Many might wonder: what is a small business? Small business is defined as a business structure with less than 50 employees and with an annual turnover of less than £10.2 million. So if you are starting a new small business, you may want to start thinking about the kind of taxes you need to pay.

For those who have been running a small business for some time, check if you’re updated with the latest small business taxes. Whether you are starting out or have been in a small business for some time, it’s time to think of ways to reduce your taxable income in order to maximise your profit margin. In this article, we will share valuable tips to help you reduce your small business’s taxable income.

What Is Considered As Taxable Income?

Before we begin, let’s look at what income is considered taxable. Some business owners often mix up taxable income with non-taxable income. \

Taxable income is a tax that you pay on your income. But not all income is taxable. Certain incomes are taxable, and some are not. Income that is not taxable is usually considered non-taxable, tax-exempted or tax-free.

Here is a list of income that is considered as taxable:

1. Business profits: if you are currently a sole trader, the business profits will be taxed once it exceeds the personal allowance of £12,570. For limited companies, you will need to pay corporation tax for business profits you’ve earned.
2. Dividends: if you are a company director of a limited company, the first £2,000 dividend payment you take from your company is tax-free. But if you pay yourself more than £2,000, you will pay tax.
3. State Benefits: Contribution-based Employment and Support allowance.
4. Government grants
5. Interest in savings: this refers to the money you’ve accumulated after saving a certain amount in your bank account.

What Are Small Business Taxes I Need to Pay?

Running a business can be quite stressful with the amount of paperwork and taxes to look after. But you don’t have to stress over it if you know the type of small taxes you need to pay. Here are the small business taxes for you to take note of:

Corporation tax

This applies to limited companies, and not sole traders or partnerships. The current corporation tax is set at 19%. This will be calculated after salaries and other expenses have been paid, but before dividends are being drawn out.

Value-added tax (VAT)

VAT is a tax that is normally added to the sale price of any goods and services sold to the customers. The standard VAT rate is 20%. A reduced rate of 5% VAT applies to children’s car seats and energy. If your company is VAT-registered, you will need to charge your customers VAT when they order goods and services from you. You are required to register for VAT if your company’s annual turnover exceeds the VAT threshold of £85,000.

Business Rates

Most small businesses operate from an office, shop or warehouse. If your company operates from these premises, it is likely you’ll be charged a business rate on your property.

For e-commerce businesses, it is common for business owners to run their small businesses from their homes due to economic reasons. For such cases, if you do not have to pay business rates. However, if you employ staff to come and work at your home, you will be charged a business rate on your property, as this will be considered as a business property. Likewise, if you invite a customer to your home to view your goods and services and they purchase the goods from you, you will be charged too.

Dividend Tax

The first £2,000 dividend tax that you received as a company’s shareholder is tax-free. But if you receive more than £2,000, you will need to pay dividend tax. There are different rates for your dividend tax. The rate you pay will depend on your income tax band. The higher you receive, the more you pay. Here are the individual taxpayer’s rates:

Basic taxpayer’s rate – 7.5%

Higher taxpayer’s rate – 32.5%

Additional taxpayer’s rate – 38.1%

Income Tax

Normally, business owners do not have to pay income tax for the business itself as it only applies to individuals. But if the wage you received as a business owner exceeds your personal allowances of £12,570, you will be liable to pay income tax. Do bear in mind that your other earnings such as dividends, capital gains, and savings interest will be added to your income and this might result in an increase of your income.

National Insurance

It is important that you pay the employer’s portion of National Insurance Contributions (NIC) if you are employing people for your small business. This contribution is known as secondary Class I NIC and it goes directly to HMRC. The rate that businesses should pay is 13.8% in NIC for employees with earnings of more than £9,568 per year.

Capital Gains Tax

Capital Gains tax refers to anything that you sell for a profit. It can be an asset or a property that you sell to another party. For small business owners, if you sell or give away an asset, shares or your entire company, you will have to pay capital gains tax.

You might ask, how much should I pay? It depends on your individual income tax. Basic rate taxpayers will pay 10% while higher and additional rate taxpayers will pay 20%. If you are selling your company’s premises, the rate will be 18% for basic-rate taxpayers and 28% for higher or additional rate taxpayers.

How Do I Reduce Taxable Income for My Small Business?

Now that we have a better understanding of the small business taxes, it’s time to look at ways to ease this financial burden. Besides, the purpose of reducing taxable income is to expand profit margins and strengthen the company’s overall business, isn’t it?

There are a few ways to reduce taxable income for your small business. One way is to take advantage of the available business tax relief that is applicable to you. Another way is to look at the deductible expenses of your business.

What Are Tax-Deductible Expenses?

Tax-deductible expenses are things that you spend for your business. For instance, you need to buy a fleet of new vans for your business to fulfil your orders, this purchase will be considered as tax-deductible expenses. One of the most common tax-deductible expenses is travelling. Most people travel on business trips, and this will also be considered tax-deductible.

Here are some of the tax-deductible expenses:

• Office costs
• Travel cost for work
• Clothing
• Staff costs
• Marketing
• Stock and raw materials
• Running of premises

However, do bear in mind that tax-deductible expenses must be for business purposes, and not for personal use. It’s very common for business owners to mix up expenses for business purposes with personal use.

Do remember that these expenses must be properly documented so that you can claim your tax back.

Are There Any Business Tax Relief I Can Claim?

The UK government has introduced a number of business tax relief to help small businesses to ease their financial burden. Let’s take a look at some of the business tax relief you might be able to claim:

Business Rates Relief

Business property is taxable, and depending on the location, it can be quite costly. The good news is you do not have to pay a business rate on your property with a rateable value of £12,000 or less. You can apply for small business rate relief provided your property has a rateable value of £15,000 or less, and you must operate your business from this property. For those who are starting out a small business, you may also apply for Enterprise Zone business relief. New business owners can get up to £55,000 a year over five years.

Employment Allowance (National Insurance Relief)

For companies that employ staff and are paying Class 1 employers’ National Insurance, you are entitled to National Insurance relief of up to £4,000 for your business, not each employee. This relief allows you to pay fewer employers’ Class 1 National Insurance contributions when you run your payroll. The relief will end once you reach the £4,000 threshold or end of the tax year, whichever is sooner.

Annual Investment Allowance

Annual Investment Allowance is a capital allowance that allows you to deduct the cost of plant and machinery from your profit when you pay tax. For instance, if you have purchased new computers for your staff and equipment, you are able to claim this relief. Thankfully, the government has extended the £1 million cap on the Annual Investment Allowance until 2022. So this is a good time to claim this relief if you are purchasing new assets for your business.

Business Asset Disposal Relief

Formerly known as Entrepreneurs’ Relief, this reduces the rate of tax paid on your assets when you sell part of or the entire business. It allows you to pay tax at 10% on all gains on qualifying assets. If you are selling part of or the entire business, you need to apply for at least 2 years from the date you sell your business in order to qualify for the relief. You must be a sole trader or business partner. Likewise, you must own the business for at least 2 years.

Summing Up

Knowing the ways to reduce your taxable income will certainly improve your business’s tax efficiency. This is important for many small businesses as the key objective is to maximise your profits. At this point, if you would like to know more about small business tax relief and tax-deductible expenses, come and chat with our experienced accountants today!

E-commerce is on the rise. For entrepreneurs, e-commerce is an exciting and growing industry. People naturally want a slice of the market.

That said, it’s easy to get lost in the crowd, and it’s hard to compete against market leaders like Amazon and Alibaba. An increasing number of business owners are looking to establish themselves by focusing on a niche and generating a strong brand presence.

If you’re just starting or looking to go in a new direction, finding a lucrative niche will make every part of running your e-commerce business easier. When you need to register your e-commerce company, we can help you deal with the administrative paperwork while you focus on growing your company. This article will look at the most lucrative niches to consider.

Benefits of Finding a Niche for Your E-Commerce Business

Before discussing the most lucrative e-commerce niches, it’s worth briefly discussing why you should focus solely on a particular sector, to begin with. After all, it’s counterintuitive to think that reducing your target audience increases your chance of success and profitability.

1. You'll have to compete with fewer companies.

One major benefit of niching down is you reduce the number of competitors. More importantly, you will avoid competing directly with a site like Amazon or Alibaba, which would be very hard to compete against, even if you did have millions of dollars to spend.

When selecting your niche, it’s good to avoid sectors that have a dominant brand. For example, the Dollar Shave Club has established itself as the market leader in the home grooming sector with an e-commerce subscription model. Other companies have imitated this approach, for example, Harry’s.

After growing so quickly, Dollar Shave Club is the biggest company in this niche. It has a competitive advantage. For instance, it can source products for cheaper than you’ll be able to. Equally, it can spend more on marketing than a startup.

Most importantly, though, it is the market leader. If people think subscription razors, Dollar Shave Club probably comes to mind.

So, niche down to reduce the number of competitors. Then, if you want to grow fast, do something to make your business stand out. For example, Dollar Shave Club didn’t just sell razors. They launched a subscription service selling razors. It’s a subtle difference based on a good business plan that enabled the company to grow quickly.

2. It’s easier to design a successful marketing strategy.

If you’re going to set up an e-commerce business, you’ll need a coherent marketing plan. One of the major benefits of niching down is that it’s easier to develop and execute a marketing strategy. Moreover, it can be easier to dominate the search results for your target keywords with a clearly defined marketing strategy.

Take the example of a company in the electronic bikes space. The company Electric Bike Review exclusively does reviews of e-bikes.

That’s a clearly defined marketing strategy. It’s easier for the site owners to devise their content marketing calendar. Picking keywords is relatively straightforward. That saves time and money, which is great.

Site visitors know what type of content to expect, which helps the site build an audience.

Thanks to this simple content marketing strategy, the site is dominating its niche for relevant search terms. According to Ahrefs, it gets around 56k visitors a month. I’m sure the real visitor numbers are at least triple that figure.

The type of benefits that I’m highlighting from a focused content strategy apply to other marketing channels. For example, it’s easier to identify relevant keywords for a Pay Per Click marketing campaign when you have a clear keyword focus and limited options.

3. It’s easier to establish your brand identity.

One of the important issues I’ve been hinting at up to this point is the importance of establishing a strong brand identity. To be successful in business, you need people to turn to your business to solve their problems. For example, many men turn to the Dollar Shave Club if they want a razor.

That’s strong brand identity.

If you’re setting up an e-commerce business, you want to establish that same presence in the mind of your customers. If you’re unable to do this, you’ll struggle with customer churn. That’s a big problem for any business that hopes to grow fast.

You can slowly evolve out of your initial niche once you’ve established your business. The most famous example of a company to take this approach was Amazon. They initially started as an online store selling books. Now, well, they sell a lot more than just books.

4. It makes inventory management easier.

An important logistical benefit of niching down is inventory management. If you sell a limited number of items, you should find it easier to source goods, manage stock and distribution.

If this is your first e-commerce business model, you want to make sourcing products, stock inventory, and distribution straightforward. After all, you don’t know how well your stock will even sell.

Niching down initially allows you to take this approach. As your business grows, like Amazon, you can expand your product line. It’s not obligatory, but it’s an option.

The 5 Most Profitable E-Commerce Niches

We touched on four reasons why niching down makes sense for a budding e-commerce store owner. Now, let’s look at which niches make sense to target. There is plenty of data out there that shows what e-commerce niches are and will continue to be profitable in 2021.

1. Technology and Home Office Equipment

The COVID-19 pandemic meant that many workers moved from the office to their homes. Many had never worked from home before and suddenly needed the technology and home office equipment they usually had access to at work.

Thanks to this shift from the office to the home, remote working technology and home office supplies are in demand. According to one survey, 45% of workers who had to work from home due to COVID-19 purchased home office supplies because of this.

Of course, the immediate effect of the masses of workers who suddenly had to work from home in 2020 was a spike in home office supplies sales.

But there is no sign of remote work going away. One expert suggests that by 2025, 70% of the US workforce will be remote. The need for home office supplies and remote work tech will not only continue but is also likely to increase.

2. Home Gym and Fitness Gear

Offices weren’t the only places to close during the pandemic. Gyms also closed and forced many of us to start working out at home. The money saved on gym memberships was noticeable for many. For others, working out at home was one of the first times they started to enjoy exercise.

An article in the New York Post suggests that gyms will become “a thing of the past” because of the pandemic. Many people are starting to return to the gym, but others are more than happy to continue their home workouts.

The home fitness equipment market saw a dramatic rise in 2020 due to the pandemic, and it’s expected to continue growing. One report suggests that the market will grow to 14.74 billion USD by 2028.

Fitness equipment and gear is a great e-commerce niche as it also has sub-niches - fitness activities from weightlifting to yoga all have a distinct target audience. With an accessible website that includes excellent e-commerce photos, your business could tap into this growing market.

3. DIY and Home Improvement

Some people got fit during the pandemic. Others transformed their homes. The DIY and home improvement market is one of the most lucrative e-commerce niches. One study predicts that the DIY and home improvement retail market will grow by 143.3 billion USD between 2020 and 2024.

DIY and home improvement also have many e-commerce niches that your business can tap into. From DIY woodworking kits to bespoke garden furniture, consumers want all sorts of products and services for their homes.

One recent success story is the French start-up Mano Mano, an e-commerce business selling a range of home improvement and gardening products. It was recently announced that they had raised 335 million USD from investors to expand their business thanks to increased home improvement shopping during the pandemic.

4. Food, Drink, and Cooking

Being forced to stay at home during the pandemic changed the way many of us prepare food. It will come as no surprise that one survey found that 57% of respondents cooked more from scratch during the pandemic than before.

That has been great news for the food, drink, and cooking e-commerce market, which is expected to continue rising in the years to come. One foodie magazine even named e-commerce the ‘trend of the year’.

There are plenty of food, drink, and cooking trends to look out for if you’re thinking of choosing this e-commerce niche. Vegan and vegetarian food, ethical packaging, recipe subscription boxes, and virtual cooking classes are popular with foodies.

5. Entertainment

With movie theatres, live music venues, and sports events closing during the pandemic, many of us had to rely on home entertainment to keep having fun in our spare time.

Home entertainment covers a lot of e-commerce niches in itself. Video games, board games, TV sets, and craft supplies are a few examples of home entertainment products your e-commerce business could specialize in.

Board games, for example, are a growing market, one that is expected to have a value of 30 billion USD by 2026. Nowadays, board games don’t just include your standard Monopoly or Scrabble set. The board games industry is filled with exciting games for all age ranges that more and more consumers are loving.

Conclusion

2020 brought in many changes for e-commerce businesses. Many people turned to buying online rather than in-store. Many budding e-commerce owners saw it as an opportunity to start a business.

If you’re hoping to do that, finding an e-commerce niche is important. Without a niche, you will be competing with companies like Amazon or Alibaba. It will be difficult to acquire customers and establish brand recognition. That is why you should niche down.

This guide discussed the most lucrative e-commerce niches in 2021. You also learned why finding a niche for your e-commerce business is so important.

I hope you’re brimming with ideas after reading. Good luck!

