopefully answer these questions:
  • What is a P11d?
  • Do I need to do a P11d?
  • What do I need to include on a P11d?
  • What is Section 336 form?
  • How can P11d easier?
  • What benefits escape tax on P11d?
What are P11ds?
If P11ds are painful to deal with, the business community perhaps has itself to blame because they close a loop-hole of enjoying perks exploited by companies for many years.

The basic concept to understand is that an employer can include whatever it likes as part of its remuneration package for Directors and employees.  Obviously the most important part will be money, but it can include anything else – gym membership, company car, trips to Disneyland, the only limit is the imagination of the HR department.

Whatever these costs are become tax deductible for Corporation Tax because they are part of the cost of employment which is a cost of the business.  At the same time they do not appear in PAYE earnings so they did not (until P11d) attract Income Tax or National Insurance for the employee or Director that benefited.  What that meant was that, until P11ds, employees and particularly Directors had found a way to earn money without getting taxed.

So in a nutshell P11ds are a way to apply PAYE and NI to benefits to employees and Directors so that they pay tax the same as if they had received the cash equivalent.

Do I need to do a P11d?
The basic principle here is that you do if you have received a non-cash benefit of being a Director or employee.  The problem is that there is no exhaustive list of what might constitute a benefit because as we said earlier the only limit to possibilities is the creativity of employers.

There are also some benefits that do not require reporting because the government is happy for them to be offered to employees tax free (eg childcare).  Finally to make matters worse there are a few expenses that require reporting but do not require tax to be paid.

So the complete answer to the question is that a P11d is required if you have no benefits or expenses that require reporting and the only way to establish that is to go through all your benefits and expenses and see if any of them need to be reported on the P11d.

If that sounds arduous we must be thankful that since 2016-17 tax year the amount of expenses that have no benefit but must be reported has reduced dramatically because we only need to report on benefits / expenses if part of them resulted in a taxable benefit to the employee/ Director.

What do I need to include on the P11d?
You will have to report all of these benefits or re-imbursed expenses if they result in a taxable benefit to the employee or Director.

Unfortunately each type of expense or benefit has it’s own rules about what constitutes a benefit that must be reported.  The only way to know is to identify the areas where you might need to report and then refer to HMRC’s guidance on that specific area.  We are given this A-Z of areas by HMRC:

Typically you are required then to report the type of benefit and the cash equivalent involved.

What is Section 336 form?
If this was not confusing enough, P11d information eventually needs to appear on a Director’s Self Assessment.  Here we hit a problem because the Self Assessment asks us to total all the employment benefits and expenses paid to the employee in order to pay personal Income Tax.  However a few of these expenses may not have been of benefit to the Director/ employee.

Essentially the Section 336 form lets the Self Assessment department of HMRC know that some of the expenses reported on the P11d do not result in a taxable income.

A Section 336 form should be sent if there are expenses or benefits on the P11d being reported that do not result in taxable income.

How can I make P11d easier?
Probably the best way to make P11d easier is to avoid giving Directors and employees any benefits.  At Crunchers we have a once a year conversation with clients to establish if there is anything to report and if so what sums there are to report.

What benefits escape tax on P11d?
As small number of benefits escape Income Tax and National Insurance essentially because the government wishes to promote their use.  We have listed the most important ones here:
  • Childcare – up to a £55/wk limit, with Ofsted registered providers and when offered to all employees
  • Bicycle expenses – as long the the scheme is open to all employees
  • Death in Service payments –  but not life insurance
  • Environmentally friendly cars – depending on the environmental credentials some car benefit is escaped
  • Mobile phones where the contract is in the company name (one per employee)

EPOSNow vs Vend vs Shopify

We are edging ever closer to an integrated world and for retailers one obvious link to make is between the EPOS system and the bookkeeping.

In this blog we compare the three front runners in Xero / EPOS integration – EPOSNow, Shopify and Vend.  With all these systems a lot depends on the hardware and the level of functionality.  We have based our comparison on the following scenario:  A delicatessen, 4 employees, one register, 700 items of stock, stock management, bar code scanner, Xero integration and support.


The basic idea with EPOSNow is that you make an upfront purchase of the till, the touch screen, card machine and thereafter you only pay for Xero integration and support if you want them.  In our experience both usually are required/ desirable and as extras  these cost £25/month each.

The hardware and the software is robust but perhaps not the most elegant and the upfront cost of touch screen register, till and card machine is £1,199.

Functionality includes stock management, reporting, and a healthy roster of add-ons.  We like the Xero integration which includes posting payments to the correct bank accounts / cash.  What it will not do is deal with Ecommerce, nor will it keep customer details.

