Money matters

Apps can take the stress out of everyday admin tasks, freeing up more of your time for billable work

It’s always important to keep on top of your business’ finances, but with busy work and home lives that is not always an easy task. However, there are several things that plumbing and heating installers can do to better manage their finances – from good communication with customers to making use of technology to maintain a proactive approach to cash flow.

Finance apps

Managing finances does not always come easily, so investing in a smart app could be the answer if you are struggling to keep up with income and expenses, and manage cash flow. Job management software can help you keep track of finances as well as automate administrative tasks with ease.

“Apps are transforming how engineers manage their workload, streamline processes and improve customer satisfaction,” says James Chillman, UK country manager for the job management software, Fergus. “The Fergus app enables you to take payments and manage your entire business on the go. You can efficiently handle invoicing, expenses and payroll, saving time and reducing administrative burdens. You can also integrate the software with your job management tools, so everything runs seamlessly while you get more important things done.”

Installers could be overlooking small business expenses, not realising how these little costs can soon add up. For example, vehicle maintenance, equipment wear and tear and even the added cost of acquiring new customers can significantly impact a business’ bottom line if not closely monitored.

“Another often-overlooked area is the time spent on ‘non-billable’ activities, such as travel or administrative tasks,” explains Chillman. “Using job management software can help track these expenses automatically, providing a clearer picture of your actual profits.”

Finance apps can be useful for managing workloads and cashflow

Recovering debt

For businesses in the unfortunate position of dealing with customers who refuse to pay, communication is crucial. You need to set out clear expectations of when payments should be made, as well as send formal reminders. If this fails, then a letter of demand is often effective.

“For persistent non-payment, consider using a debt collection agency or taking legal action as a last resort,” advises Chillman. “It’s also beneficial to use software that sends automated payment reminders to customers, helping to reduce the instances of late or missed payments.”

Pension funds

Although retirement may seem like a long way off, ensuring that your golden years are financially secure is essential. However, according to research by IronmongeryDirect, one in eight (13%) tradespeople approaching retirement age (55-64s) don’t have any financial preparations for retirement.

For those of you without a pension in place or savings for your retirement years, it’s never too late to start saving. Any contributions you make to a pension will receive tax relief, based on the rate of income tax that you pay. This can help to reduce the amount of tax you pay and increase your pension pot.

However, according to Moneyhelper, depending on how your pension scheme works, if you don’t pay tax, you might not get tax relief. Equally, you might have to claim extra tax relief not claimed by your scheme.

Tax relief on pension contributions can be accessed in two ways – at source and net pay. If you are contributing to a workplace pension the employer chooses which method is used. However, for personal pensions, relief at source is the only method that can be used. People with personal pensions may be able to claim more back through their tax return or direct from HMRC if they pay above the basic rate of 20%.

Workplace schemes

Workplace pension schemes deduct money directly from wages. Although it is possible to opt out of workplace schemes, they are well worth joining, particularly if you are eligible for automatic enrolment, as employers will also have to make contributions to the scheme. However, it is still advisable to set up a private pension or some other kind of structured savings, in addition to a workplace pension.

Anyone over the age of 22 and under state pension age, who is not already in a workplace pension scheme and earns over £10,000 working in the UK, is eligible for automatic enrolment. A minimum of 8% of an individual’s total earnings, split with the employer, will be invested into a pension.

In addition to a pension at retirement age, occupational pension schemes offer other benefits. Some schemes include life insurance, which pays a lump sum or pension to dependants in the event of the pension holder’s death if they are still employed at the time; a pension payout if an individual is forced to retire early due to ill health; pensions for wife, husband, civil partner and other dependants when the pension holder dies.

Employees should get information about any workplace scheme they are entitled to join within two months of starting work. If this doesn’t happen, contact the HR department.

It’s important to understand which pension is right for you. There are many free resources to help, such as MoneyHelper, which is provided by the Money and Pensions Service.

Self-employed savings

According to a report by the IPSE, 67% of self-employed people are seriously concerned about saving for later life and just 31% are paying into a pension. The report also found that financial concerns are the main barrier to saving for most self-employed people, with 37% of those asked why they weren’t paying into a pension scheme saying it was because they couldn’t afford to. A further 17% said that they had other financial priorities and 16% admitted that they stopped contributing to a pension when they moved into self-employment.

People who are self-employed don’t have the luxury of employer contributions and will have to choose a pension scheme for themselves, which can be difficult as their income typically fluctuates. However, self-employed people will receive a State Pension, based on National Insurance contributions, and they will receive other tax breaks, including tax relief on contributions. So, for basic-rate taxpayers, for every £100 paid into a pension, the government adds £25. For those paying the higher tax rate of 40% in England, Wales or Northern Ireland, a further £25 can be claimed back for every £100 paid into a pension. In Scotland, self-employed people can claim an extra £1.58 for every £100 paid, if they pay tax at the Scottish Intermediate Rate of 21%, and a further £26.58 if enough tax is paid at the Scottish Higher Rate of 41%. Self-employed people who have set up as a limited company may also be able to contribute to their pension through their business.

Irrespective of age, preparing for retirement as early as possible is the key to ensuring peace of mind about your future. By taking advantage of workplace pensions, as well as saving privately, engineers will be in the best possible position to enjoy their retirement.

For more information and advice, visit: www.ironmongerydirect.co.uk/ blog/tradey-retirements

For hints and tips and a free trial of Fergus, visit: www.fergus.com

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