Making sure you have access to finance and good working capital as a small business owner is crucial for future growth. It allows you to invest in the things that will help expand your company - whether that's new premises, buying the latest tools and equipment, expanding your stock or services, or investing in people development.

There are many reasons why opting for a small business loan could be beneficial, offering an important injection of cash when you need it. And the good news is there are lots of different types of business loans for companies registered in the UK.

To help you understand more about the variety of small business loans and which one might be right for you, our partners at specialist SME lender Capify have compiled a list of 13 different types of small business finance.

The list includes everything from short term loans to secured business loans, with some of the key pros and cons of each option that you need to be aware of:

1. Short Term Business Loans

A short-term business loan is a form of finance that offers small businesses access to working capital quickly. Typically, the repayment terms are set over a shorter time frame than other types of loans, but depending on the lender, these could range from one month up to 48 months.

Benefits Of Short-term Business Loans:

• Cash is often paid into a business bank account very quickly once an application is approved, unlocking access to capital as soon as it is needed.
• Can help plug a gap such as a temporary hit to a company's cash flow, providing a boost and helping to ensure operations can carry on running smoothly.  

Disadvantages Of Short-term Business Loans:

• They can often attract relatively high-interest rates compared to other forms of finance. This is usually linked to the shorter repayment periods, so it's important to forecast how long you think you will need the funds for and how soon you think you could pay it back.

2. Long Term Business Loans

In contrast to short term business loans, a long-term business loan is an option that small businesses can opt for if they know that they will need a longer period to repay the money to a lender. Often this is over several years and usually, the repayment amounts are low, ensuring that small business owners can afford them and they won't have too much of a negative impact on monthly cash flow.

Benefits of long-term business loans:

• Allows SMEs to take care of any larger expenses which might need addressing. These could range from a renovation to a big recruitment drive, or money needed to explore new markets.

Disadvantages of long-term business loans:

• They are often harder to qualify for and there can be a lot of hurdles for small businesses to overcome to meet the lending criteria. Strong business credentials are essential and as a general rule of thumb, only businesses that have been in operation for more than three years and can demonstrate strong turnover and growth forecasts are likely to be approved.

3. Government Small Business Loans

Throughout the COVID-19 pandemic, a range of different business loans was created to support SMEs through the worst of the crisis. These included the Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme (BBLS).

Both of these schemes have now closed, but businesses that did use the BBLS can use the Government's Pay As You Grow (PAYG) scheme to help manage their cash flow and have a better chance of getting their growth plans back on track.

The CBILS has also now closed, however, a range of accredited lenders are working through the British Business Bank as part of the Recovery Loan Scheme (RLS), which was launched in its place on 6th April 2021. This is another government loan that businesses can use for help in managing cash flow, to support investment and for growth.

The scheme runs up until 31 December 2021 and is then subject to review. A lender can provide up to £10 million through a term loan, overdraft, invoice finance or asset finance.

Each accredited lender has the discretion to decide whether to take personal guarantees but the RLS gives the lender a government-backed guarantee against the outstanding balance.

4. Secured Business Loans

A secured business loan is a financial product that is linked to company assets. Often, these will be high-value items, such as buildings or land, and these are used as security against the money borrowed to offer some extra reassurance for lenders if the borrower cannot afford to make repayments.

Benefits Of Secured Business Loans

• It is common for the level of finance through a secured business loan to be high, ensuring that a larger cash lump sum is available for SMEs that choose this as their preferred option.
• Longer repayment terms usually go hand-in-hand with this type of finance too.

Disadvantages Of Secured Business Loans

• The risk to small business owners is that they are effectively putting their most valuable business assets at risk if they cannot repay their debts for any reason.
• Companies that don't have many assets or inventory will often have trouble accessing secured business loans, which means new or start-up companies will often need to seek other alternatives.

5. Unsecured Business Loans

When it comes to unsecured business loans, there is no direct link to company assets or inventory, removing some of the risk and fear for SME owners of having to hand over company property or facilities if they fall into financial difficulty.

Benefits Of Unsecured Business Loans

• This type of finance arrangement naturally puts a higher element of risk on the company lending the money, and the trade-off for this is that SMEs will find higher interest rates are usually applied.
• Another tick in the box for unsecured business loans is that they typically have a faster application process than opting for a secured loan.

Disadvantages Of Unsecured Business Loans

• Similar to short term business loans, small businesses that decide an unsecured business loan is right for them will more than likely need to stick to a repayment schedule that is quite short, with higher monthly repayments.

6. Debt Consolidation Business Loans

For some SMEs, a variety of different business loans may have been taken out over the years, and it's not uncommon to have some of these agreements overlapping. From a financial management perspective, this can make it difficult to accurately forecast profit and loss, making it tricky to get a true understanding of your cash flow position.

One type of small business loan that can help with this is a debt consolidation loan. These loans provide a way for businesses to manage their debt in a more organised manner, which is usually achieved by existing business loans being paid off and then one bigger business loan taking its place.

Older business loans are refinanced and this often allows the business to reduce the size of monthly repayments to a level that works for the business. Often the debt consolidation business loan provider negotiates with your existing loan providers to secure a lower interest rate, and this type of agreement can also help towards repairing a poor credit rating in the long term.

Benefits Of Debt Consolidation Business Loans

• Getting a lower interest rate is one of the biggest advantages for small businesses looking to manage several debts

Disadvantages Of Debt Consolidation Business Loans

• Usually has a longer repayment schedule stretching for several years. With this type of business loan, there can also be consequences if a repayment is missed, including fees and the possibility of the agreed interest rate going up.

7. Merchant Cash Advances Or Business Cash Advances

Although the number of lenders offering this type of finance has decreased in recent years, a more unique type of business loan can be found in something called a merchant cash advance.

This is sometimes referred to as a business cash advance, which works through the use of a dedicated debit or credit card terminal installed within the small business borrowing the money.

The card terminal plays a key role and allows repayments to be taken as a proportion of company revenue through each transaction that happens. Retail, leisure and hospitality businesses are often well suited to this type of finance because of the reliance on physical card terminals within the business for customers to use.

There is also the possibility of taking out a merchant cash advance if your business has a poor credit history, but this will depend on each lender and their specific criteria.

Benefits Of Merchant Cash Advances Or Business Cash Advances

• SMEs can pay more of their loan when business is good, and less when things are not as busy, helping to balance cash flow with the natural peaks and troughs of the company.
• There are no fixed monthly instalments.

Disadvantages Of Merchant Cash Advances Or Business Cash Advances

• Better suited to short-term loans and generally have to be repaid within 6 to 9 months

8. Bad Credit Business Loans

It's not uncommon for businesses that have poor credit ratings to need access to finance and often these can be good businesses with solid growth plans. With some lenders, it can be tough for SMEs to get hold of a business loan if they don't have a strong credit history, but in turn, this then means that it becomes really difficult for these companies to ever be able to improve their credit score.

Bad credit business loans are essentially financial products for small businesses that fall into the category of having a poor credit rating. In this scenario, businesses are often forced to look for different lenders - usually beyond the traditional high street banks – who can offer alternative funding solutions. Certain criteria must still be met concerning things like revenue and growth potential, but lenders offering these types of loans can be a vital lifeline for lots of SMEs.

Benefits Of Bad Credit Business Loans

• A bad credit business loan can also offer smaller companies’ fast access to cash, a range of options for securing the loan and provide the opportunity to repair a low credit rating.
• Getting a lower interest rate is one of the biggest advantages for small businesses looking to manage several debts

Disadvantages Of A Bad Credit Loan

• These types of loans do also attract higher interest rates and other fees compared to some of the other types of small business loans mentioned already.
• Usually has a longer repayment schedule stretching for several years. With this type of business loan, there can also be consequences if a repayment is missed, including fees and the possibility of the agreed interest rate going up.

9. Start-up Business Loans

Start-up businesses looking for finance to get off the ground can often run into obstacles due to strict lending criteria and the fact that they haven't had an opportunity to build up a good credit score.

There are still options available, however, and those looking to give fledgling businesses a boost can find small business start-up loans in the UK. These business loans are a financial product designed specifically for firms in the early stages of their development and through the British Business Bank, funds of up to £25,000 can be borrowed.

Benefits Of Start-up Business Loans

• An advantage of a small business loan for a start-up is the fact that business owners do not have to part with any of their companies to raise capital. Often with venture capital or angel investors, a share of a SMEs ownership is negotiated in exchange for the finance.
• Currently, repayment schedules with the British Business Bank are between 1-5 years but the finance is government-backed and also comes with free mentoring.  

Disadvantages Of Start-up Business Loans

• Some things to consider include the fact that it can be difficult to get close to the full amount you want - the average business loan is around £7,200 at the moment. But you can benefit from there being no fees for arranging the loan or paying it back early.

10. Business Lines Of Credit

Another type of small business loan is a business line of credit, which works in a similar way to a credit card. It's a different type of business loan because SMEs are provided with credit up to a certain value, which they can use as and when they need to.

Benefits Of Business Lines Of Credit

• The flexibility of this type of finance is something that works well for lots of small business owners, often acting as an emergency fund should they need it. The company will only pay interest on what is borrowed rather than the full value of the credit limit.
• Often the application process is quite straightforward for this type of finance and the credit line doesn't have to be used - it's there for when the business needs it. Using credit carefully and responsibly can also help improve the credit rating for small businesses.

Disadvantages Of Business Lines Of Credit

• Some potential disadvantages of business lines of credit are higher fees for maintenance and withdrawals, so it is always worth considering how often you would be likely to dip into the credit available to you.

11. Equipment Financing

Almost every business will need equipment to operate, whether that’s IT equipment and software, machinery, furniture or company vehicles – equipment is an important part of everyday business operations. But what happens if your business can’t afford the cost of vital equipment when it’s needed? That’s where equipment financing comes in.

Benefits of equipment financing:

• This kind of loan provides you with finance to purchase equipment, with the cost spread over several years with an agreed-upon repayment schedule. The loan terms can range from lender to lender and generally speaking, no additional assets are needed for securing against the financing deal.
• For smaller businesses, where cash flow is often tight this is a great option, and unlike alternatives such as leasing, as soon as the loan is repaid the business will own the equipment.

Disadvantages of equipment financing:

• Often you are restricted to only purchasing equipment and these kinds of loans can have higher interest rates than more traditional business loans.

12. Working Capital Loans

Working capital finance is a short-to-medium term business loan that will allow you to boost the working capital available to your business – pay wages, purchase stock or plug the cash gap between invoices. Often small businesses use this type of loan to fund a specific operational need as they can rectify cash flow problems quickly, for example, if your business needs to take on more staff during peak trading periods.

Benefits of a working capital loan

• If your business needs cash injection, then working capital loans are a great option, however, they are designed to be a short-term solution and not for big investments or long-term assets as interest rates are likely to be higher.
• The flexibility of this type of finance appeals to a lot of SMEs with few restrictions on what it can be spent on and often no need to secure the loan with collateral – although this will depend on your credit score at the time.

13. Peer-to-peer Loans For Businesses

Peer-to-peer or P2P lending is the fastest-growing type of finance in the UK. Essentially, it involves borrowing from other individuals and is often done through an online platform. Depending on your company’s circumstances, and the amount you need to borrow, loans can either be secured or unsecured.

Benefits of a peer-to-peer loan

• From a borrower’s perspective, the process is similar to applying for a loan from a finance provider, but often the application process is quicker and there is a higher chance of approval. P2P lending decisions are made by individuals, and so if one lender rejects you it doesn’t mean that all of them will.

Disadvantages of a peer-to-peer loan

• Businesses should consider how manageable their repayments are, as failing to make repayments could lead to complications such as increased charges or even legal action and it could significantly impact your credit report.

Which Loan Is Right For Your Business?

If you’re considering taking out a business loan, then make sure you take the time to assess your business and its needs. Weigh up the pros and cons of each loan before selecting the one that is right for you and do your research to ensure you understand all the costs and terms associated with the type of business loan you want to go for. To get started, ask yourself the following three questions:

1. How soon do you need funding?
2. How much funding do you need?
3. What are manageable repayment terms for your business?

If you are still not sure which is the best small business loan for you, don’t be afraid to call on the help of a professional financial advisor. At East river, besides providing accounting services to businesses in the UK, we have a wide network of partners that our clients can tap into.

This article was written by our partner Capify.

If you’re setting up a company in the UK, one of the first steps to get your business up and running is choosing a name for your company. A company’s name and logo determines how your potential customers and partners view your company.

Thus, apart from setting a clear business direction and goal, choosing your company name can make or break your business as well, especially if it is still in the start-up stage. In this article, we will go through the importance of a good company name, how to be compliant with the law, and some tips to get your creative juices running.

Why Do I Need To Choose A Company Name?

When will you require a company name? If you are converting your sole trader business to a limited company, or simply starting a new business, you will need to choose your company name before you can apply to the Companies House.

Basically, if you have a company that you want to register, you will need a name for it in order to distinguish yourself amongst the millions of other companies out there.

Firstly, you have to ensure that your name is suitable for your business. For example, you do not want your business name to be anything related to “Electronics” if you are selling childcare products.

Secondly, you have to make sure that your chosen name is compliant with UK rules and restrictions. Mainly, these restrictions are found in the following:

• The Companies Act 2006
• The Company, Limited Liability Partnership and Business (Names and Trading Disclosures) Regulations 2015 (SI 2015/17)
• The Company, Limited Liability Partnership and Business (Sensitive Words and Expressions) Regulations 2014 (SI 2014/3140)

Does My Company Name Fit The UK Legal Requirements?

It helps if you have a rough idea on what you want to name your company, but if you are starting on a blank sheet of paper, you’ll find that it isn’t easy finding a name that is both legally compliant and available.

In order to avoid having your name rejected by the Companies House, we list out some restrictions that you should be aware of before you start choosing your company name.

Your limited company must follow the following requirements:

A private company limited by shares or guarantee

• Your name must end with “Limited” or “LTD”

A Welsh private company limited by shares or guarantee, with a registered office in Wales

• Your name must end with ‘Cyfyngedig’ or ‘CYF’

A public company limited by shares

• Your name must end with end with ‘Public Limited Company’ or ‘PLC’

A Welsh public company limited by shares, with a registered office in Wales

• Your name must end with ‘Cwmni Cyfyngedig Cyhoeddus’ or ‘CCC’

When Are You Exempt From Using “Limited” In Your Company Name?

If your company is a registered charity or limited by guarantee, you do not have to include “Limited” in your name. Furthermore, look at your company’s Articles of Association.

If it states the below, you are exempted from using “Limited”.

1. Your company’s purpose is to promote or regulate art, science, education, commerce, religion, charity or any profession that is conducive to any of these purposes.
2. Your company members do not receive payments or dividends from the company.
3. our company’s income will be used to promote its purpose.
4. If the company is wound up
   1. Business assets will be transferred to another body with a similar business purpose instead of being distributed amongst the members.
   2. Members are required to contribute to company assets if the company ends during their membership, or within a year of them not acting as a shareholder.

How To Check If The Name You Want Is Available?

In order to make sure your name is one-of-a-kind and does not clash with another already registered name, the best way is to check the Companies House register if there are any similar names out in the world.

