This article provides information on a service available that may be of interest to our readers and is not a recommendation or financial advice regarding making investments.

Crowd Funding is a way of generating funds for a project by getting a number of people to invest money instead of, or in addition to, seeking investment from larger venture capital firms or angel investors. There are examples of crowd funding going back to the building of the Statue of Liberty, but it’s become more popular with the growth of the internet and social media as a way to manage and promote businesses — especially with the continued rise of the ‘tech start up’, not only in Silicon Valley, but throughout the World.

Benefits & Risks of Crowd Funding for Founders

One of the benefits of crowd funding for the founder of a start up is that the investors don’t get a percentage of your business and don’t get any control or input into the way the  company is run, like a large investor would require, unless you want to include it as part of the return. Investing in this way can also attract early media coverage, thereby increasing the profile of your project and you also have feedback early on from your target market and can take on board this information for future development, marketing and funding requests.

But there are risks for founders. Your project is out there earlier and you may be concerned about protecting your intellectual property (IP) or getting negative PR before you have the funding to do anything about it. In many cases you need to raise 100% of the goal amount or you receive none of the funds. For some projects, the pros outweigh the cons, especially if your project does not fit into the usual profile that is desirable to larger investors.

Benefits & Risks of Crowd Funding for Investors

As an investor in a crowd funded project, your level of investment is usually smaller and therefore less of a risk, but obviously that all depends on your own situation. Information about the project is open and available to potential investors so easy to access before making a decision. You don’t need to take on any responsibility in the project and often you get some sort of early access to the products or service that is offered.

There is are risks in investing in this way as there are risks in any investment.  As you are only one of many investors the return will not be as high and there is always a chance the project may bring a poor return or even fail. You don’t get a percentage of the business going forward, unless the founder chooses to include this as part of your return (and most often they choose this way of funding because they do not wish to). As there is no regulation or protection in most jurisdictions, you need to take care to check that the project is authentic and that you are sure that there is no chance of fraud.

Crowdfunding Platforms

Crowdfunding Platforms facilitate the process, usually through a website. Platforms can have a variety of structures and may cater to certain types of projects. Kickstarter, one of the most well known platforms, only works with ‘creative’ projects: “Since our launch in 2009, more than 4.1 million people have pledged over $620 million, funding more than 41,000 creative projects”. Razoo focuses on fundraising for ’causes’ rather than projects. Appbackr connects app developers with backers, while also assisting with the technical aspects of getting an app to market.

Irish & UK Crowdfunding Platforms

A number of platforms started up in the UK in 2010, around the time of the change in government there. Funding Circle has funded over £104 million in loans and more than 1,000 businesses have borrowed, Crowdfunder.co.uk has raised over £500,000 and Crowd Cube has raised over £8 million. See more at: ‘Crowdfunding Takes Hold in the U.K.’ from the Wall Street Journal

With the lack of credit coming out of Irish banks for SMEs and new projects, it’s not surprising that crowd funding is taking off in Ireland. Linked Finance is a new Irish platform that started up in March 2013.  Since then they’ve funded €260K to 10 businesses via thousands of lenders. Linked Finance’s Marc Rafferty says, “€95 billion in savings accounts in Ireland earning little or no interest, that would be better off in SMEs.” They have done a video that explains the process:

Borrower feedback has been good for the sole Irish platform. Des Ruddy, Managing Director of Launch Diagnostics says, “We were delighted with the experience we had borrowing through Linked Finance.  Their use of social media and constant communication with the lenders helped push us over and beyond our target, and now we have the funds to grow and develop our business.”

Crowd funding isn’t completely new in Ireland. Seedups is a platform, founded in November 2010, with a focus on tech start-ups and has offices in the UK, New York City and Silicon Valley. FundIt is a crowdfunding platform in Ireland that started in 2011, but rather than investing in a project, you are backing the project without a financial return, though you would get a ‘gift’ of some sort: a copy of the product produced, invitation to an event, etc.

