From 6th April 2013, all companies will have to start reporting PAYE information in real time.
The new process, referred to as Real Time Information (RTI), will be mandatory and means SMEs will have to use payroll software to immediately inform HMRC of their employees pay and deductions each time they pay their wages.
The knock-on effect of this is more visibility by HMRC, so meaning companies will be less likely to get away with building up PAYE arrears before any action is taken.
Over the last few years many businesses have used the Crown as quasi-overdraft facilities by delaying payment or agreeing repayment plans once arrears have built up.
HMRC allowed this during the early part of the recession to try and assist ailing businesses. However, we have definitely seen a tightening up in recent months and the new RTI process will no doubt lead to decreasing amounts of flexibility going forward.
With this flex gone from cashflow, many businesses may find they need to look to increase their current funding to cover any cashflow gaps that may emerge.
How to cater for cashflow gaps
With overdraft facilities becoming increasingly difficult to secure without high levels of personal security, SMEs will do well to start looking early for funding alternatives.
One such alternative is invoice finance, which allows businesses to release cash in their biggest asset, unpaid invoices.
Using invoice finance facilities, which include flexible invoice factoring or invoice discounting facilities are reliable and effective ways to bridge this cashflow gap.
What can invoice finance offer?
- It generates more cash than an overdraft – sometimes twice as much
- Less personal security is required meaning there is no need to put up your home as security
- The facility is linked to your sales, not your historic balance sheet and will therefore grow with your business – meaning you don’t have to keep going back to the bank asking for more!
- It is a suitable solution for businesses in a turnaround situation or highly geared
- Financial stability is more certain, as agreements are for a fixed period and are not repayable on demand
- With factoring, you can outsource management of your entire sales ledger saving you both time and costs and helping avoid those difficult calls when chasing customers for payment.
If you’d like to find out more about how invoice finance could assist your cashflow ahead of the PAYE changes in April, why not get in touch with Skipton Business Finance.
You can call our team of experts on 0845 602 9354, email us at info@skiptonbf.co.uk or browse our website for more information.