Saturday 28 February 2009

Recession - Who Is Riding The Storm?

The research pinpoints the types of businesses more likely to be riding the storm rather than being swamped by the waves. So who is riding the storm?

• SMEs with mobile workforces – they are 10% less likely to have been hit by the slowdown
• SMEs with older, more experienced ‘captains’ – more than half of directors/owners aged over 55 are unconcerned about long term survival while just 31% of 35-44 year olds share this confidence
• SMEs who had a ‘worst case scenario’ strategy in place – confident, booming businesses were three times more likely to have had this in place
• SMEs investing more in training, IT & Telecoms, marketing - all are more likely to be riding the storm
• SMEs with a woman at the helm – female-run businesses are 30% more likely to be riding the storm

Extract from: A Guide To Plain Sailing Through The Recession - Plantronics - www.plantronics.com.

The full guide can be downloaded here: http://www.sme-guide.co.uk/

www.ukba.co.uk

Friday 27 February 2009

Recession - the regional impact


The impacts on business are being felt on a local level in varying degrees and the study helps to provide a regional SME confidence barometer. Businesses in the East of England display the greatest concern for their long (and short) term survival but those in the Midlands, the South West and Scotland have the greatest confidence in their ability to survive the economic storm (around 45% have few or no concerns about long term survival). The global economic powerhouse of London could even lose its lustre as 28% of in the capital have real concerns over their survival chances.


One of the areas showing the greatest cause for concern is the East of England. While 66% of SMEs overall say that they expect profits to fall in the next six months, in the East the figure rises to 79%. 55% of those business fear they may not survive for another 12 months. But help is at hand should businesses be prepared to look for it. The East of England Development Agency’s takeITon campaign is aiming to raise awareness of the benefits of improved IT among businesses, providing them with a package of support measures that will help boost productivity and ensure their businesses are fit to ride out the storm.

A strong infrastructure has the ability to drive business success. If we can encourage businesses across the region to adopt improved practices, they will reap the rewards in productivity and efficiency which, in turn, will benefit the economic prosperity of the region as a whole.”
Jan Pinkerton, Head of Business ICT and Intelligence at the East of England Development Agency

Extract from: A Guide To Plain Sailing Through The Recession - Plantronics - www.plantronics.com.

The full guide can be downloaded here: http://www.sme-guide.co.uk/

www.ukba.co.uk

Thursday 26 February 2009

The Stark Reality


There is little point in denying that reality is biting for the majority. Our research shows that 79% of all SMEs have felt negative impacts for their business as a result of the current economic slowdown, with almost one quarter (22%) citing that impact as ‘significant’. In the construction industry, perhaps the hardest hit of all, 47% say they have experienced significant negative impacts (six out of ten have seen turnover fall in the last six months) and just one in ten remain unaffected by the slowdown. A startling three out of ten trading currently have serious concerns that they will not be trading by Autumn 2009. 7% believe they may not even last beyond the Spring.

Construction, retail and catering are also expecting to see the biggest decreases in staffing levels over the next six months. More than half of businesses in these sectors expect to see staff levels reduce. The slowdown is not restricted to these ‘worst affected’ sectors however; 43% of all expect to reduce headcount over the next six months. Likewise, 6 out of 10 expect to see a reduction in financial turnover in the next six months, with just 21% expecting to see increases. 67% also expect to see their cashflow weakened in the next six months. In all, just 16% of say that they have not felt any ill-effects of the slowdown, whilst one in twenty businesses say that they are actually booming.


Extract from: A Guide To Plain Sailing Through The Recession - Plantronics - www.plantronics.com.

The full guide can be downloaded here: http://www.sme-guide.co.uk/

www.ukba.co.uk

Wednesday 25 February 2009

Business Owners Urged Not To Cut Staff

Small business owners have been urged to explore different options rather than cutting staff by the Chartered Institute of Personal and Development and the arbitration and conciliation service (Acas).