More resources on crowd funding in Ireland:

• @Crowdfund_irl is a Twitter account providing news on crowdfunding in Ireland
• Crowdfunding a new kind of industrial revolution, Silicon Republic
• Investors can take a punt on start-ups with crowd-funding, Irish Examiner

Many people are finding crowd funding as a way to enter the investment market or just dabble, but there are also a number of more serious investors involved. If you are thinking of getting involved be sure to check into the platform and involved parties carefully and note that some platforms may only include projects and investors based in their own jurisdiction or specific jurisdictions.

Have you used crowd funding before, either to get funding or to invest?

Do you think crowd funding is a good way for a start up to fund projects?

Let us know in the comments below. 

The above article was originally published by Ann Donnelly at Crowd Funding: A New Way to Go for Investors and Those Looking for Funding? on the site Accountants Ireland Business Advisors Cork Ireland.

Introduction & Start Up Years of Business

When you first establish a business one of the most important issues you will need to consider is your accounting & systems of control.

Appropriate systems need to be implemented to ensure that you are managing  the business adequately and that the business assets are safeguarded, proper accounting records are maintained & the risk of fraud & error is reduced to an acceptable level.

Shareholders, investors, suppliers & government bodies need to know through the medium of the external auditors report that the accounts show a ‘true and fair view of the state of affairs of the company’.

With Directors responsibilities ever increasing in Ireland, Directors need to get this right to ensure  no major fraud or error can occur.

Financial Managers need good quality financial data to base business decisions on and the systems are an integral part of this.  Whilst you may have an adequate accounting recording system, the system controls run outside of this since good controls ensure that transactions are caught and recorded in that system.

The accounting recording system is also important and electronic systems are now commonplace though this topic warrants a separate article! However the choice of accounting software is important and care should always be taken to select the one that is appropriate to your business and is user friendly.

It is very common for the owners and directors (often the same people in an SME business)  to be involved in many aspects of administration, financial & marketing during the start up years of the business.

There may be minimal delegation of duties due to size & resources issues, cost concerns and also maybe a reluctance to delegate.

Growing Your Business

As your business grows then the need to delegate responsibilities  increases.

More can be achieved bringing specialised skills together as the combination of these in one organisation has always proved to be greater than their individual component parts.

With the increase in delegation you will  need a more sophisticated system to counteract any possible risk of error or fraudulent behaviour within the organisation.

Features of a Strong Accounting System

Segregation of duties introduces more checks and controls into a system & reduces the risk of one aspect of the system  being the subject of human error or one person able to deliberately influence the recording or non recording of a transaction to their own advantage.

The areas that need close examination in your business process concern those areas of authorisation, recording, custody of assets & reconciliation. No one person should be in a position of responsibility for more than one of these tasks though if this is not possible then compensating controls must be implemented. For example:

• In a cash business the cashing up and banking duty should be separated from income recording so that discrepancies can be easily highlighted.
• Two signatures on a cheque provides adequate assurance that a payment is known and authorised by more than one individual and thus more likely to validate the expenditure.
• Control over inventory is a common issue in the retail business as items may be small and easy to lose.  The person responsible for receiving the goods when they are delivered should be different to the person who orders the products or who records the supplier invoice.
• In the sales process new customer accounts should be approved by someone outside of the sales team, normally by the finance department.

You can probably see from above examples where this could go seriously wrong and where the company’s system could be open to significant error or fraud by a simple failure to implement some basic controls.

There are clearly numerous areas of a business where controls must be implemented and the larger the entity the more complex the system may be & more segregation & controls will be needed.

If you want to review your accounting systems & controls for your business,
we can help: click here to email or ring +353 (0)23 8835287.

The above article was originally published by Michael O'Mahony at How Good are Your Accounting Systems & Controls? on the site Accountants Ireland Business Advisors Cork Ireland.

Are you looking to grow your business by expanding to new markets?