Otherwise, another way is to do a Google search on your name, you’ll probably get a few similar results if your name is too common. That is a sign for you to switch paths instead of going with your chosen name.

Remember that when you incorporate your company with the Companies House, you register your company name as well. Therefore, you have to prepare a company name before you start your incorporation process.

Of course, there are times you feel stuck or unsure on how to continue on your incorporation journey. No worries, here at East river, we assist entrepreneurs like yourself in all aspects of company registration.

Tips For Coming Up With Your Company Name

You will want to pick a name that is memorable, in line with your business operations, easy to pronounce over the phone, simple to spell as a web link, and compliant with the law. It may sound simple, but actually requires a lot of work. Fret not, here are some tips that you may find helpful.

1. Choose a name that describes your business literally

For example, some popular names that have literal meaning include: Toys R Us, Burger King, Hertz Rent-A-Car.

2. Make up a fun, new name

A totally random word made up of your favourite few alphabets. Just make sure it’s easy to pronounce and remember.

3. Use a catchy phrase

A company name does not have to be traditional. Try something like: “Thankgoditsfriday.com”, “Canthelpfeelinggreat.com”, “Hakunamatata” etc.

4. Use humour or puns

A clever play on words can help you stand out, but make sure that it is in line with your business. For example: A luggage company called “Lostmycase”, or a watch company called “Travelbackinntime”.

5. Appeal to the locals

There are street names in the UK that are made famous. Some examples include: Oxford Street, Abbey Road, Brick Lane, Piccadilly, Shaftesbury Avenue etc. Try incorporating these names into your company name for that local touch.

Things To Avoid In Your Company Name

Your name cannot be the same as another already registered company’s name. Keep in mind that if your name is too similar, you will be asked to change it once someone makes a complaint.

1. Similar names

Similar names refer to those that are pretty much identical to an existing name. The only difference is punctuation, special characters, a word used commonly in UK company names.

For example, “Burger King Ltd” is a registered name. If you want to register your name as  “Burgers King Ltd”, “Burger Kings Ltd”, “Burgers & Kings Ltd” etc, there is a high chance you will be rejected. Anyway, this is something you want to avoid, as it ruins the uniqueness of your name.

2. Names that are too alike

For example, “Easy solutions for mums” is too similar to “EZ solutions 4 Mums”.

3. Avoid offensive names

It is common sense to not use an offensive word in your company name. However, you may not realise that your name contains these words right off the bat. For example, stay clear of words such as “bugger”, “crap”, “damn”, “bloody” and more.

4. Do not use sensitive words

Sensitive words can suggest a connection with government or local authorities, and they probably will have an issue with you using it, unless you get permission which will cause delays in your company incorporation. If in doubt, always check back with this list on which words you will need permission to use.

Next steps

After you’ve chosen your name and double checked it against any possible similar names, you will want to protect and register your company name as soon as possible.

Once you have formed your limited company with your chosen name at the Companies House, you have the rights to the name exclusively, and other companies can register it. You can also consider buying the domain names if you are planning to go the e-commerce route or simply have a website for your business. A suggestion is to purchase both dot com and dot co.uk endings if you plan to expand your business out of the UK in the future.

Well, if you are a seasoned entrepreneur, you can choose to incorporate your business yourself at the Companies House for a small fee. However, for new entrepreneurs and SMEs, we highly recommend you get the help of a professional team to assist you with the incorporation process.

As you’re attempting to do accounting for your small business, are you trying to understand why your e-Commerce cost of goods sold is too high? Do you find it difficult to calculate cost of goods sold? If you are struggling to know how to calculate this to find whether there are any mistakes, this article can help you find a solution.

E-Commerce in the UK

Choosing to be a UK e-Commerce owner might be one of the smartest decisions that you have made so far. With the growth of technology, we have seen how artificial intelligence and machine learning have helped businesses in general. This has brought remarkable changes to people’s lives and has transformed their habits and lifestyles.

For example, many people prefer to do online shopping instead of going to the shopping centre and buy what they need. Especially after the Covid-19 pandemic and the inevitability of lockdowns, people have tended more towards online shopping. So, you certainly have made a great decision!

Taking a look at e-Commerce in the UK, we can find some admirable statistics. According to Statista:

• The United Kingdom appeared to have Europe's biggest B2C e-commerce market in 2019.
• UK consumers spent 200 billion euros on online purchases
• By now a mature market, UK e-commerce sales reached a value of 693 billion British pounds in 2019.

So, if your cost of goods sold is high and you cannot make your desired profits, it is highly likely not because of the economical situations of the UK or the negative growth rate. Rather, you may have some problems identifying how to account for the cost of goods sold.

What Does Cost Of Goods Sold Mean?

An e-commerce business’s cost of goods sold is the amount of money spent in a certain period to make and sell the company's goods. The cost of goods sold might be much easier or much more complex to calculate depending on the type of business. The smaller your business, the easier it is to calculate the cost of goods sold, and the less qualitative analysis is required.

The cost of goods sold is stated on your income statement and is deducted from gross income when calculating it. A prospective investor may look at the income statement and consider a high cost of goods sold as a major reason why the company's profit isn't as great as it could be, and refuse to invest accordingly. However, a more controllable cost of goods sold would aid in the development of a more sustainable economy.

How Do UK E-commerce Owners Wrongly Account for Costs of Goods Sold?

So, let’s review the most common mistakes that UK E-commerce owners make when accounting cost of goods sold.

1. Not Considering Both Direct and Indirect Costs

As a UK e-commerce owner, when you want to calculate the cost of goods, you should make sure to consider both direct and indirect costs. The reason is that they both comprise the total cost of goods.

But what are direct and indirect costs?

Your guess based on the names is right. Direct costs are those that are directly associated with the goods while indirect costs are not.

Here are the examples of direct costs:

• Raw materials
• Inventory costs of the goods
• The supplies costs
• Packaging costs
• The supplies for production
• Overhead costs, including utilities and rent

And here are some of the examples of indirect costs:

• Labor
• Technical equipment and tools
• Storage costs
• Administrative salaries

If you do not consider all of these costs, your cost of goods sold will not be accurate. So, you need to employ an experienced accountant to make sure if you are calculating correctly and accurately.

If the total cost of goods sold is too high, you should look for the reason in one of the elements that comprise the total costs. To lower your cost of goods sold, you can go remote and use anoffice management software so that you do not pay overhead costs. You can also use a co-working office if going remote is not possible for your e-commerce business. Employees spending too much time on meetings both virtual and direct adds to indirect costs, you could switch to an asynchronous video communication tool to boost productivity and efficiency amongst employees.

2. Not Considering Both Direct and Indirect Costs

Regardless of what you sell on your e-commerce website, either physical or digital, you should never ignore the amount of inventory you start and end the year with, in accounting cost of goods sold.

At the beginning and end of each year, it's important to keep track of all your inventory. Your inventory contains all raw materials, any goods that have been started but not completed, and other supplies, in addition to the finished goods in stock and ready for resale.

Both your beginning inventory and your ending inventory must line up exactly for accounting and reporting purposes; otherwise, you have to look for a clear explanation. If the business owner would like to know exactly how much they made during a specific period, without accurate inventory information at the end of that period, the cost of goods sold won't be accurate.

How to Account for Cost of Goods Sold?

So, now that you know the metrics that are important in calculating the cost of goods sold, this is the formula that shows you how to calculate the cost of goods:

Cost of Goods Sold = Initial inventory + purchases and other costs - ending inventory

However, accounting for cost of goods sold is not as easy as it seems in this formula. Each metric, as we said earlier, includes several important elements. If you ignore any element, the calculated cost of goods sold would be far from reality. Therefore, it is very crucial to recruit an accountant. You can also automate the accounting tasks of your e-commerce business and use office management software or accounting software.

Pick an Overall Accounting Approach

You cannot use the same cost of goods sold for several years. And it is obvious because the prices are never fixed and are always fluctuating. That means the value of all the goods in your warehouse varies based on when they were bought or manufactured. So, every year, you should account for the cost of goods sold. Here, we will introduce three choices for you to choose an overall accounting approach:

1. FIFO

FIFO (First-In, First-Out) strategy assumes that the oldest inventory units are always sold first.

2. LIFO

LIFO (Last-In, First-Out) strategy is the opposite of FIFO. It assumes that the newest inventory is sold prior to the oldest.

3. Average Cost

Average cost strategy entails calculating an average cost for each unit of inventory sold.

Conclusion

If you are a UK e-commerce owner who wrongly accounts for the cost of goods sold, you should take time and understand what is going on in your company. If any of the elements that play an important role in your cost of goods is neglected or overestimated, the result would have consequences for you. You should either pay high taxes or suffer revenue loss. To avoid this, make sure that you use well-trusted accounting software or hire an expert accountant who knows e-commerce. We wish you the best of luck!

Client: FoggyWipe

Name: James Webb

Business Name: FoggyWipe LTD

Line of Work: Optical

East river Package: East river Starter E-commerce Accounting Package

Member Since: 14 October 2020

About FoggyWipe: Solving Mask-wearing for the Bespectacled

James Webb started FoggyWipe out of frustration. When face masks were made mandatory in the UK. he was so frustrated with his glasses fogging up when breathing out, especially when he was out shopping, and realised there could be potential dangers too when vision was blurred.

A FoggyWipe™ is an optical lens cloth designed to prevent glasses from fogging. It is touted to work against all fog, humidity, sweating and fast temperature changes which cause condensation or fog on surfaces.

Challenge: Not Knowing How To Do Accounting & Bookkeeping And Spending Too Much Time On It

Webb had good sales coming to his online shop especially when he launched Facebook ads. However, when it came to bookkeeping and accounting, he had no clue about what to do. He understood how important it was to get your taxes right and stay compliant with the UK accounting laws to avoid hefty fines, and ended up spending an excessive amount of time figuring out how to do it right.

Solution: A Trusted Accounting Service That’s Easy To Work With

Thankfully, he stumbled upon East river, and realised how easy it is to communicate with one of our dedicated accountants and ask any question.

Outcome: With Time Saved, Webb Created a Corporate Social Responsibility Programme To Support Cancer Research

With all the extra time saved, he was able to come up with a corporate social responsibility programme to support Cancer Research in the UK through sales of his FoggyWipe™ lens cloth. £1.50 from each order till 31 December 2021 placed on the FoggyWipe website will be paid to Cancer Research UK.

Mindset That Will Set You on the Path to Success

Success is never an overnight story, and James has this piece of advice for aspiring entrepreneurs:

Free Yourself From the Admin Work and Focus On Your Business

We connect directly to all your marketplaces and upload financial statements from there. We then transform them into books, reports, and tax filings. Simply leave the administrative work to us to take the routine off your workload, so you can focus on more important tasks. Get started today.

In a UK-registered company, shares are often transferred from one shareholder to another. Depending on your business model and how you wish to proceed, you may want to issue, allocate, or transfer shares. So let’s take a closer look into when you would need to transfer shares, some restrictions you would possibly face and how to transfer shares.

What Exactly Are Shares?

In the UK, company shares are usually either allocated during company incorporation, or transferred afterwards at a later date. You may wonder - why do I require shares in my company?

When you first decide to start up your company, there is a big possibility you will be lacking in paid up capital. Allocating shares to shareholders can help to increase your total capital needed for business operations. In exchange, these shareholders own units of equity in your company and are eligible to receive dividends or capital gains if the value of your company rises in the following years.

To put it simply, if you own a share in a company, you are known as a shareholder and own a small portion of that company. If the company does well, you as a shareholder can earn more in terms of dividends and capital growth.

On the other hand, if you start your business all by yourself and all of the start-up capital came from you, you can issue all your company shares to yourself as well.

Company incorporation can either be a simple, straightforward or a tedious and time-consuming one. With the right help from professionals at East river, you could get your company incorporated within a few hours.

When And Why Would I Need To Transfer Shares In My UK Company?

There are a few reasons as to why you might be considering to transfer shares between shareholders in your company.

The most common reasons include:

1. A shareholder has left the company and wishes to sell their shares.
2. Some shareholders are holding more than their fair share of shares.
3. Transferring shares in exchange for cash payment.
4. Exchanging shares for goods or services.
5. Selling off shares to write off debt payments.
6. An agreement between business partners for share transfer.
7. Transferring shares on the death of an existing shareholder.
8. Transferring shares if the company changes its corporate structure.
9. Gifting shares to family members to pass on the family business.

Transferring Shares For Tax Efficiency

Let’s dive further into how transferring shares can help you be more tax-efficient.

1. Transferring shares to a tax-efficient vehicle such as an ISA or pension scheme

When your tax bill on company profits has reached a certain level, you can consider moving your company shares into a pension scheme or Individual Savings Accounts (ISAs). One thing to note is that this is not something that is generally done when you have just started your new company.

You do not have to pay Income Tax on the interest or dividends you receive from an ISA. Any profits from investments done with the ISA are free of Capital Gains Tax as well.

2. Transferring shares to a spouse or child to reduce payable tax

Here’s how you can reduce the tax payable by using another vehicle.

Restrictions On Share Transfers

Public, private companies and SMEs can place restrictions on the transfer of its shares. This means that existing shareholders, directors and certain third parties have the right to prevent or be notified of any transfer of shares happening in the company. You should not transfer shares without notifying your shareholders.

If there are two or more shareholders in your company, appropriate share transfer provisions should be included in the company’s articles of association and shareholder’s agreements. The reason for this is that shareholders would most probably prefer not to allow a complete stranger to hold shares in the company without their consent, and it is an understandable concern especially since it affects the company as a whole.

These should cover the following as a basic guideline. Provisions can be added based on your company.

• A sale of the any shares
• A gift of any shares
• What happens to the existing shares upon the death of a shareholder
• Directors can have a discretion to refuse any transfer
• Consent of all members needed to do any transfer

How Do I Transfer Shares?

Once you and other shareholders, if any, have come to a unified decision to allow the transfer of shares, here’s how you can transfer your company shares. Do not forget to consult and go through your company’s articles of association and shareholders’ agreements before doing any transfer of shares.

The process can be done electronically if you wish to save time, but can also be done the old fashioned method by printing the forms and then submitting to the Companies House.

Things You Should Require

• Stock transfer form

The stock transfer form should contain details of what transfer you want to perform. This includes the quantity, class and type of shares to transfer, the buyer, the seller, and the value of what the seller paid for the shares in (cash, stock, shares or debt).

• Signatures of involved parties

This confirms that all parties are informed and in consent of the transfer.

• Payable Stamp Duty fee (0.5%) if the value exceeds £1,000

You are unable to do a series of smaller transactions in the hope of avoiding payment of the Stamp Duty fee.

Steps to follow

1. Complete, sign and date the Stock Transfer Form

You can use a power of attorney if necessary and e-signatures will be accepted.

2. Include electronic versions of any agreements and supporting documents

This should be provided to prove how much Stamp Duty fee you will need to pay.

3. Email a copy of documents to the HM Revenue & Customs (HMRC)

From 25 March 2020, all forms should be emailed, and not posted to the HMRC. To complete the transfer request, email a copy of the stock transfer form or instrument of transfer (such as a scanned PDF) to this email.