With cash flow tight for many small firms cutting costs by loosing staff can seem like the best option, but businesses that cut too many staff have been warned that they will damage staff morale and could leave themselves worse off in the long run.

"Many of those organisations that were quick to lay off people in the last recession struggled to meet renewed business demand when the economy picked up again," said John Taylor, chief executive of Acas.

Employers are being advised to offer voluntary redundancy rather than sacking staff, consider pay freezes and look to re-train workers in different areas of their business rather then laying them off.

Source: http://www.newbusiness.co.uk

Tuesday 24 February 2009

Fraud costs SMEs millions

Small companies are loosing up to £800m a year to fraud and online crime, according to a survey by the Federation of Small Business (FSB).

Over 50% of small businesses reported that they had been victims of crime in the last 12 months. Of those surveyed, 37% had problems with phishing emails, and 15% were victims of card fraud and IT problems caused by viruses and hackers.

"E-crime is becoming an increasingly serious issue for small firms, which are losing up to £800m a year to fraud and online crime - a cost which could have a significant impact on a small business," said Mike Cherry, FSB home affairs chairman.

The survey also revealed that a third of small firms do not report fraud or online crime to the police or their banks because of a lack of faith in the system and that 53% want clearer information about how and where they should report this type of crime.

Over 80% of those surveyed revealed that they would report fraud if a designated reporting centre was set up to gather data and follow through with prosecutions, like the centre that is already operating in Wales.

Source: http://www.newbusiness.co.uk

Monday 23 February 2009

New £250 million fund for South Region businesses

You may have seen some coverage in the press over the last few weeks on the launch of the RBS South Region SME Fund. This means they have committed to making an additional £250 million of lending available for viable business propositions in the South Region. The focus of the funds will not only be traditional lending products, but also other ways of managing capital and cash flow in the downturn.

They want to make a real difference to customers and the Regional Fund is one way of providing practical support so they can focus on the day-to-day running of their business. Details of the fund are provided in the 'Helping Your Business in 2009' guide which also shows other ways in which we might be able to help if you bank with us. The guide can be downloaded from the following link:
'Helping Your Business in 2009' guide


Sunday 22 February 2009

Only One In 20 SMEs Confident Of Bank Lending

The number of business owners confident of being able to secure bank funding has plummeted from 73 to six per cent over the past year, according to a poll.

One in ten owners of small and medium-sized enterprises (SMEs) is turning to family and friends for cash, six times as many as 12 months ago, according to the survey of 505 business owners from asset-based lender Close Invoice Finance.

That implies that 540,000 businesses across the UK are borrowing from family and friends to keep afloat.

‘The relationship between banks and SMEs has collapsed, with severe repercussions for the sector as a whole,’ says David Thompson, CEO of Close Invoice Finance.

‘With banks now closing their doors to SMEs, owners are relying on friends and family for financial support, placing immense pressure on these most precious relationships,’ adds Thompson.

Last month the government set aside £10 billion to guarantee £20 billion of bank loans to businesses with sales of up to £500 million.

Source: http://www.growthbusiness.co.uk/news/business-news/996147/only-one-in-20-smes-confident-of-bank-lending.thtml

Saturday 21 February 2009

Almost half of staff believe they work better away from the office

Almost half of employees believe that they work more effectively remotely but only 8% of managers trust their staff to work out of the office, according to research conducted by YouGov.

The research, commissioned by BT Business and Nortel, revealed that 42% of staff feel that they could work better remotely but, despite a raft of new technology, business owners are reluctant to allow their staff to work away from the office.

With many small businesses currently struggling in the current crisis SME owners are being advised that being flexible and allowing staff to work remotely could provide their firm with a boost.

"This boils down to a matter of trust. In the current climate, small firms need to be operating at full stretch," said John Wright, national chairman of the Federation of Small Businesses.

"Last week's bad weather demonstrated the need for British businesses to enable their employees to be productive, wherever they are."

Friday 20 February 2009

Small firms 'losing money' by not selling on the internet

60% of small firms are losing out on money by not using their company website to sell their products and services, according to a new study published by BT.

