Page 12 - Profit assessment Template v1

Current Allocation Percentages (CAPs)

Context to Profit, Owner’s Pay, Tax & OpEx Current Allocations

Following on from our initial discussion and your provision of your Profit & Loss Account information, at this
stage we have needed to make some assumptions in order to provide us with a starting point that we can work
from at this juncture. There are a couple of issues which have governed the thought process at this time:

(i) A lack of clarity around the loan / credit card payments made in terms of the relative split between
anything ‘personal’ and anything that can be directly related to the business means that these costs
have been excluded fully at this inception point.

(ii) The level of rent and lease payments claimed and processed through the business currently – our
previous discussion noted that historically your accountant has managed to deduct all
accommodation expenses on the basis of your working from home. In my experience, this is unusual
to be able to make a full claim, and in checking the premise with other finance and accounting
professionals, the feedback I have received is that it is indeed unusual / ‘never occurs’ –
consequently, for the purposes of this review, these costs have been completely excluded until we
can gain more clarity around either how it is possible (‘allowable as an expense’) at this level, or that
a lower proportionate amount is agreed and claimed against the business with the balance being
considered a ‘personal’ cost

(iii) You have previously noted that your accountant has managed to create a scenario for you of a ‘zero
tax bill – nothing wrong with that – so I have continued on the premise of that being our starting
point.

(iv) The figures provided as being processed through your accounting system reveal a loss in both years –
however, that may in fact be conditional upon the items above, and so for the time being, we have
assumed that Profit starts from ‘zero’.

(v) In light of the above, the exclusion of the loan / credit card payments and rent / lease payments has
meant that both years show a positive Net Operating Income – for the purposes of this exercise
currently, I have therefore assumed that all of this is allocated to your ‘Owner’s Pay’ – and from that
amount, you have then covered off the payments for loans, credit cards and rent / leases.

(vi) Additional clarity should be sought around all of the above points in order to create a scenario that
may be more actually representative of how the money is actually flowing through the business to
you personally, and how you in turn are able to record / nominate certain costs more precisely as
being ‘personal’ or ‘business’ related. There is no ‘problem’ with any of the above as such, but it
makes it far more difficult to create a solid plan built upon the facts of what is actually flowing
through and truly attributable to the business – all of which can be worked out successfully.

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