Here’s a complete guide on the HMRC website on how to get your share transfer process done without hiccups.

If you are looking to transfer your shares, or simply just unsure of how to get your company started in the UK, do not hesitate to reach out to our professional team here at East river. We help you with the most important aspects of setting up your own company without all the hassle of documents and forms. Of course, if you have already registered your company, feel free to check out the other services we provide, such as e-commerce accounting, bookkeeping and more! Of course, we can help with any other queries you have about your company processes, so chat us up for an instant call back anytime.

Today, cryptocurrency is starting to be accepted as a payment method or digital currency. Since the first cryptocurrency inception, as of January 2021, there are more than 4,000 cryptocurrencies that exist. Before you jump on the bandwagon, assess whether cryptocurrencies are suitable to be used in your business.

By the way, if you are an e-commerce company or sell digital products, you might want to keep track of your transactions, even those made using cryptocurrencies. Keeping track of these would help you get a hold of where your expenses and revenue comes in to get a good hold on your finances. If you need advice from experienced accountants in e-commerce, look no further and chat with us!

What Is Cryptocurrency?

Cryptocurrency is a digital asset or money that is mainly used to buy, sell, and invest. A cryptocurrency could be created by individuals or companies, to serve a particular purpose and has no standard value. Bitcoin, for example, is priced at USD $32,641 at the time of writing, while Dogecoin is priced at USD $0.81. The value of cryptocurrencies is determined by their coins’ availability, desirability, and usability.

The main difference between cryptocurrencies and fiat money is that they are decentralized and are not regulated by any governments or central authorities.

Cryptocurrencies run on blockchain technology, which are digital databases consisting of blocks which in turn, are made up of transactions. These transactions are encrypted for security and recorded on public ledgers. Every transaction involves two public keys and the sender’s private key.

Sending of a digital coin from one person to another must be confirmed by miners. Miners audit cryptocurrency transactions by verifying the legitimacy of these transactions. A group of miner-approved transactions are called blocks.

Miners are compensated for verifying the transactions and by solving advanced mathematical problems using supercomputers. This is called hashing. As such, it is possible to transfer assets between two parties without a central authority that facilitates the exchange. Digital coins received could then be stored in digital wallets, or used to sell, trade, or invest in other coins, or even used to buy physical goods and services.

What Are the Risks of Cryptocurrency for Business Owners?

A new business owner should be cautious before accepting cryptocurrency as payment due to the volatile nature of cryptocurrency. The value of a cryptocurrency changes quickly even within a day of trading. It could even halve in value from one hour to the next. This is because cryptocurrencies are not regulated and are anonymous.

Businesses also risk their reputations if their customers’ digital wallets are hacked and their digital tokens were to be stolen. Although cryptocurrency wallet companies are trying their best to enhance security, blockchain technology is not 100% safe from hackers. There is still a risk of being hacked into where hackers could gain illegal access and spend from a customer’s digital wallet.

Advantages and Disadvantages of Accepting Payments in Cryptocurrency

As a business owner, you may consider accepting cryptocurrency payments for your products and services due to the fast processing speed of the transaction. While credit card systems take days to process and batch out, cryptocurrency is processed immediately, streamlining your business’ cash flow.

On top of that, there are more benefits of accepting cryptocurrency payments:

1. Reduced Transaction Fees

Small businesses are usually charged between 25-30 cents plus 2%-4% of the total transaction for each credit card swipe. Fees for cryptocurrency payments vary depending on whether you receive your digital coins in your personal wallet or through third-party wallets like Coinbase, but they are definitely less expensive than PayPal or credit card providers. There is no middleman collecting fees to facilitate the exchange.

2. No Chargebacks for Merchants

As cryptocurrency transactions are quite similar to cash, that is, no third party could reverse the transactions and they are final, businesses are protected from fraudulent chargebacks. The blockchain system serves as a peer-to-peer objective ledger, which means chargebacks could not occur. If a consumer demands a refund, there is no bank or card network to appeal to, and only you as the merchant could decide to reverse the transaction if he chooses to do so.

3. Broader Market

Accepting cryptocurrency would open doors to a new market of mostly tech-savvy customers, often internationally. For example, a small electronics retailer reportedly sold $300,000 worth of products to customers in almost 40 countries when he started to accept cryptocurrency.

4. Responding to Consumer Demands

Cryptocurrency is increasingly growing in acceptance and legitimacy, and there are more people who hold them and want to spend using them. From a business owner’s POV, accepting cryptocurrency would offer your customers another option to pay, especially to customers who value privacy and anonymity. This would gain you an advantage over other retailers who do not accept them.

However, dealing with cryptocurrency requires a certain level of technological know-how. There is quite a steep learning curve to understand cryptocurrency.

Accepting payments in cryptocurrency involves maintaining a digital wallet on digital currency exchanges and requires the user to have a certain level of familiarity with the cryptocurrency market.

On the other hand, the disadvantages of accepting cryptocurrency payments include:

1. Price Volatility

Business owners need to convert cryptocurrency prices quickly and regularly due to its volatility. Ethereum, a cryptocurrency coin, started at around USD $1 initially during the first months it launched, and today, it is priced at USD $1,976.

Startups and businesses could use services provided by BitPay or Coinbase to protect against volatility. These services immediately convert digital currency to its value in cash in real-time when payment is made. Holding on to cryptocurrency might amount to speculative investment and could possibly risk your revenue stream.

2. Security

Currently, cryptocurrency transactions are not 100% secured and there is no complete guarantee or security against cyber criminals from getting access to customers’ digital wallets. There is an average of USD $2.7 million of cryptocurrency assets stolen every day in 2018. To cover these risks, there are now insurers dedicated to insuring cryptocurrency risks such as Nexus Mutual, Bridge Mutual, Coincover, and Etherisc. The cryptocurrency exchange platform Coinbase, for example, keeps less than 2% of its customers’ assets online.

Regularly back up your data, keep your private keys safe, and turn on multi-factor authentication when logging onto your digital wallets. Some digital wallet companies such as Optherium also incorporate biometric face verification before granting users access to their digital wallets for added security.

3. Regulatory Uncertainty

There is no universal law governing cryptocurrency since it is fairly new. Each country has different laws, and almost have no regulations concerning cryptocurrency.

Bitcoin, for instance, is recognized in Japan as a legal payment method. Business owners would need to be adaptable if they adopt cryptocurrencies as a payment method as rules and regulations are still evolving. They need to be up-to-date with laws concerning reporting gains and losses and taxation if cryptocurrency faces regulation in their countries.

3 Ways To Use Cryptocurrency in Your Business

So how might you use cryptocurrency in your business if you’re sold on the advantages of it?

Here are 3 suggestions that we have. You might think of more ways as you grow your business and experiment.

Paying Employees’ Salaries in Cryptocurrency:

Setting Fiat-Cryptocurrency Conversion Rate and Ratio

Companies considering paying their employees’ salaries in cryptocurrency could decide on a recurring date each month to set the fiat-crypto conversion rate. They could freeze this rate as the conversion rate for their employees’ payroll, even if the actual disbursement of salary is done at a later date. The market rate of cryptocurrency could be used as the conversion rate.

Business owners should consult their staff on the ratio of fiat to cryptocurrency that the latter prefer to receive. As different employees have different financial obligations, it would be more equitable than the employees have a say in deciding how much salary they would like to receive in cash and in cryptocurrency. Employees with a bigger risk appetite would perhaps agree to receive half of their pay in cryptocurrency, while others might take between 10%-20% of their net pay in cryptocurrency.

Choice of Cryptocurrency

Business owners could offer several types of cryptocurrencies for their employees to receive their salaries. They could provide options of the most popular cryptocurrencies (like Bitcoin, Ethereum), alongside their company’s own coin, if they own such cryptocurrency. Business owners should find a coin that suits their employees’ risk profiles. The employees could then keep the coins in their digital wallets or use different tools (for example MakerCDP) to liquidate their cryptocurrency.

Paying Suppliers in Cryptocurrency

One of the benefits of paying suppliers in cryptocurrency for new business owners is the speed at which cross-border payments take place. It usually takes a few minutes compared to several days using credit card payments, for example. Cutting out the middleman such as banks and credit card companies also mean lesser fees paid by business owners.

Furthermore, cryptocurrencies would offer greater liquidity than illiquid or exotic currencies. This is especially true in foreign markets that curtail the cost-effective flow of their own currencies internationally. To illustrate, it is much easier and faster for a business owner to pay his Estonian supplier in cryptocurrency rather than the Estonian Kroon.

The challenges that business owners might face in paying their suppliers in cryptocurrency could be from their own banks. Traditional banks have invested billions in building their cross-border payment infrastructure (such as the SWIFT network). These banks would be more inclined to maintain their relevance through their legacy (old, but still in use) payment systems. They might compete with the adoption of cryptocurrency payments by offering business owners faster processing times or lower foreign exchange rates when businesses pay their suppliers.

Cryptocurrency is also still trying to shed its bad image of being used for a wide range of illicit activities, which might affect the readiness to accept cryptocurrency payments among suppliers. Cryptocurrency and its blockchain technology have also yet to achieve scalability for cross-border payments due to their lack of liquidity, and the fact that they are privately run and not government-backed. They have yet to achieve the scale of the trusted payment systems of today such as ACH, FedWire and U.K. 's CHAP system, which are distinguished by their large payment volumes, established operating rules, known costs, security, and deep liquidity pools.

Issuing Cryptocurrency As Dividend

Is It Possible for Fiat-Based Companies To Issue Cryptocurrency-Denominated Dividends?

Yes, fiat-based companies could issue cryptocurrency-denominated dividends only if they mint their own digital currency and issue investors with cryptocurrency coins. They could not issue Bitcoin- or Ethereum-denominated dividends for instance, but could issue their own companies’ dividends when they mint their own cryptocurrencies.

Can Companies Create Their Own Cryptocurrency?

Yes, they can. Most companies or startups build their own cryptocurrency using Ethereum’s technology. The startups then raise funds through initial coin offerings (ICOs), which is the IPO of a blockchain-based company. In return for the money, the startups reward investors with cryptocurrency, either as a share of profits or as dividends. However, for a company’s cryptocurrency to take off and be successful, it needs to have a strong use case, i.e. actual use or application besides paying for goods and services.

Taxes on Cryptocurrency in The United Kingdom

Taxes on Cryptocurrency in the United Kingdom

The U.K.’s tax, payments and customs authority, the HMRC (Her Majesty’s Revenue and Customs) has outlined that:

• Cryptocurrency assets invested by their owners would be taxed on the profits made on them.
• Capital gains tax needs to be paid on overall gains above the annual exempt amount (that would be up to £12,300 for the year 2021-2022).
• Cryptocurrencies received from mining, airdrop, confirmation rewards, and cryptocurrency received as salary from an employer would all be liable for taxes.
• If you pay part of your employees’ net income, rather than gross income, in cryptocurrency, they need not worry about additional income taxes -only capital gains taxes if they liquidate their cryptocurrencies for a profit.

If you’re reading this, you are probably either looking for a director for your newly formed company or have been appointed as a director of a company in the UK. In the below guide, we bring you through what kind of directors there are, who can become a company director, a director’s duties and what the role entails.

By the way, if you’re looking for help to open your company, or to finding out how to outsource your bookkeeping to a trusted company in the UK, we can help you with that. As business owners, you don’t have to do everything alone! Drop us a chat to find out more, meanwhile, do read on.

What Is A Director?

First and foremost, all companies must have at least one director appointed by the shareholders who form the company. However, a common misunderstanding is that the director of a company is automatically the company owner. This is not entirely true - you may be the person starting up the company, but are not the director.

Company directors are legally responsible for running the company. This widely applies to directors who appoint company secretaries to assist with the director’s job, although company secretaries are not legally responsible for the company’s records, accounts and performance.

The role of a company director is stated in the Companies Act 2006 and is usually defined in the company’s Articles of Association. Below, we will list out what your role as a director of a company is and how important it is to a company.

What Kind Of Director Are You?

There are two major types of company directors - executive and non-executive. There is a difference between the two, and you have to be sure of what kind of director you are appointing or taking on. To put it simply, directors participate in board meetings and are in charge of helping the board make strategic decisions for the good of the company.

Shareholders can choose to appoint a certain director who has higher power over the rest of the board members as well. Ultimately, this will come down to the Articles of Association on what you can or cannot do as a director.

Executive director

An executive director must be registered at the Companies House as the director of the company, while a non-executive does not necessarily have to. The appointment must be registered with Companies House within 14 days of their appointment. As there is no legal distinction between executive and non-executive directors, their details will need to be filed with Companies House in the usual way.

Non-Executive director

A non-executive director still has the same legal responsibilities as an executive director. However, he or she is not involved in the day-to-day operations of the company business. Instead, they sit on the company board of directors and provide strategic input to improve the business. Non-executive directors are most often paid on a part-time basis.

Who Can Become A Company Director?

The general rule states that almost any individual or corporate body can become the director of a company. There are no specific law requirements and no need for any formal qualifications, skills or experience for a director. Nonetheless, there are some restrictions that can hinder your appointment as a director.

You cannot be appointed as a company director if you are:

• Under the age of 16
• The auditor of the company you are being appointed at
• An undischarged bankrupt
• A disqualified director by court

What Are The General Duties Of A Company Director?

According to the Companies Act 2006, there are certain responsibilities a company director has to comply with.

1. A director must act within powers under the company’s constitution

A company’s constitution includes the most important aspect - the Articles of Association. This is a set of rules that have been set by the company and must be followed. Failure to do so can and may result in legal penalties depending on the severity of the situation.

In any case of not adhering to the Articles of Association, related decisions you make could result in you having to compensate the company for any financial losses.

2. A director must promote the success of the company

One of the most well-known responsibilities of a company director, larger companies with more than 250 employees have to explain in their annual report how directors have fulfilled this job duty.

This means that as a director, you must act in good faith for the benefit of the entire company and its members. This includes deciding whether it is appropriate for the company to take on a certain course of action, and if it will promote the success of the company.

3. A director must exercise independent judgement

As a director, you should have your own informed view on what the company should or should not do, based on research and your opinions. Simply put, decisions you make should not be based on what other parties command you to do. This could be difficult if you do not have enough prior experience or knowledge in similar roles or the company itself.

4. A director must exercise reasonable care, skill and diligence in the role

Previously, directors were appointed purely based on name and reputation, without having to perform any work as a board member. Today, an appointed director must be equipped with the proper knowledge, skill and experience to carry out director duties.

5. A director has to avoid any conflict of interest situations

A conflict of interest can arise when the director:

• Has prior business or personal relationships with persons or entities that are affected by the company’s activities
• May be considered taking advantage of property, information or opportunity that rightfully belongs to the company
• Receives personal benefits or gifts from third parties

A director has the legal duty to disclose and report any direct or indirect interest with any persons or entities. This applies to whether or not the company decides to follow up with the particular third-party person or entity.

What Are The Consequences If I Breach My Duties As A Company Director?

If a breach in director’s duties is found, the company should take the necessary action. For instance, one or more shareholders can refute the director and make a claim against said director.