The BT Voice of Small Business report surveyed more than 400 firms that employ a maximum of 50 staff and found that despite 80% of SMEs having a company website only half of these firms use the site to generate business.

The latest figures showed that over £20bn was spent online last year- meaning that small businesses are missing out on potential sales.

"The number of firms using the internet to sell their goods is too low, especially in a recession," said Stephen Alambritis, chief spokesman for the Federation of Small Businesses.

"There is clearly an opportunity to create sales online, not least because people are increasingly preferring to stay at home and shop rather than go out."

Survive the Downturn - Plan Ahead

Extract from ICAEW report: 8 Ways To Survive The Downturn

Find out how taking a long-term view can help your business survive the downturn.

It is all too easy to focus on quick remedies at the expense of the long-term view.

As well as concentrating on the immediate challenges you face, revisit your growth plans and strategy: are your assumptions still valid?


Prepare contingency plans

Consider a number of different scenarios:

* What are your options to take advantage of any strategic opportunities that arise?
* What steps do you need to take now to ensure you are well positioned to take advantage of the economic recovery when it comes?

Ensure that you have contingency plans in place in each case.


Review new and existing markets

Now is also a good time to review new as well as existing markets. Where are your key markets and customers, now and in the future?

Be prepared to examine these critically. Are you reliant on a major company or market? Are any of these at risk?

You may be unable to do anything in the short term but an over reliance on a major customer can threaten the viability of the business. Regularly obtain credit reports and get feedback from staff in contact with them.

Consider international and global markets which may present new opportunities.


Think about your competitors

Also, think about how your competitors are faring: how are they likely to respond to the current crisis? Does this present an opportunity for you?

Collect information about your competitors from staff, suppliers and customers: it might help to identify potential opportunities.

Source ICAEW - full report can be downloaded by clicking here.

Thursday 19 February 2009

Survive the Downturn - Recognise The Value Of Employees

Extract from ICAEW report: 8 Ways To Survive The Downturn

Find out how communicating with your employees and thinking about their skills and abilities can help your business survive the downturn.

It’s always difficult when there’s bad news, but there is never a more important time to communicate openly, honestly and regularly with your staff.

How you behave during the difficult times will affect your reputation as a responsible employer and be vital in attracting and retaining quality staff in the future.


Plan ahead

Have you identified your ‘bad weather’ spokespeople, those who have credibility and can be relied upon to deliver vital information to your key staff?

Have you set up effective channels of communication to inform staff and stakeholders quickly when you need to?

During the recession you may be facing redundancies or restructuring to make savings, but:

Have you also identified the key individuals who will be essential for the long-term success of your business?

What steps do you have in place to retain and develop this talent?


Look for guidance and advice

It has been estimated that two fifths of directors today will be facing recessionary pressures for the first time in their careers. They may need support as they face increased pressures internally and externally.

Consider looking for mentors or advisers inside or outside your company who can provide guidance and advice based on previous experience.


Think about your staff and their skills

It’s also important to look at your management team, and ask whether they have the right skills to manage the new problems you are facing.

Some firms made the mistake of cutting back on training in the early 1990s and found themselves short of good, qualified staff when the economic upturn came. ICAEW research has shown that those organisations which continue to train in challenging times are most likely to be the winners over the longer term.

Businesses should also review their reward structures to ensure they are still relevant in the changed environment, particularly share option schemes and sales targets.

What alternatives do you have to keep your loyal staff? For example, can you offer sabbaticals or secondments; should you move to a four-day week or ask staff to accept a pay decrease to avoid multiple redundancies?

Source ICAEW - full report can be downloaded by clicking here.

Wednesday 18 February 2009

Survive the Downturn - Manage Your Year End

Extract from ICAEW report: 8 Ways To Survive The Downturn


Find out how building additional time into your year-end planning can help your business survive the downturn.

