Franchise Q&A [Bio] Amanda Hilario is joint franchisor of Screen Rescue
A. If you are vat registered and your vat-taxable turnover (excluding vat) is less than £150,000 in the coming year, you may be eligible to join the flat rate vat scheme, which is designed to simplify your vat accounting – reducing the time and effort usually spent on your vat calculations – and can even return money to your bottom line. For franchise businesses newly vat-
Q
What is the flat rate vat scheme and why is it
so beneficial to new franchise owners?
[Bio] Frank Orchard
registered, you can reduce your flat rate by a further 1 per cent in your first year, in addition to the flat rate per cent your industry sector is entitled to. At the highest end of the flat rate scale, accountancy or bookkeeping sectors are entitled to make their vat returns at 14.5 per cent. Repairing vehicles sit at 8.5 per cent and at the opposite end of the flat rate scale are retailing, food, confectionary, tobacco, newspapers and children’s clothing, currently making vat returns at just 4 per cent. Significantly, the difference between the vat percentage charged out and the vat returns made applying your industry flat rate percentage is real money retained
on your bottom line, which improves your profit and margins. So, how does it work? Under the flat rate vat scheme, you charge vat to your customers (output vat) in the usual way and pay vat to your suppliers (input vat) again, in the usual way. For your quarterly vat return, you then add up all the sales you charged standard-rated vat on to your customers for the previous quarter (including exempt sales, reduced-rated sales and zero-rated sales) and, if no capital asset has been purchased at a cost of £2,000 or more including vat in that quarter, you can then apply your industry entitled flat rate per cent to calculate the vat payment due against those sales – and that’s the vat you pay to HM Revenue for that previous quarter. If your franchise business is eligible, you can join the scheme at the beginning of any vat accounting period and can remain in it until your total business income is more than £230,000. For more details visit HM Revenue and Custom’s website.
is head of franchising for UK and Ireland at CeX
Q
I’m afraid that by investing in multiple outlets,
I will be biting off more than I can chew...
A. So, your franchisor has delivered on their promises in providing a sustainable business concept, which is proving to be an excellent medium- to long-term investment. The future looks bright! Your peers, family and friends are showering you with compliments on your business prowess and hard work, and people want to tap into your business acumen. Other franchisees are drawing on your knowledge and hold you in high esteem. One of the quips you hear often is “you were destined to succeed”. You have a healthy bank balance and profitability is evident. Human nature dictates that there is a natural pull towards growing your empire. A single outlet is satisfying, but you have a hunger for more and are leaning towards a second or even third store. Would opening further outlets be the correct decision? Managing multiple sites can be the
secret to achieving your long-term wealth
objectives, but must be approached with the same amount of caution as the first outlet. The key issues to be considered, however, are completely different. You will no longer be hands-on as owner- manager. Delegation and up-skilling of staff to take on more responsibility is an essential ingredient. Can you share your vision and impart skills to ensure customer service levels are maintained and staff are motivated to work for a second tier of leadership and management? Consult with experienced multi-site franchise owners on how to manage increased staff across wider territories. Your franchisor should provide the systems and tools to assist with monitoring the business at arms length from a financial-performance and people-performance perspective. You can rely on technology to assist up to a point, but remember that people need the human touch.
October 2014 |
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