Some consequences of breach include but are not limited to:

• An interim injunction to prevent any extended loss or damage
• Removal of the director from the board subjected to shareholders voting decisions
• Compensation for financial losses incurred
• Restoration of company property

In more serious cases, criminal fines and court hearings can be held, which can result in grave consequences for you as a director.

Am I Responsible For A Company’s Failure If I Am The Director?

Generally, directors are not normally liable for the company’s debts if a decision has resulted in financial loss and liability for the company. Nevertheless, to prove that you have fulfilled your legal duties as a director, it is always a good idea to keep a record of all minutes of board meetings, so that you can show your role in the board’s decision-making process.

According to UK law, these minutes of meetings must be kept for ten years. In any case you are unable to recall a certain decision you made that resulted in a certain consequence for the company, these minutes can provide a record and evidence that you acted in good faith of the company.

Next Steps You Can Take

If you are still unsure of how to go about with forming your company in the UK, we are here to help. Other than company formation, we are also more than happy to assist with accounting for SMEs and E-commerce companies as well. Just drop us a message for an instant callback!

If you are a small business owner, you are not required legally to have a corporate bank account. However, opening your corporate bank account has its advantages and can help you keep your accounts clean. Thankfully, it is rather effortless to open a corporate bank account, with many options for you to choose from.

We love that you’re taking steps to grow your business. If you’re looking to unload the boring routine of bookkeeping and accounting for your UK e-commerce business, let us help you with that. Meanwhile, read on.

Here’s what you need to know.

What Are The Types Of Company Structures In The UK?

In the UK, the company structures that are legally accepted include:

• Sole trader
• Partnership
• Limited Liability Partnership (LLP)
• Limited Liability Company (Ltd)

The specific details regarding company structures vary across the UK, so be sure that you are clear of your region’s rules and regulations.

When Do I Need a Business Bank Account?

If you have yet to start a corporate bank account, you should consider doing so especially if:

• Your company is processing a high volume of transactions
• You want to obtain a business credit card
• You are looking to get a business loan
• You want to accept card payments from your target audience
• You have the intention to incorporate your company as a limited company
• Your business expenses and income are getting more complex and you want to simplify things when completing your self-assessment for tax season

The Advantages Of Having a Corporate Bank Account

Separating your business finances from your personal finances can benefit your company in the long run.

Here are the 4 main advantages of having a corporate bank account:

1. Maintain Professionalism

With a dedicated corporate bank account, your company will appear to have more credibility as your customers make payments to your business account rather than your personal account.

2. Simplify Administrative Work

As your business grows throughout the years and oversees important milestones including office space rental and staff employment, these bank statements will be reflected more clearly in a corporate bank account that is not combined with your personal one.  

Additionally, with a corporate bank account, you don't have to waste extra time sorting out your personal expenses from your business ones, and the time saved can allow you to manage your business budget and finances in a more efficient manner.

3. Build Credit Rating

When the need to apply for a business loan arises, having a corporate bank account can help you build a credit history for your company. When considering your eligibility for a business loan, many banks will look at your credit rating.

4. Keep Things Simple For HM Revenue & Customs

When tax season comes, having a corporate bank account makes it much easier for you to maintain records and submit your tax returns. When filling up your tax return, you are required to inform HM Revenue & Customs (HMRC) of the amount of money your company has earned. You are allowed to deduct certain allowable expenses (e.g. office costs and travel costs) to work out your taxable profit.Ift you use only one bank account for both your personal and business costs, it can be challenging to accurately work out these calculations.

Corporate Bank Account Vs. Personal Bank Account

Similar to your personal bank account, your corporate bank account can also offer the basics from cash and cheque handling, issuing a debit card, to an overdraft. You can also set up standing orders and direct debits, with your corporate bank account paving the way for your business to build credit rating for potential loans, obtain a business credit card, and receive payment from clients.

However, a corporate bank account typically requires a monthly fee of around £5 to £8 to maintain, with additional fees needed for transactions such as cheque deposits. Nonetheless, most business banks provide an initial fee-free duration of one to two years following your corporate bank account opening.

What Are The Required Details And Documents To Open a Business Corporate Bank Account?

For companies opening a corporate bank account in the UK, the procedure is fairly simple so long as you adhere to the eligibility criteria. You will need to have these documents ready:

• Proof of address in the form of a recent bank statement, utility bill or council tax statement
• Proof of ID. All named company directors will require this. This can be in the form of a photo driving license, national ID card or passport.

You will also have to furnish your company details, including:

• Full company address (including postal code)
• Approximate annual turnover
• Registration number with Companies House (for limited companies and partnerships)
• On a case-to-case basis, you may even be required to show your personal financial situation with documents to prove that your credit and banking history is clean

Can I Open a UK Corporate Bank Account With a Foreign Entity?

It can be challenging to open a corporate account in the UK for a foreign entity. If you are banking with a global institution from your region, it may be worth checking if they could assist in creating an account for you with their business in the UK.

Otherwise, HSBC is known for extending help to smaller international businesses, but this would depend on your case.

Which Are The Best Corporate Bank Accounts In The UK?

With a variety of banking options available, consider your business needs before you decide on the best corporate account that will serve your requirements. While the UK has its own 'big four' including HSBC, NatWest, Lloyds Banking Group and Barclays, these may not be the best option for your business. Instead, keep an open mind and also consider the newer banks including Starling Bank or Metro Bank, or even international money transfer companies such as Wise.

The Big Four

Newer-Established Banks & Alternatives

Things To Consider When Choosing a Bank

The features of corporate bank accounts vary depending on the chosen product offered. Before you choose your provider, here are some considerations:

Initial Fee-Free Period

Many providers provide a duration at the start of your corporate account opening when you are not required to pay any standing fees on your corporate bank account. Make sure you are also aware of the fees you will incur after the initial fee-free period, as it can be time-consuming to change your corporate bank account at a later stage.  

Personal Adviser

Having a personal adviser you can contact directly is especially useful since this specialist understands your business needs and can provide you with a personal experience. They are also able to explain your corporate account’s features and the loaning options available to you.

However, some online-only corporate accounts do not offer a personal adviser. Thus, if you are starting a new business or emphasise the need for readily available advice, it may be worth applying for a corporate bank account from the Big Four.

Bank Charges

Most corporate bank accounts charge a monthly fee, as well as extra fees for other transactions including cheque deposits. Basic accounts typically cost between £5-10 per month, while the more expensive and feature-rich corporate accounts can set you back upwards of £40 per month.

Overseas Transactions

If you transact with foreign customers, you will have to set up a corporate bank account that can carry out foreign currency transactions. Remember to check on this before you sign the document if this is a non-negotiable service for your business.

Insurance

Starting your own business always involves some risks, including incoming and outgoing missed payments. Luckily, some banks provide insurance at an additional fee, which can be a load off your mind if your borrower defaults on payments. Before you sign the documents for any corporate banking products, be sure to understand the coverage level offered by your provider.

How Long Does It Take To Open a Corporate Bank Account In The UK?

This can range from three weeks to three months for your corporate bank account application to be approved, followed by the subsequent meetings.

However, some providers such as Metro Bank allow you to walk in and make an appointment on the same day. Alternatively, opening a corporate bank account with Wise can be even faster. You can simply create an account in a matter of a few minutes, and your corporate account will generally take between two to five working days for verification.

Focus on Your Business and Leave the Rest to Us

We know how challenging it can be to run a business, but we are here to help. It is not always easy to stay on top of things with so much going on. Fret not and leave the pesky paperwork to us.

Free yourself from the admin work and let us handle your company's accounting, taxes and reports. We take over paperwork, cross-check data, and submit your annual reports neatly. You will also have advice from experienced Chartered Accountants to help pay tax efficiently. Got any questions? Chat with us today!

Creating YouTube content? Check. 10k followers on Instagram? Check. Selling your own apparel line online? Check. How about selling digital products as your next milestone?

Digital products are easier than physical products to sell inventory-wise. You do not need to keep stock or worry about expiry dates, packaging or shipping. You earn revenue as long as you keep them available for download online. Pretty attractive, what say you?

We love seeing e-commerce businesses grow. That’s why if you own one, we’d rather you speed things up by letting us help you with the routine administrative paperwork like accounting and bookkeeping. Talk to us to find out how you can get the help of expert accountants in the UK to help you do that. Isn't it a relief when you get to know accountants who understand how e-commerce businesses work?

What Is a Digital Product?

A digital product is an online asset or form of media where the ownership is transferable (either paid or free)  from the content creator to the buyer. It can be sold and distributed many times without ever needing to replenish your inventory. Digital products could be downloaded or streamed online, e.g. PDF, audio or video files, software, and plug-ins, and can also be subscription-based, e.g. website membership access, and online lessons. Digital products could be turned into physical products though. For example, a poster could be printed from a digital photograph that you bought, or a 3D print of a mug from a print model you purchased online.

Digital products are mostly from these product categories:

1. Writing: e.g. Ebooks, online magazines and newspapers, academic papers;
2. Audio: e.g. Instrumental tracks, sound effects;
3. Video: e.g. Video animation intros, documentaries;
4. Design: e.g. Wallpapers, photographs and prints, presentation templates;
5. Photography: e.g. Stock photos, Photoshop or Lightroom presets;
6. Software and tech: e.g. Apps, domain hosting, games;
7. Education Services: e.g. Language lessons, financial planning and consultation, audits and proofreadings.

Here are some examples of popular digital products sold from the United Kingdom:

• Nadiya Bakes £9.99: A best-selling e-recipe book sold on Amazon.co.uk from Nadiya Hussain, the winner of the BBC’s sixth season of The Great British Bake Off.
• Driving Theory Test 4 in 1 Kit + Hazard Perception £4.99: It is the top paid mobile application in the United Kingdom that helps those who are taking their driving licenses pass the theory test.
• Microsoft 365 Family £79.99/year: Microsoft Office software with cloud storage for 6 users.
• The Financial Times online subscription £17.98/month: Online Financial Times magazine and newspaper subscription.

Where Can I Sell Digital Products?

The best place to sell your digital products is on your own website. You could use tools and plugins such as SendOwl, Easy Digital Downloads, and DPD to generate a buy now button for your website or a payment link for your products that you could display across all of your social media platforms. Depending on the tool, you could even send abandoned cart emails, view sale statistics and generate reports, and opt for upselling and cross-selling for your published products.  

If you do not have a website yet, you could create an online store on Sellfy or Selz to sell your digital products. These sites allow you to host and distribute large digital files that your customers would download. You can run promotions, generate discount codes and have access to a basic email marketing platform on Sellfy, while Selz features SEO options like adding a meta description for your products.

All these services range between USD $10 to $200 per month depending on the options and plans that you select.

When you have the download and payment links in order, you could then sell your digital products to a wider audience on online marketplaces such as Amazon, eBay, Etsy, and Facebook Marketplaces.

How Are Digital Products Taxed?

In the United Kingdom, according to Her Majesty's Revenue and Customs (HMRC), only digital products that fall under ‘digital services’ which are electronically supplied are taxed.

Electronically supplied means payment processing and delivery of digital goods or products are done automatically (or almost everything done automatically) by the seller’s online store system. Radio and television broadcasting services, telecommunications services, electronically supplied services are all taxed.

These digital services are taxed:

1. The supply of audio and audio-visual content for simultaneous listening or viewing by the general public on the basis of a programme schedule by a person that has editorial responsibility;
2. Supplies of images or text, such as photos, screensavers, e-books and other digitised documents, for example, PDF files;
3. Supplies of music, films and games, including games of chance and gambling games, and programmes on demand;
4. Online magazines;
5. Website supply or web hosting services;
6. Distance maintenance of programmes and equipment;
7. Supplies of software and software updates;
8. Advertising space on a website.

On the other hand, these digital services are not taxed:

1. Supplies of goods, where the order and processing is done electronically;
2. Supplies of physical books, newsletters, newspapers or journals;
3. Services of lawyers and financial consultants who advise clients through email;
4. Booking services or tickets to entertainment events, hotel accommodation or car hire;
5. Educational or professional courses, where the content is delivered by a teacher over the internet or an electronic network (in other words, using a remote link);
6. Offline physical repair services of computer equipment;
7. Advertising services in newspapers, on posters and on television.

As an online digital products seller, you are expected to charge 20% Value-Added Tax (VAT) if you sell taxable digital products to British residents currently residing in the United Kingdom. This rule applies even if you made one single sale from the U.K., as there is no sales registration threshold.

Remember to include this information in your invoices to customers in the United Kingdom for taxation purposes:

1. Your business name and address
2. Your business VAT number
3. Invoice date
4. Invoice sequencing number
5. Description of the goods or services
6. Rate of VAT applied to each item
7. The total amount charged including VAT

You could apply for a VAT registration number online here -without the need to appoint a tax representative in the U.K.- if you are living abroad. A VAT number recognizes you as a legal business and registers you in the United Kingdom’s tax system. This number tracks the amount of tax you charge customers, how much taxes you pay, and the tax credits you receive.

10 Tips How To Sell Digital Products Online:

1. Quality Text and Images

When you are selling digital products online, the only customer touchpoint is through their screens. Thus, make sure the published text (or copy) on your website is grammatically correct, easy-to-read, and sounds professional and reliable. Never make your customers question the legitimacy of your offerings with sloppy write-ups. Engaging in digital products copy merits the extra time and effort that you need to come up with it.

• Use a tone and style that is consistent with your products and brand image;
• Proof-read your content for an error-free copy;
• Consider engaging a professional copywriting service if writing is not your forte;
• To complement good copy, include high-quality and high-resolution images on your website.

High-quality images speak volumes of the quality and trustworthiness of your digital products. Provide online shoppers with several images of each digital product if possible. High-quality images help convert visits to your website into sales by garnering more views to your site, increasing user engagement, and decreasing bounce rates. All of which would translate into more time spent on your site and increasing the conversion rate. Engage a photographer or designer if you want custom images, or you could also download or buy stock photographs from websites like Getty Images and Shutterstock.

2. Clear Product Specifications

Digital products such as software need technical product information to be presented clearly and concisely. Customers take product specifications and documentation into consideration when deciding on a big-ticket digital product purchase. Digital products shoppers increasingly prefer searchable online documentation and FAQs over downloadable PDF guides. Think about the questions that consumers would have about your products and make sure that they are addressed. Aid your customers with photos and videos for them to learn how to get your template, software or application, up and running quickly.

Your product information and documentation:

• Uses easy-to-understand, succinct, and not too technical language;
• Has pages with clearly defined sections, is easy-to-navigate and user-friendly;
• Includes SEO-optimized content and is mobile-friendly.

3. Provide Product Demo and Promote ‘Live’; Showcase Customer Testimonials

Besides recording a product demonstration video, you could also conduct a ‘live’ product demonstration or promotion for your digital products.

• Choose a social media platform that suits your brand image, like Facebook, Instagram or TikTok.
• Highlight the features, functions, and quality of your digital products through these demonstration videos or ‘live’ sessions.

These videos would build rapport and trust with your customers and manage their expectations better. Word-of-mouth recommendations and referrals are invaluable for an online seller, notably for new digital product sellers.