Visit the Website


In the Vend model hardware is not included and the product is the software which for our example delicatessen costs £79/month or £708 if you pay annually.  The software works on PC or Mac and there is an iPad app however there is no Android app and they do not recommend to use with an Android tablet.  The cost of getting a till, receipt printer and other hardware is likely to be around £300.

Sales and payment integration with Xero is excellent.  It supports mobile and contactless payments which is great and provides an online store and order management.  Customer support is included as standard.

Visit the Website


The Shopify model is also on a subscription basis with our delicatessen would need the £79/month version.  In a twist on the charging, Shopify integrates card payments into the system taking 2.6% of transaction costs.  The software is supported on a browser or iPad/ iPhone and includes the same functionality of Vend for online store and customer database.

We have had more problems with the Xero integration mainly in the area of cash payments but otherwise it works well.  Customer support again is included as standard.

Where Shopify really excels is in its online store.  In fact there is another way to look at the subscription which is to see it as an incredible eCommerce platform that also allows for EPOS with integrations into Facebook, Amazon, Pinterest and other platforms.  When seen this way the cost is extremely good value.

Visit the Website


Clients tend to go with EPOSNow on price but we have found that with the Xero integration  and customer support which they find is essential, the costs are similar.  In terms of interface and reporting there is no doubt much more work and love have gone into the Shopify and Vend systems.

As for choosing for these two, at the level of our delicatessen there really is not much to split them apart but at the next level if another shop were to be added it starts to look like Vend pulls ahead, giving much more functionality around multiple locations and inventory.

Budget Report

As the dust settles on the last Spring Budget, we look at the key changes for small business and some reminders of changes in the 2016 Budget that take effect from 1st April.

Business Tax
Corporation Tax – Corporation Tax has reduced to 19% from 1st April 2017.

VAT – VAT registration threshold increases to £85,000 from today and the deregistration threshold is now £83,000.

National Insurance – this provided created the biggest waves on budget day with the Chancellor announcing increases of Class 4 NICs for Sole Traders.  The Chancellor has since backed down on these.  However his reasoning is that whilst it is the right thing to do, the Government belatedly wishes to respect the commitment made in the manifesto not to do this.  One must therefore assume this change is pencilled in for after the next election.

Business Rates – business rates has become a hot topic for business tax with many ‘bricks and mortar’ businesses complaining that they seem to be singled out for punishment.  The Chancellor announced a cap on rates rises to £50/month for small businesses losing their rate relief with special rates relief introduced for pubs.

National Living Wage – this now rises to £7.50/hr from April.

Making Tax Digital – Plans for quarterly reporting and paying taxes has been postponed to April 2019 for businesses with turnover less than the VAT threshold (£85k), however for the April 2018 remains in place for sole trader businesses with turnover exceeding the VAT threshold.

Personal Tax
Personal Allowance – this was increased as predicted to £11,500

Tax Bands – The Basic Rate band has been increased to £33,500 which when combined with the personal allowance of £11,500 means Higher Rate tax now kicks in at £45,000.

Dividends – there was bad news for company shareholders.  The dividend allowance will be falling to £2,000 from April 2018.  This year it remains at £5,000.

ISAs – the ISA limit increased to £20,000 per year to encourage saving.

Trading Income Allowance – anyone making less than £1,000 profit from trading will no longer be required to pay tax on that income or even declare it.

Property Income Allowance – similarly if profit from renting property is less than £1,000 in the year there will be no requirement to pay or declare this income.

Capital Gains Tax – the Capital Gains Tax Annual Exempt Amount has increased to £11,300.

Rental Income
Interest Deductions – a big change comes into effect for property income with deductions for mortgage interest being replaced over the next 4 years by a ‘Tax Reducer’.  Instead of subtracting the amount of interest from the rent, the Tax Reducer works thus: first profit is calculated on the rental income without deducting interest, then a reduction is made for the interest paid capped at 20% of interest paid.

As previously indicated the change does not come into full force immediately by is being phased in between this year and 2020-21 tax year.  It also does not apply to holiday lettings or commercial property.

The Economy
The Government is bullish on growth for this year with forecasts up from 1.4% to 2.0%.  Growth is also forecast for the next four years albeit slightly depressed figures from the 2016 budget.

This was not a budget to send shock waves through the country.  However we do note that the Government seems to be steadily chipping away at tax savings for small business owners.  Perhaps this is inevitable with the rise of the gig economy where the difference between a zero hours contract salary and freelance work is getting blurred.  The impression is that the Government is concerned to see tax receipts disappearing as more and more people end up self employed or incorporating a small business.  We suspect many small business owners would ask why more focus is not put on our large corporate cousins.