It will be essential that you build additional time into your year-end planning. This will ensure that there are no surprises and that you have sufficient time to discuss any issues with your advisers and shareholders. These issues need to be reviewed on an ongoing basis.


Going concern

As many companies face increased uncertainties, going concern will have a higher profile in the preparation of annual reports and accounts. The question that needs to be asked is ‘is the business likely to survive for the foreseeable future?’

You must have adequate documentation – such as cash flow forecasts and board papers – for the application of the going concern basis. It will also be important for you to document carefully the evidence on which assessments and decisions are made.

There will also be an expectation of increased disclosures, both on the financial position in general and on liquidity risk in particular.

Directors will find further help on the application of going concern in the current economic climate in the guidance issued by the Financial Reporting Council and the Auditing Practices Board bulletin for auditors.


Make sure adequate funding is available

Current circumstances mean you will need to consider how to manage going concern issues by meeting financial obligations when they need to be paid.

This means that you must carefully and regularly manage your cash flow to make sure that adequate funding is available when you need it. It’s better to be prepared for a ‘worst case scenario’ than to assume that all that is needed is a bit of pruning at the edges.

Source ICAEW - full report can be downloaded by clicking here.

Tuesday 17 February 2009

Budget 2009 delayed until late April amid deepening recession

The Budget is normally held in early March, but this year's statement has been put back to the latest date since 1997 amid the deepening recession.

The timing of the statement is partly due to a major international economic summit taking place in London on April 2.

Mr Darling told the Commons: "Following the meeting of the G20 countries in April, this year's Budget statement will be on April 22, that is when the House returns after its Easter recess."

Gordon Brown, the Prime Minister, told MPs that the Group of 20 summit is vital to any economic decisions the Government will make in the Budget.

Source: Telegraph....read more.

www.ukba.co.uk

Survive the Downturn - Review Your Structure & Cost Base

Extract from ICAEW report: 8 Ways To Survive The Downturn

Find out how reviewing the structure of your business can help you survive the downturn and take advantage of the upturn when it comes.

Now is a good time to review the structure of your business critically. Do you have the right business model to see you through the recession and put you in the best possible position to take advantage of the upturn when it comes?

Current economic circumstances may present opportunities and allow you to make changes that were previously difficult or unpalatable. If you need to make savings, examine carefully how you can get the best value out of your business and enable your business to emerge leaner and fitter at the end of the recession.


Think long-term

Avoid making across-the-board or short-term cuts which may damage your business over the long term.

Focus on key areas and activities which are business critical for the future to ensure your business emerges in good shape from the recession. Are there activities you could stop? Is outsourcing, offshoring or relocation a possibility?


Consider spending cuts carefully

Consider carefully before cutting your spend in apparently ‘soft’ areas such as marketing, IT or corporate responsibility. Think about the value of expenditure not just its cost. For example, research shows that in a downturn the winners continue to invest in their brand and build their reputation and profile with their key stakeholders.

It has been well documented that ‘brands that increase advertising during a recession, when competitors are cutting back, can improve market share and return on investment at lower cost than during good economic times’*.

Consider carefully which products and markets are most valuable to you. How can you reach these markets most effectively? Focus your activities and marketing investment to protect your most valuable markets and customers for the long term.

*John Quelch, Harvard Business School

Source ICAEW - full report can be downloaded by clicking here.

Monday 16 February 2009

Survive the Downturn - Secure Your Funding

Extract from ICAEW report: 8 Ways To Survive The Downturn

Find out how reviewing requirements and exploring new sources of funding can help your business survive the downturn.

As the future becomes more uncertain, it is difficult to predict sales, profits and cash flows.

There is greater risk and the banks are likely to take a cautious approach to renewing facilities.


Review your funding requirements

It is essential that you regularly review your funding requirements over the next 12 months and beyond.

If you have a term loan or overdraft, be aware of any covenants or other conditions and constantly monitor how close you are to breaching them.

Prepare thoroughly if a review is coming up of any of your financing facilities.


Have contingency plans in place

If limits might be threatened ’think the unthinkable‘ and have contingency plans in place, such as the sale of assets.