• Customers who had good experiences using your products would most likely write a review for you. Feature them on your landing page.
• Invite or incentivize them to leave a review for you and rate your app on app stores or online marketplaces.
• Use social listening to see what others are talking about your products and brand and listen to their feedback to improve.

4. Redefine Value Proposition and Appeal Emotionally

Your value proposition, or how your products or services benefit your customers, should be at the heart of your marketing communications and online content. Check if your value proposition could be easily identified on your landing page copy, and your sales and marketing materials.

• Convey site visitors how your digital products would solve your customers’ problems and the specific benefits they offer. For example, ebooks or online courses would improve a buyer or subscriber’s understanding regarding a certain subject and even his life.
• Differentiate your products’ value propositions and explain how they are superior to your competitors’.

Moreover, you could make a connection with your prospective buyers when you use language that appeals to their emotions. Help prospects visualize how your digital products make them feel good, be successful, or feel secure. Explain to them how your products save their time and hassle or help them gain a new skill.

5. Engage With Users on Social Media

One of the best ways that a brand can increase customer satisfaction, brand awareness and sales is by engaging with their prospective buyers or current consumers via social media.

• Strive to respond quickly to customers’ queries in a polite and friendly tone;
• Be honest with them, e.g. if you are unable to fulfil their customization requests.

Most big brands set up Twitter accounts to interact and respond to their customers' queries. Puffin Books in the U.K. for example created a community around their products by holding online polls on Twitter, as a way of creating conversations with their readers.

6. Use Remarketing

Remarketing or retargeting is an online marketing strategy that promotes your website or products again after your customers have visited and exited your site. A tracking pixel placed on your website allows you to follow which other sites your prospects visit after yours. It would then place an advertisement of your product or services there, as a reminder for them to visit your site again.

• Target recent visitors to your sites, shopping cart abandoners, and/or repeat customers in this remarketing strategy;
• Schedule your ads so that they are not too frequent, else it would overwhelm and irritate prospective buyers;
• Test which part of the ad (visual, promotion offer, or headline) helps convert visits into sales (A/B testing).

7. Create a Sense of Urgency

During its 2020 Black Friday sale, Shopify reported $2.4 billion in sales globally, 75% growth in sales from 2019, despite being conducted during the Covid-19 pandemic. Black Friday sales signal a sense of urgency, and consumers would buy more ‘just because it’s on sale’.

Similarly, you could apply the same concept when selling your digital product online. These are some of the strategies that create a sense of urgency for you to employ to sell your digital products:

• Create a sense of scarcity and instil fear of missing out (FOMO). For example, Booking.com prompts that there is just one “last room left” when customers are browsing to book hotels.
• Use short call-to-action words such as “hurry”, “one time offer”, “today only”, “clearance”, etc.
• Set deadlines when giving out discount coupons, and free delivery.
• Incorporate countdown timers to indicate the hours, minutes and seconds that pass by before your promotion ends.

Neuroscience Marketing reported that adding a countdown timer increased revenue by 9% in a test where time left for next-day delivery was displayed. This method is really effective on impulse and repeats buyers.

8. Use the Voice of Your Customer

It is useful to conduct market research, surveys and focus group testing before launching your digital products online. From there, you gauge the voice of your customer and find out their wants and needs, expectations, pain points and aversions. Take note of the language and lingo of your target market, and use the voice of your customers across your ads and website copy to relate and engage with them better.

9. Smooth Payment Processing With As Many Payments Methods As Possible

Alright, so your prospective buyer viewed your ad and clicked it. She scrolls and browses through your product catalogue and adds three prints into her shopping cart. At checkout, she needs to select the paper type, confirm her print dimension sizes, agree to the copyright terms, fill in her name, address, email, delivery address, billing address… and her doorbell rings and she abandons her cart. Barclaycard reported that in 2018 in the U.K., £18 billion is lost each year in abandoned shopping carts.

Try these methods when you sell your digital products on your websites to avoid cart abandonment:

• Make sure that your checkout page is easy to navigate and the payment processing smooth.
• Skip unnecessary form-filling and make sure that any information entered would be saved automatically if the buyer happens to navigate away for a while. This is to avoid them from needing to start all over again.
• Provide as many payment options as possible. Debit and credit cards, PayPal, digital wallets, etc. Ensure that your region’s most popular payment options are included.

10. Follow Up, Follow Up, Follow Up

Follow up with your customers after their purchase. Send them a thoughtful follow-up email to thank them for their purchases. Offer and remind them about your after-sales services and support should they face any problems when accessing and using your digital products. Doing so would increase customer retention and create brand loyalty.

Amazon has ‘Customer Obsession’ as one of its 14 Leadership Principles. Amazon’s understanding of customers, personalised services, plus their attentive and reliable customer service team have bagged them the first place in the U.K. for excellent customer service across a decade. That is no small feat. The Institute of Customer Service in the United Kingdom published a report that Amazon received an average customer service score of 87.4 (out of 100) on the U.K. Customer Service Index (UKCSI) between January 2010 and January 2020. Never underestimate the power of good after-sales support and services. It will leave a good impression on your customers.

As an e-commerce merchant, many payment options allow you to accept credit cards and other types of payments online. But how do you choose which online payment processing method to include on your website? Read on.

When you’re growing your e-commerce business there are so many factors that you can experiment with to increase your sales. You wouldn’t want to spend any of your time on boring and routine paperwork like accounting. That’s when you can turn to our e-commerce accountants. Drop us a line to find out more, otherwise, do read on!

How To Choose an Online Payment Processing Method That’s Best For Your Business?

Payment gateways or merchant accounts are the ones that offer online payment processing solutions.  

A payment gateway is the technology behind processing payments online, acting as the middleman between the buyer and seller. Payment gateways encrypt sensitive card details, ensures the funds are available in the customer’s bank, and allows the merchants to get paid. Examples of payment gateways in the United Kingdom include WorldPay, Amazon Pay, and Stripe.

A merchant account, on the other hand, is set up by banks offering online payment processing solutions. They help you accept credit card payments from your customers. Many merchant accounts are also payment gateways. In the U.K., banks like Barclaycard and Lloyds Cardnet bank offer merchant accounts to online sellers.

Before we go on to list all the available payments options online for you as an e-commerce seller, these are some tips to consider when choosing payment gateways and merchant accounts:

• Be wary of tiered pricing. Some payment gateways charge different rates and fees for different card types. Tiered pricing is usually the most expensive and ambiguous option for online sellers or merchants.
• Confirm the monthly fee rate. While you might be sold on the low per transaction fee, the payment gateway or merchant account’s monthly fees might be high.
• Figure in setup time and fees. There is an approval process if you opt for a traditional merchant account which takes a longer time as compared to other payment gateways, especially when you are a new business owner.
• Read the fine print. Some payment solution service providers include in their requirements or contracts that you must engage them for at least a year, others have minimum monthly transactions for you to meet.
• Verify compatibility. Confirm that the service providers’ plugins, software, etc. are compatible with your own website or online store’s.

7 Ways To Accept Payment For Your E-commerce in 2021

1. Debit, Credit and Prepaid Cards

In a 2019 survey carried out by Attest, 37% of online shoppers used credit or debit cards for their online purchases, the second most popular payment method after PayPal. Accepting debit and credit cards would mean that you capture more than a third of British online shoppers, thus it is prudent that you keep that option open for them on your mobile store.

Top Credit And Debit Cards Used In The United Kingdom

• Visa

In 2019, Visa processed USD $8.8 trillion in payments volume and generated USD $23 billion in total revenue. As of 2018, it has 3.3 billion cards in circulation worldwide. It is widely accepted both in brick-and-mortar and online stores in the U.K.

• MasterCard

In 2019, MasterCard had a payment volume of USD $6.5 trillion and its total revenue was USD $16.9 billion. As of 2020, there are 2.3 billion MasterCards in circulation globally. While Visa surpasses MasterCard in terms of transactions, purchase volume and cards in circulation, both are almost always accepted together among merchants internationally.

Both Visa and MasterCard mainly earn from service and data processing fees. However, they classify these fees differently and have distinct fee structures. Service fees are based on card volume and charged to the issuing bank. For data processing fees, Visa and MasterCard also charge them to the issuer, who pass them on to merchants who collect a per-transaction fee. They are the fees charged for the sharing of transactional information over Visa and MasterCard’s networks with merchants.

Some of the popular banks in the U.K. and the bank accounts that issue debit cards in the U.K. are the Santander Everyday Current Account, Starling Bank Current Account, Barclays Bank Account, Royal Bank of Scotland Select Account, Natwest Select Account, and First Direct 1st Account.

Prepaid Cards

Prepaid cards, cash cards, prepaid credit (they don’t offer credit though) cards, prepaid debit cards all mean the same thing. They are all reloadable money cards that you would top-up, much like pay-as-you-go mobile phone plans. They are usually for people who are budgeting or learning to budget, e.g. those with bad credit scores, students, and children.

Prepaid cards charge monthly fees of about £2 to £5 and also transaction and ATM withdrawals fees around £2 each time. Prepaid cards could be used both in-store, and for online payments. However, booking a hotel, or flight, or hiring a car would usually not be accepted by using a prepaid card. Examples of prepaid cards are thinkmoney Prepaid Card, Cashplus plus prepaid MasterCard (Deluxe), Pockit Prepaid Card, Rooster Money Prepaid Card for Parents and Kids, and Suits Me Premium Card.

2. Digital and Mobile Wallets

A mobile, digital or e-wallet is a virtual wallet where users store, send, and receive money and pay for purchases made online. More than two-thirds of UK adults (72%) used online banking and more than half (54%) used mobile banking in 2020, UK Finance found. The ones popular in the United Kingdom include PayPal, Google Pay, Apple Pay, and Samsung Pay.

Top Digital And Mobile Wallets Used In The United Kingdom

• PayPal. PayPal is the top digital wallet in the United Kingdom because it is free (excluding currency conversions) to open a PayPal account and pay for an online purchase for those in the U.K. For merchants, with a PayPal option, your customers will have access to credit and debit cards, PayPal, Pay in 3, PayPal Credit and local payment methods. You can also use PayPal to accept recurring payments or subscriptions, and send invoices.
• Google Pay. Google Pay could do what a digital wallet does: send and receive money, store debit or credit card information for online or in-store purchases. Merchants do not have to pay any fees for accepting Google Pay payments online. However, for in-store purchases, card networks might charge merchants up to 4% as they consider Google Pay card-present transactions. To add Google Pay as a payment method, your website or online store must be able to add the Google API and must use a Google Pay-compatible gateway like 3dcart, Adyen, Stripe, Worldpay, BigCommerce, Shopify and WooCommerce.
• Amazon Pay is another way to facilitate customers’ payments without them entering their credit card information. It is especially convenient for Amazon users. Merchants are charged 2.7% plus 30p for domestic UK transactions if their turnovers online are less than £50,000 per month. Higher turnovers would merit custom discounts. If customers paid with a debit or credit card issued outside of the U.K., merchants would be charged a cross-border fee between 0.4% to 1.5%.

3. Bank Debits

Bank debits deduct the amount spent by a customer from his bank account directly to yours. Customers give their bank account information for a merchant to deduct automatically from the customers’ bank accounts at a specific time weekly, monthly, yearly, etc. Merchants or online sellers would usually send a confirmation message or email to customers of the amount deducted at the time of deduction even though customers have pre-authorized the debits.

Direct debit is suitable for subscriptions like memberships or software, recurring payments like bills, instalment payments and rent collection.

In the U.K., the most prominent direct debit payment method is Bacs (Bankers Automated Clearing Services). Retail payments authority Pay.UK owns and operates Bacs since 2018. Bacs is used to pay wages, salaries, pensions, state benefits, employee expenses, tax credits and insurance settlements. With Bacs, you are able to set a regular date for payments. It is also a cheaper way to make payments as the average price per transaction is 23p on average.

Besides Bacs, bank debits could also be made by CHAPS and Faster Payments. CHAPS transfers are settled on the same-day compared to 3 working days for Bacs. CHAPS is usually used for high-value transactions like buying a car or property.  Faster Payments are mainly used for small value payments and payments are credited almost immediately. Faster Payments can be used for bills, supplier invoices and online transfers between bank accounts in the U.K.

4. Bank Redirects

Bank redirects are payment gateways that have an additional step of verification to complete a bank debit payment. At checkout, instead of entering bank account information directly, users are redirected to their online banking or payment gateway login page to authorize the payment.

These are some of the main types of bank redirects or online payment gateways:

1. Hosted payment gateways. They direct customers away from your website’s checkout page to the Payment Service Provider’s (PSP) page where they confirm their payment details. When the purchase is paid, customers are redirected back to your website. PayPal is an example of a hosted payment gateway.

Pros: Secure, simple, and easy-to-setup. Transactions are Payment Card Industry (PCI)-compliant and protected against fraud.

Cons: Merchants do not have control over the whole user experience as hosted payment gateways are external operators.

2. Self-hosted payment gateways.Payments are made on the merchants’ websites themselves. Customers enter their payment details which are collected and sent to the payment gateway’s URL. Examples of self-hosted payment gateways are Stripe-powered Shopify Payments and Quickbooks Commerce B2B Payments.

Pros: Merchants control the whole payment experience as all parts of the transactions are completed on the same website.

Cons: If you are operating the website on your own, you would need to have some technical know-how if there are any hiccups on the payment system. This is because technical support might not be available for self-hosted gateways, or you might need to hire technical support help for your website’s payment gateway.

3. API-hosted payment gateways. Payments are processed using an API (Application Programming Interface) or HTTPS queries after customers enter directly their credit or debit card information on the merchant's checkout page. Stripe API and Square API are examples of API-hosted payment gateways.

Pros: Can be integrated with mobile, tablets, laptops and PCs for a smooth user experience. API gateways also give merchants full control over the user interface and the customer’s shopping experience.

Cons: Additional PCI DSS compliance and purchasing SSL certification requirements for merchants.

Top Bank Redirects Used In The United Kingdom:

• PayPal

Synonymous with payment gateways, and most accessible to all, PayPal is one of the most technologically advanced payment gateways. It boasts a 377 million strong base of active users and merchants. In a 2020 PayPal-commissioned Nielsen research of U.S. based merchants, PayPal’s customers convert 2.8x more when shopping with merchants who offer PayPal as a payment option. Customers trust PayPal as a secure payment option for them.

• Opayo (previously known as Sage Pay)

Opayo has top reviews on Trustpilot of 4.9/5. It is the payment processor for companies like easyJet, Europcar, Krispy Kreme, Murco Petroleum, and is the technology behind the BBC's Children In Need donation app. Opayo operates in the U.K. and Ireland. You could integrate Opayo’s payment processing system on your website or online store by 3 ways: Opayo Form (payment on Opayo’s payment page), Opayo Server (payment integrated in your own page), and Opayo Direct (you develop your own payment process with Opayo’s technology).

5. Buy Now, Pay Later

Buy now, pay later (BNPL) is a buying on credit payment option for online or in-store shoppers. Payments are split into instalments, usually interest-free unless not paid on time. Where previously the BNPL model was more commonly offered for big-ticket purchases, nowadays retailers are offering this credit payment option for small purchases like cosmetics and apparel too.