One of the advantages of setting up a business in Ireland is access to the highly desirable European market. Many of our clients from outside Europe choose to set up here, not only to do business in Ireland, but also as a base for their European operations. Our membership in the Enterprise Worldwide network of accountants around Europe and the rest of the world, gives us an advantage to help clients move into these countries.

Recently statistics showed that only 13% of Irish businesses export, while 30% of US companies and 70% of Chinese companies do. It’s amazing how few Irish businesses take advantage of this great opportunity to sell to markets, right on our doorstep, when there is so much advice and assistance available.

A business based in a country in the European Union (EU) can take advantage of the following treaties in place to encourage and assist business across the EU:

• free movement of citizens
• free movement of goods,
• freedom to establish a business, and 
• freedom to provide services

In addition to trade with countries within the EU, there are agreements with the rest of the countries on the continent in the EEA and European Free Trade Association (Liechtenstein, Iceland, Norway and Switzerland) to encourage and assist with reaching these markets as well.

Here are a few resources to help you to start doing business Europe:

Europa
The European Commission’s website with a vast amount of information on life and work in the EU.

EU-wide Public Procurement and SIMAP (Information About European Public Procurement)
Most companies don’t realise that there is an initiative to encourage businesses in the EU, especially SMEs, to tender for projects outside their own countries.

Points of Single Contact
The European Services Directive requires each country to have a Point of Single Contact, an online portal, for information on setting up a businesses in that country. The portal includes information on regulations, requirements, procedures, etc.

Access to EU Finance
Information on a country by country basis on banks and venture capital funding  supported by the EU.

SOLVIT
Service to assist with cross border issues “arising from the misapplication of EU rules by public authorities”.

ERES
The European Job Mobility Portal for employers and jobseekers.

Enterprise Europe Network
The network, with offices throughout the EU, is funded by the European Commission and provides advice and assistance for doing business in other EU countries. The EEN sets up trade visits, organises and promotes events and maintains a database of over 13,000 partnership opportunities submitted by businesses looking to expand into other EU countries.

Info2Innovate
The Enterprise Europe Network’s “Directory of Innovation Supports and Services for Irish SMEs”

Europe INNOVA
Portal with a vase amount of information on innovation initiatives and partnership opportunities in Europe.

European Small Business Portal
Portal with information on a wide range of topics.

CIRCABC
Web based application to distribute and manage documents.

Eurochambres
The Association of European Chambers of Commerce and Industry

Business Europe
Lobby representing businesses across Europe

European Association of Craft, Small and Medium Sized Enterprises
Employers’ organisation

Enterprise Ireland
The Irish government body to assist businesses to grow internationally. With a network of offices in Ireland and around the World, they provide training, funding, access to research and data, events (i.e. trade fairs and missions) and advice.

With this much information and assistance available, there’s really no reason you can’t grow your business by selling and expanding into Europe.

To get advice on Doing Business in Europe,
click here to email or ring +353 (0)23 8835287.

The above article was originally published by Ann Donnelly at Doing Business in Europe: Resources to Grow Your Business Across Borders on the site Accountants Ireland Business Advisors Cork Ireland.

One of the key performance indicators (KPI’s) that we continually review during our business analysis work is the gross profit margin.

Gross Margin is the percentage that the gross profit of the business bears to turnover. The gross profit is calculated by deducting the direct costs from turnover.  Direct costs are the costs that relate directly to production; in a service business professional, staff costs, and in a product led business, stock purchases.

Gross Profit Margin = (Turnover – Direct Costs) / Turnover 

The higher percentage of gross profit means the more profitable the business is and the more profit is available to cover overheads and ultimately to pass to the owners.

The margin will be different depending on the industry, service or product led business and geographical markets that your business operates in.

By reviewing this margin on a periodic basis you can assess if the margin is meeting your expectations, comparable to local/national/international industry benchmarks and take positive action to improve it.

Why the Gross Margin May Have Reduced

Higher salary production cost than expected. This may be due to numerous reasons such  as inefficient staff, staff changes, quiet or seasonal work periods, incorrect or inefficient allocation of work duties, client work or products that are outside your normal business expertise, unprofitable client work (time consuming for service industry) or unprofitable products (such as slow moving stock).

