Today is Budget day in the UK. This means that our Chancellor, Alistair Darling, will be walking the incredibly difficult path between the economic realism needed in the face of this country’s huge overdraft and the need for his party to be re-elected in a few weeks time. (Incidentally, what a backward country we are to not have fixed term parliaments: we still don’t officially know on what day the General Election will take place!)

As a business-owner, I feel as though I ought to be interested in today’s budget but I simply can’t be bothered. There’s nothing new about this – I’ve been uninterested in budgets for years. Why? Because, in practice, they make little difference one way or another to the micro-business owner.

Very few measures have a significant positive impact. Even in the good times, there was a progressive removal of incentives to small business as well as business in general. Over the coming years, we can expect small and micro companies to take a significant part of the debt repayment burden (ironically paying back the debt owed by the very banks who refused to lend money to them) as they’re an easy target politically. Why? Because there’s still an underlying envy in many people – they see the small business owner and they’re jealous of the control and freedom (and, in some cases, wealth) that they enjoy. So, if small business is knocked in the Budget, who cares? Well, everyone should – small and micro businesses contribute hugely to the UK economy and will help pull the country out of the current dip.

But, in the end, whatever the Chancellor does now or after the election, the effect on your profitability should be marginal. Getting your product and its marketing right will have a much bigger impact on your profits than anything a politician does. Look at it this way, let’s say you have a microbusiness with a turnover of £50k per annum. Out of this your marketing costs, say, £20k (primarily Adwords costs). If you could increase your conversion rate and the clickthrough rates of your ads you might see turnover increase to £60k and the cost of marketing reduce to £15k. You’ve therefore increased your net income by £15k in total or 30%. Nothing any Chancellor does can affect you by that amount and this is comforting news – it means that, fundamentally, your business success is in your hands. Sure, politicians can help or (more often) hinder you through tax, regulations and bureaucracy but these are marginal effects: concentrate on what you can affect and don’t worry about what you can’t.

You might, quite reasonably, point out that if you run a business that depends on the cost of petrol/diesel or that derives its income from items that are traditionally highly taxed (smoking and drinking) then the effects of the budget are more significant. But even for most of those businesses, the impact of an individual budget is likely to be minimal. Focusing on marketing, product and service are far more important than mitigating the effects of this budget.

Update

Ok, I did watch the budget! Here’s my response to it.

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When I set my business up in 1999 there was really only one choice for accounting software: Sage and you’d be forgiven for thinking that this was still the case given their marketing budget and visibility.

The consequences of choosing Sage were that I needed to employ someone specifically to use that one piece of software (I can hardly believe it even as I write that!)  and that I got very little use out of it, as MD, because I would have needed to buy an extra licence to view the information.

In my view, Sage accounting software is an utter nightmare and it completely taints your view of what accounting software can do for you. In desperation, last year I looked for an online solution and, thank heavens, I found FreeAgent.

I kid you not, if you’re a Sage user or if you find book-keeping a long winded, boring process that you do because you must, take a look at FreeAgent (http://www.freeagentcentral.com). You can trial it free for a month so there’s nothing to lose.

As an illustration, I’ve gone from having to employ someone three days a week to do the books on my main company to doing the books myself in no more than one hour a month. I kid you not. In fact, I also do the books for another business and that takes 30 minutes a month.

Here’s how it works (having set up your account) -

1. Download your statements from your online banking account
2. Upload them to FreeAgent. FreeAgent then tries to work out what each entry means and only asks for explanations of those it can’t be sure about. It gets progressively better at this over time and I typically only have a dozen or so transactions to explain per month.

…that’s it.

Doing the VAT? Just make sure your statements have been uploaded, click Taxes, VAT, and there it is: a visual version of the paper form for you to fill straight in.

How about sending the books to the accountant? Easy: under Accounting you’ll see a range of reports to send to your accountant along with the ability to export the whole lot to Excel.

Accountants are a conservative lot and many of them are tied to the Sage treadmill (of course it suits them to perpetuate the air of complication and mystery around accounting that Sage encourages) but I’ve persuaded my accountant to accept information in FreeAgent format (you could even add them as a user on your account). If they don’t: fire them! Remember, your Accountant works for you not the other way round!

FreeAgent ranks in my top couple of web applications of any sort. As an extremely busy person, I confess to almost enjoying doing the accounts now. When a business isn’t doing well, I feel better for knowing the worst. When it IS doing well, I get a warm glow from knowing just how good things are.

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