Accountability and drift

Last month we recommended reading Gino Wickman’s excellent book Traction.  At the very end is an implementation plan for the methodology of the book and right at the top of the list is to establish who is accountable for what in your business.

It got us thinking on the importance of accountability in business and how this is one area where small business suffers greatly compared to the corporate world.

The word accountable is defined thus by Wikipedia: required or expected to justify actions or decisions; responsible”

In other words being accountable means having to explain why something did or did not get done.  It sounds insignificant.  Providing an explanation is not going to affect the outcome after the event so why does it matter?  However it does matter greatly because ultimately human beings are social animals and the expectation of others is a massively powerful motivation.

There is great discomfort in having to explain why something you promised did not happen.  And therefore motivation to fulfil on promises is greatly increased.

Whilst being held to account can be uncomfortable, it is also highly valuable for personal growth.  When we fail to meet targets we start by having to justify ourselves.  There is an opportunity for us to deal with the things that have stopped us from succeeding and therefore increase our capacities.

In corporate structures, the worker must account for their actions to the manager, the manager to the Directors, the Directors to the shareholders.  But in small business the worker, the manager, the director and the shareholder are often the same person and as a result there is no-one to have to justify actions to.

We are also assuming that results have been promised, but again in small business this is quite uncommon.  The business owner thinks they can hold the results they are producing in their head which tends to mean that targets are woolly if they exist at all.

All too often the result is drift.

With this in mind we have 4 recommendations to increase accountability in your business.

Create a written plan with targets
If your targets and actions are written down, someone else can pick them up and hold you accountable for them.  GoalDriver is a brilliant tool for this.

Recruit a non-Executive board for your business
The idea here is to have people that will hold you to account.  Ideally they will have business acumen and experience to help you.  Pay people if you can afford to but even recruiting family and friends as willing volunteers to support you in this function will improve your accountability.

Hold quarterly board meetings
Empower your board to hold you accountable on a regular basis for achieving your plan.  Quarterly meetings is our recommended rhythm for these meetings.  Crunchers Drive Meetings have a similar function.

Find a business buddy and have buddy calls
Work with a buddy to mutually hold each other to account for your targets and actions.  Our recommendation here is a weekly call to align on actions for the week and keep the ball rolling between quarterly board meetings.



Building the car as you drive

Here at Crunchers we’ve been batting about business analogies and I am proud to coin a new one.

We are fond of saying that building a business is like building a vehicle.  It’s like putting together a lot of different moving parts so that it takes you to your destination – retiring at 45, being knighted for services to industry etc.

But actually it is more challenging than that.  It would be so much easier if that machine were sitting motionless in some garage as we worked on it, but it isn’t.  It’s travelling down the road with us at the wheel.   So it’s more like building the car as you drive it.  I’ve been trying to track down footage I have in my head of a woman riding a unicycle that she turns into a bicycle as she is riding.  Sadly I can’t find it but I am sure your imagination will do the job.

In fact there is a design phrase here that is directly related –  ‘Iterative design’.  It has become the norm for web applications.   The idea is that you come up with an application concept, prototype it and then get people to start using it in order to feed back into the next phase of design.

Business is not so different.  You have an idea, you put together some initial collateral to take it to market (product, marketing materials etc), you go to market, you learn from the experience and feed that back into your development.

And seeing as we have started down this road of metaphor we are going to give you our tips for arriving at your destination intact having turned your go-cart into a gleaming sports car.

1.  Don’t wait for it to be perfect to get moving.  The whole idea is that you learn from getting the car travelling along the road.

2.  Don’t drive too fast.  If you are constantly avoiding potholes and dealing with on-coming traffic there will be no time to do the all important job of upgrading the vehicle.  If you are in the lucky position of rapid growth or rapid investment watch out the wheels don’t fall off!

3.  Automate as much as possible.  Time is of the essence.  Get as much as possible into simple repeatable processes.  You need your hands free to do this rebuilding work.

4.  Keep building. After the effort of getting your vehicle moving, the prospect of redesigning, replacing moving parts can be paralysing.  You may end up cruising comfortably at 15mph.

5.  Observe and reflect.  Take time to see where you need to upgrade and what you can leave for the time being.  You can’t do everything at once.

6.  Don’t forget it needs to make money.  A business may have many purposes but the one common to them all is making money.  Don’t forget to check it makes money every time you evaluate.

7.  Keep in touch with the final machine you want to make.  It’s highly unlikely you can build it all in one go so it’s important to keep in touch with the vision that originally inspired you and keep working towards it.