The above issues can be addressed in the service industry by reviewing individual staff performance to identify individual staff gross margins and this will demonstrate your higher and lower performing staff.

In a product led industry you will need to review your product line and identify individual product margins on each item.

Consider  your staff compensation packages as this may be impacting on performance if there are are inadequate incentives.

Do you solicit ideas from your employees in an attempt to improve productivity as facilitating staff input can have a positive impact?

Also forward planning for quieter work or sales periods should always be on the planning agenda to ensure you can pull in either new or existing client work earlier than normal.

In the retail or wholesale business selling more of higher margin goods than low margin goods or special promotional periods could be possible to move slow moving stock.

Lower selling volumes, price or client fees. This may be due to competitive factors, lack of demand, etc.

It is worth analysing and assessing the feasibility of new revenue streams, markets or opportunities to counteract recent competitive factors. For example, if not already doing so look at feasibility of taking your business online as this can open up new markets which were not possible before due to geographical limitations. We have seen a number of successful online businesses that would not have been possible without this facility.  The key to the above is a thorough marketing plan to identify what new service or product you could provide, how your online tool will be used in this plan and who your new target customers will be.

If you haven’t yet reviewed your gross profit margin for you business or are unsure how to review and forecast to improve business performance, we can help.

Our Business Planning Service includes:

• Identifying which KPIs are relevent to your business.
• Setting up systems to measure the determined KPIs.
• Review of KPIs for set periods and against industry standards.
• Flagging areas where improvement can be achieved.
• Forecast of future results based on current KPIs with and without recommended improvements.

To book your Business Planning session now,
click here to email or ring +353 (0)23 8835287.

The above article was originally published by Ann Donnelly at Gross Margin – How This Key Performance Indicator is Key to Maximum Profitability on the site Accountants Ireland Business Advisors Cork Ireland.

Are you looking for ways to improve your business performance?

The answer is right under your nose (or just a click away on your computer).

So often businesses focus on increasing sales as the only way to improve business, but sales figures are only part of the equation.

In order to really know best how to improve your business results, you need to look at ALL of the Key Performance Indicators (KPIs) and compare to past results and project future performance. It is also beneficial to compare these to industry norms to see how well your business is performing in your own industry.

Recessionary or boom times, there are still industry KPI’s to which you can benchmark your business, and usually scope for improving these.

As 2013 Q1 has just finished, you should be looking at the results your business has had over the past 3 months of the year and comparing to similar period in 2012, 2011, etc. In this way you can actively guide your business to success in 2013.

There are standard KPI’s like turnover, direct costs, gross profit margin, overhead costs and net profit percentage; but each business owner must determine which KPIs are significant to his own industry and key to his own business’s success. For example: a business which maintains stock to supply products must keep a close eye on the cost of inventory, while a service based business should analyse the costs of productive staff.

You should set up a system for gathering data related to your KPIs to ensure that this information is available to you as soon as possible. If it’s a bother to gather the information it’s likely to fall to the bottom of the ‘to do’ list.

If you haven’t yet set KPIs for you business or are unsure how to review and forecast to improve business performance, O’Mahony Donnelly can help.

Our Business Planning Service includes:

• Identifying which KPIs are relevant to your business and industry.
• Setting up systems to measure the determined KPIs.
• Review of KPIs for set periods and against industry standards.
• Flagging areas where improvement can be achieved.
• Forecast of future results based on current KPIs with and without recommended improvements.

To book your Business Planning session now,
click here to email or ring +353 (0)23 8835287.

The above article was originally published by Michael O'Mahony at How to Improve Business? The Answer is in Your First Quarter Results on the site Accountants Ireland Business Advisors Cork Ireland.

Recent focus of Revenue Commissioners audit teams have been on the ‘contracting’ sector and particularly on travel and subsistence expenses claims made by engineers, IT and other contractors by individuals operating through their own Limited Company.