Top BNPL Providers In The United Kingdom

• Klarna

For the U.K., Klarna offers online shoppers three payment options: in three interest-free instalments, in 30 days, or up to 36 months. As an e-commerce business, whatever payment option that your customers choose, you are always paid in full and upfront. you would also get access to millions of Klarna shoppers through integrated marketing campaigns.

• Clearpay

Clearpay stated on their website that with the Buy Now Pay Later method, their retailers experienced an increase by 20% on average in cart conversion, and 40% increase in average order value. With Clearpay, customers need to pay a quarter of the price of purchase upfront, and the rest in 3 instalments over six weeks. Merchants will be paid ‘within days’ of the purchase.

6. Cash-Based Vouchers

Another way to accept payment online is through cash-based vouchers, or e-gift cards. Retailers like Argos, ASOS, Asda, Primark, Sainsbury’s, M&S and John Lewis accept e-gift cards. E-gift cards are used like regular gift cards, but the recipient would receive a digital card with a code through his email address rather than a physical card. He could then purchase items online with the e-gift code.

Top E-gift Card Payment Option In The United Kingdom

• Love2shop

Love2shop is accepted at over 100 major retailers with more than 20,000 stores across the United Kingdom. It is the U.K.’s top multi-retailer gift voucher and prepaid gift card issuer, where those who receive them can decide at which retailer they want to spend their gift cards at. There are four different types of vouchers available for customers to purchase: Love2shop voucher, Love2shop gift card, Love2shop e-gift card and the Love2shop contactless card.

7. Cryptocurrencies

Cryptocurrencies are digital tokens, they are not physical coins or cash. It is a decentralised digital currency, with no central authority or government regulating it. Cryptocurrencies are encrypted and secure, and run on peer-to-peer blockchain technology and could be used to buy goods and services or even traded. There is no standard value for cryptocurrencies and the price is set by the market’s demand and supply.

Top Cryptocurrency Payment Gateways In The United Kingdom

• CoinPayments

CoinPayments is an all-in-one digital currency payment solution with 3 million user accounts and merchants in 182 countries. It handles cryptocurrency payments and transactions, has a cryptocurrency trading platform and a digital currency storing wallet. Out of 5,862 crypto coins available today, CoinPayments supports 1,925 of them, with an industry-low transaction fee of only 0.5%. Its payment gateway is offered by major e-commerce platforms internationally, e.g. WooCommerce, Shopify and Magento.

• BitPay

With BitPay, cross-border payments would be settled within 48 hours. What sets BitPay apart is that merchants have the option of getting paid in GBP or 37 other fiat currencies instead of bitcoin. Bitpay will lock in the exchange rate at the time of transaction, accept customers’ pay in Bitcoin or other cryptocurrencies, and convert that transaction into fiat currency to be deposited directly into the merchant’s bank account.

What Are the Fees Involved?

Costs of accepting payments online vary between different online gateway providers. There are many fees associated with accepting cards and other payment types online. Most payment gateways and merchant accounts charge per transaction, on top of setup fees, monthly and annual fees, minimum transactions fee, and processing fee, among others. The standard transaction fee for online payments could be cheaper for merchants with volume discounts.

In the United Kingdom for example,

• U.K.-based PayPal merchants accepting payments locally will be charged 2.90% + 30p per transaction.
• BitPay merchants pay a 1% fee on all transactions.
• For Klarna, merchants are charged based on the payment options their customers choose. If their customers chose to pay in 3 interest-free instalments, merchants are charged 5.4% transaction value + 20p, 3.4% + 20p if they pay in 30 days, and 1.9% + 20p if customers pay over up to 3 years.

Do check out each payment gateway’s website for more details regarding merchant fees.

All set to choose that payment gateway? Great! We hope you found the best way to accept payments online that is suited to your business needs; we really wish you all the best!

Whenever you need help filing your company taxes or with the accounting for your UK company, we at East river are here for you. We will support your growth and take away all the administration pains of running your online store.

Every e-commerce business likes new customers. However, it’s even better when the same customer returns.

Existing customers help in creating a solid foundation of your business that provides a steady revenue stream that costs less than the costs of acquiring new customers. Research shows that return customers account for about 15% of all transactions and spend an average of three times as much as new customers.

Instead of retaining new customers, some customers focus on acquiring new ones. However, not taking the necessary steps to retain new customers can lead to revenue loss and a decline in growth which you do not want.

By the way, as your e-commerce business grows, you might overlook the boring but necessary work of keeping your books in order. That’s when we can help. Our e-commerce  accountants, who know how e-commerce business works, can help you with sorting that out. Talk to us to know more, otherwise, do read on.

What Is Customer Retention?

Customer retention is a skill of retaining customers. The strategy of retaining customers is different for every industry and also differs from company to company. Still, the important part is to provide a great customer experience to keep your customers coming back. You can start by giving a positive buyer journey through check out and beyond that will help in improving the loyalty and affinity for your brand.  So, how can you calculate customer retention?

How To Calculate Customer Retention?

You can calculate customer retention by:

• Choosing a period like a onth or year.
• Subtract the number of new customers (N) acquired in that time frame from the total number of customers (E) remaining.
• Divide this number by the number of customers at the start of the period (S).
• To get a percentage, multiply it by 100.

(CRR=((E-N)/S)*100)

For example, let’s say you want to calculate the retention rate for a particular month. You see that you had 105 customers at the start of the month (S) and that you acquired an additional ten customers (N) during that month. At the end of the month, you lost 30 customers, leaving you with 75 existing ones (E).  Following our formula, we would subtract 10 from 75 for a total of 65 customers. Divide this number by 105 to give you a retention rate of .62. (Multiplying by 100 will provide you with a percentage - in this case, 62%).  

In other words, the higher your customer retention rate, the better your position in the marketplace.

Why Is Customer Retention Important?

Apart from the fact that acquiring new customers is more expensive than keeping existing customers, other reasons make customer retention important.

Retaining customers can use your services 50% more than a new customer. They also tend to spend 33% more than new customers and help in reducing your marketing costs. So you see, retaining existing customers is more profitable than just acquiring new customers.

Retained customers are more likely to send referrals your way. They tell their friends and family, thus contributing to the word of mouth advertising. It has been seen that word-of-mouth advertising drives five times more sales than paid advertising.

This results in more happy customers who drive more sales your way, thus saving your money by decreasing the advertising costs.

Benefits Of Focusing On Building Customer Retention

Let’s see why focusing on customer retention is beneficial for your business.

1. Customer Retention Is Cheaper Than Customer Acquisition

As mentioned earlier, focusing on existing customers is less costly than acquiring new customers.

Acquiring new customers always takes lots of time, money, and effort. You’ll have to create strategies, target your primary audience, publish ads and promote your brand endlessly. It doesn’t need this much effort regarding existing customers as they already know about your brand and what it does.

To acquire new customers, you’ll have to spend five times more than to keep the existing customers. Also, there’s only a 5-20% chance of making a sale with new customers. The percentage increases to about 60-70 when it comes to selling products to existing customers.  This means that by focusing on existing customers, you can generate revenue and grow your business.

2. Valuable, Genuine Feedback

By purchasing a product from your company, new customers don’t send any specific message about your products. However, existing customers send a clear message through their purchase behaviours. The products they buy regularly can show quality and popularity while items that are only purchased can showcase some problems. Also, repeat customers give you their feedback and suggestions as they show genuine interest in your store and products.

3. Increased Word-of-mouth Advertising

Word of mouth advertising is a popular form of promotion that never fades away. Since times have changed, online reviews are an important part of the purchasing process. Many customers focus on reviews of the brand before making any purchase. That’s why review sites like Yelp! and Google’s review platform play an important role in the buying decision.

If they are happy with your products, existing customers will leave a positive review as compared to new customers. These positive reviews will help in acquiring new customers in return.

8 Customer Retention Strategies For Online Businesses

Around 67% of customers have said that they support small and local businesses. But in today’s marketplace, how can you set yourself apart from other famous e-commerce stores?

This can be solved by creating a loyal local customer base that will help you establish a strong business. Here are some ways that can help you to develop strong customer retention strategies to grow your business.

1. Create A Customer Loyalty And Referral Program

With so much competition around, you will have to prompt your customers to keep using your services repeatedly. This can be done by creating a:

Loyalty Program

Developing a loyalty program can encourage customers to use your services in the future. Usually, loyalty programs issue points to customers for every purchase that they make. These points can be exchanged for free samples, products or discounts. As loyalty programs are based on how much your customers spend with your business, they drive up the average order value.

Referral Program

A referral program awards customers for sending more customers your way. According to GWI, "41% of internet users mention that rewards are one of the top things that motivate them to promote their favourite brand online."

The Shopify App Store has various types of referral program apps that encourage customers to refer people through social media via a personalised link, text, email and more.

People who like your brand refer your services to their friends and family, and in return, they get discounts or other rewards; it's usually a win-win situation for both; you get to boost sales and increase your customer base.

2. Stand Up For Causes

Many people like to use services for those companies that share their values and stand for any cause.

According to GWI, "46% of internet users globally want brands to be eco-friendly, 44% want brands to be socially responsible, and 28% want brands to support charities."

For example, if you want to support environmental causes, you can use eco-friendly products promoting that you are actively trying to reduce your company's carbon footprints. Or you can donate a portion of your profits to organisations that clean up the environment. You can also share some of your profits with non-profits that fight for hunger.

3. Continue Building Relationships After The Sale

Show your customers that you care about them by communicating with them regularly. Here are some ways to develop relationships with your customers.

Use Push Notifications

Your real relationship with your customers begins after checkout. You can start creating a funnel to a better post-purchase experience that can help with your repeat sales. Your shop app notification should deliver order status and delivery tracking updates to your customer's phone and inform them about every touchpoint after checkout.

Aspired by push notification, customers can find recommendations from your store every time they use your app or check out your newsletter. This means that you are helping them to decide on your next purchase even before their last order has arrived.

Send Post-purchase Emails

Make the best use of email marketing. This means that you can keep the conversation going after visiting your website or making a purchase.

According to GWI, "sharing helpful information is one of the top motivations for brand advocacy—globally, 32% of internet users reported they are more likely to promote their favourite brand online when something is relevant to their own interests."

You can send out informative newsletters to your subscribers. It's a great way to show-tell about different products they might like based on their purchase behaviour.

4. Give your customers a seamless online to offline shopping

By providing different choices to shop and buy across various channels, including in-store and online, you can provide an omnichannel experience which many people like.

Here are some ways on putting a great omnichannel channel experience for your customers:

Offer (BOPIS) - Buy Online, Pick Up In-Store

BOPIS is also known as click and collect or curbside pickup. During the pandemic, it has gained a lot of traction. Now, customers can buy online and go to pick up a delivery. This saves their time, can quickly return items, and avoid long delivery times.

Sell your stuff on social media

Many customers use social media to find out more information about a business or brand. This also prompts them to do social shopping, allowing them to make purchases directly through social media. Commonly, popular social media platforms like Facebook, Tik Tok, and Instagram allow companies to sell directly through their platforms. "GWI research shows that 25% of Instagram users, 22% of Facebook users, and 22% of TikTok users have clicked on a sponsored or promoted post in the last month."

Let Customers Buy In-store, And Ship To A Home

About 28% of buyers said that next-day delivery would increase the chances of buying a product online. Then, why don't you use the same ideas for your in-store order fulfilment strategy?

Offering local delivery to your customers is a good solution if your company has a (virtual) showroom or offers customisable products. This gives your customers an easy way to purchase what they want which isn't available in your area.

5. Streamline Customer Service Across All Channels

About 16 hours a day is spent making online purchases by the average US adult. The data have increased slightly since the pandemic of about 12:24 hours which is still high.

As people are spending more time online, their expectations from the business have also increased. This also included a regular customer support experience across all platforms.

Customer success is about forming a long-lasting relationship with your customers. This means delivering steady customer service on all channels like phone, email, live chat, social media, etc.

Suppose a customer leaves a comment on one of your social media posts asking for more information about your products. In that case, you can respond directly in the comment section or send them a direct message to solve their queries. You can also provide your contact details in your DM, letting them know that they can reach you directly if they have any further questions.

On your website, you can use live chat to engage with site visitors. Live chat helps in improving the conversion rate and customer experience by solving all your customer queries, guiding them in their shopping spree, or booking an appointment.

Using all these customer service strategies contributes to boosting brand loyalty, brings up repeat customers, and increases customer loyalty.

6. Offer Value-added Services Along With Your Products

People don't only look for items to buy, but they also look for an experience that makes their lives easier. To improve your customers' lives, you can provide value-added services along with your products. This also strengthens the bond between your customers and your brand. Some value-added services include:

• Personal shopping. Personal shopping can be done online (by sending product recommendations to your customers based on their shopping behaviour) and in-store or through virtual appointments.
• Subscription boxes. Subscription boxes allow you to curate experiences for your customers. This also prompts them to go shopping again.
• Free gifts with purchase. You can show your customers that you care about them by giving them a small freebie with the purchase and making them familiar with new products that they will want to buy again.

7. Create a shopping experience versus a purchase transaction

When customers go shopping, they expect more than just an item they purchased; they look for a shopping experience. You should get creative and brainstorm some ideas to create a unique experience for your customers.

For example, if you have a boutique store, you can offer various stylist services. You can think about different ideas to make your customers' lives easier when providing products and services and implement those services into your customer retention strategy.

8. Leverage technology creatively

There are many different technologies through which you can build a local, loyal customer base. You can create a consistent brand experience between online shopping and personal store by using other apps.

There's a popular app called Experiences which lets you host classes, tours, events in your physical location through your online store. When your customers are in your store, they can book or check out new experiences through your app.

Summary: How to Retain Customers in 2021

As mentioned earlier, many brands focus on acquiring new customers rather than focusing on keeping existing customers. Keeping an existing base is as important as attracting a new customer base. So, try to put some effort into building relationships with current/past customers. As these people already know about you and your brand, it'd be easy to retain them. And you can even get referrals from them. Some of the customer retention you can follow:

1. Set realistic expectations early.
2. Develop a loyalty program.
3. Pay attention to customers’ questions.
4. Dig into the complaints.
5. Be active on social networks.
6. Target past customers based on their activity.
7. Use email to nurture relationships.
8. Market to customers’ interests.
9. Engage in social responsibility.
10. Be honest and transparent.

For a business to run smoothly, the payroll process must be streamlined and error-free. It is easy to streamline and optimize your payroll and other back-office processes within your SMB. Did you know that this can improve your cash flow?

Although payroll involves money paid out by an organization, it is viewed as distinct from accounts payable because it involves both expenses and liabilities.

Although payroll is separate from accounts payable, you can use payroll to boost your cash flow just as you can by streamlining your accounts payable process. If you need further advice from a trusted accountant in the UK on improving your payroll process, have a chat with us. Otherwise, do read on for our top 5 tips to handle your business’s payroll accurately and efficiently.

