Appointing the right accountant
When Paul Robinson and Gurinder Mullhi set up their own recruitment consultancy, RM Recruit, they knew they had the credentials to succeed. Together, they have over 20 years’ experience in recruiting finance professionals. But they also knew they knew a lot less about running their own business. As Gurinder puts it: “We were just two blokes with a calculator and a phone ready to go, that’s it.”
Their first step was to appoint an accountant. They knew Ian from his career before he set up Vertis Accounting. Paul says: “We gave him a call, and he just moved on it quickly. He said, ‘I’ll come and meet you tomorrow.’ So we went to meet him and it was an easy conversation. We just said, ‘Let’s go for it.’”
Forming the business
Our first action was to get the business set up correctly. We advised Paul and Gurinder to incorporate and operate as a limited company, then took care of all the paperwork to register the business with Companies House.
Paul comments: “Ian helped us with everything: what we needed to do to get up and running, how we would register the business and do our joint directorship. We asked questions around bringing other directors in, such as our wives, which he recommended wasn’t necessary right at the start. He just basically talked us all through it.”
As well as the business structure and finances, we were able to advise in a wider capacity. Because they would be placing candidates on temporary contracts they would be responsible for paying their wages. We therefore introduced Paul and Gurinder to our specialist payroll partner, KMS Payroll Services Ltd, who are experts in this area and provide a first-class service to many of our clients.
We could also see that cashflow might be an issue for them, at least in the early days, because their temporary staff would need to be paid regardless of whether RM Recruit had been paid by their client or not. We therefore encouraged them to work with a specialist provider in the funding space who would be able to provide them with the safety net they needed. We also ensured the funded transactions were correctly set up within Xero.
Managing the company finances using digital accounting software
As a digital accountant, we are passionate about showing people the benefits of cloud accounting. In the first instance, we set RM Recruit up on Xero.
Paul says: “Xero software is really easy to use. Ian drip-fed me to start with, which was useful, then gave me the independence to get on with it.”
We set them up with apps such as Soldo, which helps them manage company expenses, and Hubdoc, which takes all their receipts, bills, statements and emails and automatically exports them into usable information within Xero.
Gurinder comments: “We have apps on our phone that mean every time we are out and about meeting clients and candidates, we can log expenses and mileage, and it all gets imported into Xero automatically and the bank account is reconciled.”
We also created bespoke reports within Xero that show them up-to-the-minute figures so they know exactly where they are at any moment in time.
Planning for tax was another important element. We advised Paul and Gurinder to open several different bank accounts and set aside money they would need to pay their VAT and Corporation Tax each month. We advised on the most tax-efficient way to pay themselves. We give them ongoing support about what money they can take out of the company without paying too much tax too. The relevant information is available in Xero in real time so we can all look at the information together and talk through the options.
Paul says: “Ian advised us on directors’ salaries and dividends. When it comes to taking dividends, he’s told us that we’ll have to set aside money for our personal tax. What’s very handy is that we can ask Ian what we can take out of the business and he’ll say, ‘You’ve got this limit on dividends at the moment because of this and that.’”
With the business now up and running, we’re on hand when we’re needed. Paul says: “Ian’s helped us through our first year-end and probably about five VAT returns. We go away and do what we do, and we just call on him when we need it. Or he’ll highlight something to us that we need to register or submit.”
Gurinder adds: “He’s great. We needed someone right here, right now that we can pick up the phone and call. Ian’s that person.”
An impressive first year of trading
The Covid-19 pandemic has understandably had an impact on Paul and Gurinder’s first year in business. However, we could always see they had the right credentials and commitment to hard work to succeed. Despite everything that’s happened, RM Recruit Ltd had a turnover of just under £500,000 in the first year and made a significant profit.
Paul says: “I would have backed us to succeed, because we have all the factors in place. But it’s still quite an achievement to get to £500,000 turnover, especially with all the things that are out of our control, and Ian’s supported us in getting there.”