A total of 170 cases are currently under scrutiny in the South West region and it is believed further cases will be initiated within the coming weeks and during 2013.

If you consider your ‘normal place of work’ to be a home office, you will base your expense claims for travel from there. The Revenue Commissioners are concerned that you are not interpreting the definition correctly; thereby your claims are inflated and you are taking more than you are entitled in expenses claims rather than salary.

Low salary to contract value is an indicator to revenue that this is happening and may trigger an audit.

A Definition of ‘Normal Place of Work’

A recent meeting has taken place with the Irish Taxation Institute and the Revenue Commissioners where key issues were discussed and Revenue provided further guidance on their definition of ‘normal place of work’:

As detailed in Statement of Practice IT/2/07, ‘normal place of work’ is the place where the individual normally performs the duties of his employment. Usually the employer would provide the facilities necessary for the work to be performed at the business premises, but the employee’s home is regarded as the ‘normal place of work’ if there is an objective requirement for the employee to carry out his duties there. Opting to carry out duties at home is not sufficient for it to be considered the ‘normal place of work’. Additional information can be found in the document IT54 Employment Subsistence Expenses.

How Your Misunderstanding May Trigger An Audit & Effect Any Penalties Applied

It appears that the Revenue’s concerns centre around the tax affairs of companies and their directors whose main source of income is with a larger company or companies, the client company concerned does not have a substantial business distinct from these contracts and in the majority of cases the directors are the only employee of the company and pay tax through PAYE. Apparently, a low level of the contract value is being reported as liable for tax purposes.

Revenue select a high proportion of their audit cases based on a risk based approach and a low salary to contract value could well be a possible trigger.

Even if you have calculated your expenses based on an incorrect concept of normal place of work, the Revenue will treat your under declaration of income tax as deliberate behaviour under the Revenue Audit Code of Practice and this will effect the level of penalty that is applied.

Are you clear on your definition of ‘normal place of work’ ?

Are you calculating your expenses and declaring your income tax correctly?

If you are concerned about what may trigger an audit
and what it will mean for you
click here to contact us.

The above article was originally published by Michael O'Mahony at What You Need to Know To Reduce Your Chances of A Revenue Audit on the site Accountants Ireland Business Advisors Cork Ireland.

The law of VAT in Ireland is a complex & continually evolving area of Ireland’s taxation structure. Without doubt this is where the most costly errors are  made by Irish businesses. With expert advice and knowledge many of these errors can be avoided.

Here is a summary of our most common DOs & DON’Ts based on cases that we encounter on a daily basis:

DO Register for VAT when the obligation to do so applies to your business.

• For businesses in the domestic market only, this can be relatively straightforward as the turnover thresholds for supplying services (€37,500 per annum) and goods (€75,000 per annum) are the main indicators.
• Domestic businesses below these thresholds and those supplying overseas markets who acquire a business to business or an EU 4th schedule service (this would include consultancy services) are also obliged to register for VAT.
• Domestic & International businesses must also register if their intra-community acquisitions of goods (that is goods bought from within the EU but outside Ireland) exceed or are likely to exceed €41,000 in a 12 month period.

DO Register for the cash basis of accounting as opposed to the invoice basis of accounting.

• This can significantly assist your cash flow. The cash basis turnover threshold was increased to € 1.25 million in the latest finance bill so if your turnover is below that value then your business is entitled to this VAT basis.

DO Carefully structure your business if you are operating internationally.

• Be aware in advance if you may be creating a VAT establishment in another country. This may have VAT implications in the foreign country you are operating in. You also need to consider which of your international entities issues invoices to your clients and this will depend on market and financial considerations.

Do Know the profile of your customers/clients.

• Look at where they are located, are they individuals or businesses, are they registered for VAT themselves, etc.
• This is especially important if you are operating in the EU as this can influence whether you have to charge VAT or not in many cases! The rules governing this draw a distinct line between supplies made to business or consumers.
• In the domestic market this can make your supplies more expensive to competitors should you need to register for VAT and your supplies are to consumers only who cannot reclaim the VAT.