1. Be Aware of The Payroll Processing Procedures in the United Kingdom

As of 31 January 2020, the United Kingdom (UK) has finally departed from the European Union (EU) after three years of negotiation.The UK is still considered an international business powerhouse, although the long-term effects of Brexit on the UK's economic progress remains to be seen. However, those who are looking to invest resources in UK operations should first understand nuances of the UK payroll process and the UK payroll basics.

PAYE and Payroll

Even if you only have one staff member, you are still required to register as an employer to set up your Pay As You Earn (PAYE) scheme. PAYE is HM Revenue & Customs (HMRC)’s method of collecting National Insurance and income tax from employees at source.

You can apply for yours online through www.gov.uk, then wait up to 5 working days for your employer PAYE reference number. Once you have successfully registered as an employer, you can use payroll software to set up or run payroll yourself, or outsource this task to a payroll provider, but you will still be liable for collecting and maintaining employee records.

The United Kingdom’s Minimum Wage

Under the National Minimum Wage and the Living Wage, workers in the UK are entitled to a minimum wage.

As of April 2021, the Living Wage of £8.72 is applicable to all workers aged 23 and over. While the National Minimum Wage is calculated at an hourly rate, it is applicable to all your workers even for those who are not paid by the hour.

Working Hours

In general, the working hours in the UK are from 9:00 am-5:00 pm, depending on the job nature. A typical work day is usually eight hours long.

UK’s working time directive mandates that workers cannot work over 48 hours in a week on average, measured over a 17-week period. Your employees can opt out of a 48-hour week voluntarily.

Pay Slips Should Be Issued to All Employees

Most workers in the UK are paid on a monthly basis, and this amount is made directly to their bank account. Under the UK law, you are required to issue a payslip to your employees with each payment. Bonus schemes and performance payments are left to your discretion.

Taxes

Depending on wages, individual income tax rates vary from 0 to 45%. Every worker has a personal allowance of up to £12,500 of income, which is tax free. After the first £12,500, income is taxed at higher amounts depending on salary.

Scotland has different tax bands compared to the rest of the UK. Depending on where you are located in the UK, the tax rate for your employee may differ.

Leave Considerations, Including Sick Pay, Maternity Pay & Paternity Pay

Nearly all workers are eligible for 5.6 weeks of paid annual leave or statutory leave entitlement, with those working typical 5-day weeks entitled to at least 28 days of paid annual leave in a year. Your part-time staff will be entitled to at least 5.6 weeks of paid annual leave calculated on a pro-rated basis.

Bank holidays need not be given as paid leave, with many employers opting to include bank holidays into a worker’s statutory annual leave. Under UK labour laws, a Statutory Sick Pay (SSP) is stipulated, with £94.25 per week up to 28 weeks.

Workers in the UK are eligible for up to 52 weeks of maternity leave, with the first 26 weeks being known as Ordinary Maternity Leave, while the last 26 weeks are considered Additional Maternity Leave. The same goes for adoption leave.

Workers who are eligible for maternity or adoption pay can receive up to 39 weeks of pay at 90% of their average weekly income for the first six weeks, before tax. The remaining 33 weeks will see an adjustment to  £148.68, or 90% of their average weekly income, depending on which is lower.

As for paternity leave, workers can enjoy up to two consecutive weeks. Those who are eligible can receive £148.68, or 90% of their average weekly income before tax, depending on which is lower.

Statutory Payments

Statutory payments including statutory sick pay, statutory maternity pay, statutory adoption pay, statutory paternity pay, are processed through payroll.

As an employer, you can get reimbursed for these payments, depending on the amount of National Insurance paid in a year. You can then recover the appropriate amount by adjusting your monthly payroll tax payment to HMRC.

2. Set Up a Payroll Calendar And Stick With It

A payroll calendar is one that allows you to determine when you have to collect your employees’ timesheets and process payroll. Payroll calendars are based on the frequency of payment, direct deposit processing times, as well as bank holidays.

Setting up a payroll calendar and sticking with it can enable your employees to understand when they will receive their salary. Moreover, your payroll employee can also take reference to this payroll calendar to help with the execution of payroll tasks and planning. Make  your own payroll calendar by choosing from the variety of available templates online, build from scratch with a spreadsheet or use an Office Suite program.

Before you create your own payroll calendar, here are some tips you should take note of:

• Base your payroll calendar off a regular calendar as a guide for certain intervals in the year that you may need more time for payroll processing
• Highlight important dates using colours. These can include early time card deadlines as a result of a bank holiday
• Disseminate a copy of the payroll calendar to your managers and supervisors so they can distribute to their respective staff

In addition, your payroll calendar should show all fiscal year pay dates for easy payment processing and reduce your employee’s confusion on when they will get their wages. After you have made your calendar template, don’t forget to save it in your hard disk for updating when there are changes.

3. Jot Down Your Payroll Processing Procedures

Documenting your payroll process is crucial to managing payroll procedures. When you clearly report every step of the payroll processing procedure, you can then effortlessly analyse, audit and identify weak areas in the process. Once you have figured out a payroll process that works best for your company, record the steps and disseminate it to your payroll employees to ensure that they are well aware of their respective roles in the procedure.

Upkeep a standard operating procedure for your payroll processing, jotting down all the steps in payroll processing, including the reporting and check handling procedures. It will also be useful for you to include instructions on manual ways to process payroll in case of emergencies.

4. Automate Your Payroll With Modern Technology

Modern technology can be helpful when it comes to automating your payroll processes. With a Variety of payroll management software available in the market, you can choose one that is most ideal to help you optimise your payroll functions.

Needless to say, processing payroll is a laborious process. When this function is carried out manually, it is prone to human errors and can possibly lead to severe penalties. However, investing in a payroll software can help you automate the entire payroll process. These software can even factor in tax calculations, generate employees’ payslips, adhere to local legislation and provide you with up-to-date information for end-of-year tax returns. Remember to streamline your payroll management process by using the latest software for higher accuracy.

5. Outsource Your Payroll

Of all the payroll tips for small business, this is one of the most useful ones.

Running your own business is certainly a feat — it is always challenging to handle everything from marketing to payroll management. However, you don’t have to struggle with everything on your own!

Best of all, managing payroll costs does not have to burn a hole in your pocket. Consider outsourcing to payroll service providers like East river, who will take care of all your payroll needs. Simply focus on growing your business, and leave the rest to us. Let our accounting experts in the UK handle your paperwork woes from payroll, invoices, reports, and taxes. We even have accountants who know e-commerce businesses. Chat with us today!

Have you ever wondered who pays for the free shipping when you shop online? If you are thinking of setting up your e-commerce store on platforms such as Amazon, WeChat or Lazada, let us share with you some of the ways you can offer free shipping profitably to your online customers. Turns out, it is possible to offer free shipping and have a profit margin at the same time.

To grow as an e-commerce company, you also need your paperwork and accounts to be settled so that you can deal with daily operations with peace of mind. To avoid scrambling around when it’s time to file for your returns, find out how accountants who know e-commerce businesses can help you with just that.

Why Offer Free Shipping?

In a 2019 report by Clutch, 77% of 500 customers were more likely to order an item if there is free shipping, while only 43% would buy it if shipping costs US$2.99. That means, more than half of shoppers would abandon their carts if they had to pay more for shipping!

Offering free shipping not only decreases online cart abandonment which translates to more sales and revenue, but it could also increase customer loyalty. Since more people are selling online nowadays on various platforms like Amazon, Wish, Shopee, Taobao, Lazada, eBay, etc., offering free shipping would be a differentiating factor for your e-commerce business.

It could translate to repeat purchases, word-of-mouth recommendations and positive reviews on the online marketplaces that you sell -even though it does not necessarily mean that you fork out extra expenses for free shipping.

5 Things To Consider Before Offering Free Shipping

Of course, it is not prudent to offer free shipping all the time. Especially if the item that you are sending is bulky, or when you are shipping across borders. Therefore, you need to consider these 5 factors before offering free shipping:

1. Average Order Value: The total amount purchased by your customer.
2. Average Order Size: The number of items that need to be shipped.
3. Product Dimensions and Weights: Measurements of items’ width, length, height and weight.
4. Shipping Rates by Carrier: The cost of shipping you are charged by your delivery partner or provider.
5. Shipping Radius: The distance the orders need to travel to be delivered.

If the item that a customer buys from your Shopee store, for example, exceeds the average order value or dimensions, you might not be able to offer free shipping. Listing these variables would help you make the most rational decisions for your shipping strategy.

Furthermore, having good shipping management tools would speed up the order fulfilment process and shipping. Shipping management tools like EasyShip and ShipStation automates tedious and error-prone shipping tasks by organizing packing orders, automating picklists, creating packing slips and tracking shipment processes in real-time. They help you compare the best carrier options so that you always get the cheapest shipping rates available in the market.

11 Ways To Offer Free Shipping Profitably

Offering free shipping profitably sounds like an oxymoron. It is not something impossible though. Sometimes it would be you or your customers who are paying for it or sometimes, this would be split, but ultimately when your customers reach the checkout page on your Amazon store, they would see ‘free shipping’.

Let’s see how you could offer shipping at low or no cost without hurting your bottom line:

1. Set Minimum Order Value

Setting a minimum order value that is attainable to your customers would encourage them to shop more. Find a value that is not too high that your customers wouldn’t even try to reach, but not too low that you lose money when you offer free shipping.

Display clearly on your shopping cart:

• How much do they need to spend to get free shipping;
• How close they are to qualify for free shipping after they start adding items to their cart.

Prompting the shopper each time he adds an item onto his shopping cart how much more he needs to spend to get free shipping would encourage him to spend more.

2. Include Shipping in Listing Price

Bill D’Alessandro, of Rebel CEO, a consulting firm, ran a test for a skincare product to see how offering free shipping converts web page visitors to buyers.

When customers view two options:

Option 1: $30 product cost + $5 shipping, and

Option 2: $35 product cost with free shipping

The conversion rate for option 2 was twice of option 1.

Including shipping price in listing price works well for items that are unique and not sold across multiple sites. You will recoup the shipping costs by offering free shipping when you incorporate the shipping price in the listing price.

3. Flat-Rate Shipping

You can apply a single flat rate for shipping to every order. For example, £10 for orders sent within the UK.

Or, you can offer flat rate shipping according to shipping box volume. This requires a bit of planning. Assess which items your customers habitually purchase, and which items they purchase together. Fill the commonly purchased items together in an average-sized box and see how much space you have. You could then fine-tune your offerings, upsell and adjust your free shipping threshold to fill that space.

4. Offer Bundles

When shopping online on Wish, Lazada or SHEIN we may have come across bundles, or an offering of items grouped, usually at a lower price than if they were bought separately. This is a way that e-commerce sellers use to sell more products than their customers intended to buy and thus increase their profits.

Suggest product bundles at the landing or shopping page and remind them again at the end of the checkout process. This encourages customers to reach the minimum order value to be eligible for free shipping.

To illustrate, if you are selling household products, and customers purchase laundry detergent, offer them a bundle with softener and dryer sheets as a package option. You would have considered the shipping price when you offer the bundles. Your customer would likely be persuaded to opt for the bundles, which would increase your revenue or profits.

5. Free Shipping With Memberships

The most popular (and replicable) e-commerce membership program is Amazon Prime. Customers pay monthly or yearly fees to get into the Amazon Prime loyalty program to get free delivery on Prime eligible items. (In the U.K., Amazon Prime costs about £7.99/month)

In theory, the membership fee and repeat business would make up for the shipping costs. If you offer free shipping with membership, this would ‘lock in’ your customers to keep buying from your e-commerce store since they are paying a monthly fee.

6. Use Ground Shipping

Oftentimes, ground shipping is the cheapest option. Customers do not mind trading in longer waiting times for free shipping. In a 2017 consumer survey conducted by Internet Retailer and Bizrate Insights of 2,815 U.S. consumers out of 10 shoppers are willing to wait longer for a free shipment. While air cargo would be faster, it is more expensive. Ground shipping reduces shipping carrier costs and gives you better margins as trucks and vans are used instead of aeroplanes.

7. Restrict High-Margin Items Only for Free Shipping

To offer free shipping profitably, offer free shipping only on products where you know the shipping cost is low and the product margin is high. By doing so, you could offer free shipping for those items for the long term, and this method is fairly easy to implement too.

Examples of high-margin low-cost products are fashion accessories and beauty products. They cost next to nothing when bought in bulk. Although this is not suitable for all e-commerce businesses, if you can get the items close to production prices, and set prices way above cost, you do not even need to charge for shipping but still gain profits. What you have to look out for instead are competitors selling the same items at lower costs.

8. Outsourcing Fulfillment and Shipping

Outsourcing fulfilment and shipping lets you concentrate on running your business instead of racing with time to pack and dispatch your customers’ orders. You do not need to set up your distribution centre if you outsource, saving costs for you.

By outsourcing, you can scale easily and quickly. Third-party logistics providers could offer you discounted shipping rates because they ship large volumes of orders. You could pass on these savings to your customers, and they could enjoy free shipping without cutting into your profit margins.

9. Offer Local Store or Drive-Thru Pickup

Another option where you and your customers would not have to bear shipping costs is working with local stores and provide curbside or drive-thru pickups as an option. This works best for e-commerce retailers who have brick-and-mortar shops, or even online sellers who sell from their warehouses or pop-up stores. The “buy online, pick up in store” (BOPIS) trend would only continue to grow as e-commerce grows. Signifyd reported that 43.7% of omnichannel retailers in Digital Commerce 360’s Top 500 offered curbside pickup in 2021, compared to just 7% at the end of 2019. Set the shipping rate automatically to ‘free’ if your customers select store pickups.

10. Limited-Time Free Shipping (e.g. Important Holidays)

Offer year-round free shipping only if you can afford to. If you can't, take advantage of the holiday seasons to boost sales and then return to paid shipping the rest of the year. Do consult our key e-commerce dates and events calendars for the UK., Singapore, and Hong Kong to see when to time your free shipping promotions.

11. Free Shipping for First Time Customers

Besides limiting the period for free shipping, you could limit the people who enjoy free shipping. Target first-time customers by creating a one-time use coupon code for them to shop on your online store. Shopee, for example, gives $10 off for a minimum spend of $20 for the first 250 new users signing up for an account between 6 June and 7 July 2021, combining this offer with the previous’.

Item Returns - Should They Be Free Too?

The caveat to giving free return shipping is that you would be likely to receive more returns. Thus, that might not be sustainable nor cost-effective for you as an e-commerce seller in the long run. What you could offer instead are either exact cost shipping or flat-rate return shipping. With exact cost shipping, customers pay the exact return fee, but it would add an extra step of verifying the price of return shipping. Flat-rate return shipping gives visibility to your customers on how much they need to pay when returning an item. It is also fairer for you because you would split the return cost with them.

Finally, continue to test these shipping strategies to see which works best for you. You could further work on these points too:

• Fine-tune your offerings and price points, compare with your competitors’.
• Evaluate whether your profit margins are healthy when you offer free shipping on low and high-profit margin products.
• Smoothen out your shipping processes to keep your costs low.
• Refine your target audience. Study your customers’ personas, get to know their interests, engage them, and take their opinions and feedback into consideration.
  Following these steps, besides being able to offer free shipping profitably, your business would most likely do well too.