DO Retain your VAT invoices for at least 6 years after the accounting year has ended.

• The Revenue Commissioners can request these during this period. Without valid VAT invoices the basis for your claim will be weak.

DON’T Claim VAT back on invalid purchase invoices.

• A valid VAT invoice must be addressed to the taxable VAT registered entity so you cannot claim VAT back on invoices addressed to you personally if your business is an Irish Limited Company or Branch.
• We have also seen clients making VAT claims for expenses that are specifically excluded such as entertainment, hotel & personal outlays.

DON’T Expect to obtain a VAT number unless you  can demonstrate some commercial substance in Ireland.

• Commercial substance can be such as ‘central management & control’ of the business, local based employees, customers, suppliers or business premises. Without all or some of these in place it will be difficult to justify that the business has a real activity in Ireland!

DON’T File your claim for repayment of VAT late if you are an International business.

• Those who carry out all their business outside of Ireland and are not Irish VAT registered have 6 months after the year end to lodge a claim for repayment of Irish VAT incurred here (so 30/06/2013 is the deadline for 31/12/2012).

DON’T Forget to charge Irish VAT on services related to property.

• The place of supply connected with Irish property is in Ireland so Irish VAT applies even if the client is foreign based.

DON’T File your VAT return late.

• This will result in late filing penalties and/or interest being applied.

DON’T Ignore the rules surrounding VIES & Intrastat law.

• These apply when you are doing business within the EU. Seek professional advice if you are unsure when you need to register for these additional VAT compliance issues.

These are just some of the issues that we have helped our clients with, whether we are just providing advice or processing returns for them.

If you have concerns about whether you are handling your VAT properly
or would like assistance in processing your returns,
click here to contact us now.

The above article was originally published by Michael O'Mahony at VAT in Ireland: What you need to know to Save Money – The DOs & DON’Ts on the site Accountants Ireland Business Advisors Cork Ireland.

The Special Assignee Relief Program (SARP) is one way in which higher paid executives can reduce their income tax bill. It applies to salary greater than € 75,000 and excludes 30% of the excess over € 75,000 from Irish tax. There are qualifying conditions such as residency in another country prior to transfer to Ireland so further advice should be sought on this and the other options which would include split year treatment and cross border relief.

The above article was originally published by Ann Donnelly at As a foreign executive posted to Ireland, how can I reduce my tax bill? on the site Accountants Ireland Business Advisors Cork Ireland.

Legal definitions of ‘domicile’ state that a persons domicile is the country where he or she intends to reside permanently and indefinitely.  Irish resident but non-domiciled individuals are not taxed taxed on non-Irish sourced income unless they remit this income to Ireland (Remittance basis of taxation) .

The above article was originally published by Ann Donnelly at What does the term ‘domicile’ mean and how does that affect my tax status? on the site Accountants Ireland Business Advisors Cork Ireland.

A close company includes a company where, on distribution of its full income, more than 50% goes to five or fewer participators or participators who are directors. A participator is a person having an interest in the income or capital of the company. The Close Company provisions set out in the Taxes Consolidation Act 1997 have four main implications for a company and its participators/directors.

1. Certain benefits-in-kind and expense payments to participators or associates will be treated as distributions.
2. Interest in excess of a specified rate paid to directors or their associates will be treated as distributions.
3. Loans to participators or their associates must be made under deduction of tax and, if the loan is forgiven, the grossed-up amount is treated as income in the hands of the recipient.
4. A surcharge of 20% is payable on the total undistributed investment and rental income of a close company. Close “”service”" companies are also liable to a surcharge of 15% on one-half of their undistributed trading income.

The above article was originally published by Ann Donnelly at What do you mean by ‘close company’ or ‘close company surcharge’ and how does this affect our corporation tax liability? on the site Accountants Ireland Business Advisors Cork Ireland.