When re-negotiating overdraft and loan facilities, be aware that banks are taking different approaches to interest rates, fees and charges. You may also be asked to give a higher level of security or a personal guarantee.


Explore different sources of finance

Make sure that you fully consider all types and sources of finance such as asset finance and invoice factoring and discounting. You might need new sources of finance if negotiations with your current providers prove difficult.

It is worth investing time talking to people about new sources of finance. Are there any funds available from the Government or local agencies?

These are unprecedented times and some larger businesses are offering their suppliers finance to maintain an increased supply of goods, so it’s worth exploring all your options.

Source ICAEW - full report can be downloaded by clicking here.

Sunday 15 February 2009

Survive the Downturn - Think Cash

Extract from ICAEW report: 8 Ways To Survive The Downturn

Find out how managing cash flow and access to capital and funding can help you survive the downturn.

Managing cash flow and access to capital and funding are critical to all businesses – more so in difficult times.

It is important to keep updating your cash flow forecasts and examine your debt cycles, stock and overhead levels and working capital.


Be proactive

Be proactive in managing your cash. Put cash flow and financing on the agenda for every management meeting.

Consider what you can do to improve your sales in a declining market:

* Can you reduce your stock levels quickly to boost cash?
* How reliant are you on your major customers and suppliers?
* How robust are your credit control procedures?
* If you are ’cash rich‘ do you need to conserve this cash or could you use surplus cash for the longer term benefit of the business?


Minimise your tax liabilities

It’s more important than ever to minimise your tax liabilities where possible and ensure that you are paying the correct amount of tax. Make sure all capital allowances and expenses have been claimed. Are you taking maximum benefit for all losses?

If you have difficulties making your tax payments, talk to HMRC before they become due; it may be possible to agree repayment deals without suffering any surcharges for late payment.


Talk to your financiers

It is vital that you talk to your current financiers before you get into difficulties. If you delay telling your finance providers about changes in your circumstances, they will lose trust in your future forecasts.

Source ICAEW - full report can be downloaded by clicking here.

Saturday 14 February 2009

Survive the Downturn - Manage Risk and Uncertainty

Extract from ICAEW report: 8 Ways To Survive The Downturn

Find out how identifying and managing risks to your business can help you survive the downturn.

Business risks have changed dramatically as companies of all sizes find themselves caught in supply chains facing global market volatility and uncertainty over the availability of finance.


Undertake a rigorous and honest appraisal

Now is the time to undertake a rigorous and honest appraisal of the risks facing your business and ensure your risk management systems and controls are up to scratch.

* What are the main risks facing your business now and in the future? How have these changed?
* What is the impact of these risks on your plans to grow and finance the business?
* Is your business sensitive to currency fluctuations?
* What is the impact of loss of turnover? Is the business showing signs of under-performance?
* If borrowing becomes more difficult or more expensive, how will this affect your finances?
* How will you maintain the confidence of your key stakeholders – investors, shareholders, customers and staff?
* Have your or your suppliers’ credit ratings been affected?
* Can your business meet its pension fund obligations?
* Are you exposed to any bad debts?


Maintain the confidence of your key stakeholders

It’s important at this time to maintain the confidence of your key stakeholders, whether they are major customers, suppliers, the banks, audit committees or shareholders.

Managing information during this period will be critical to maintain confidence and avoid nasty surprises – remember the internet can undo good news in seconds.

Be aware that shareholders’ expectations may have changed or may change during a period of uncertainty. They will want to know that you have challenged your assumptions, have confidence in your forecasts and have plans in place to respond and adapt quickly to unexpected changes in the market.

Audit committees and shareholders will want to be confident that you have financial and risk management systems in place to manage through the recession.

Source ICAEW - full report can be downloaded by clicking here.

Thursday 12 February 2009

It's not all doom and gloom!

A recent email from one of our UKBA members in response to another doom and gloom report from one of the banks

Don't believe everything [anything] you read in the newspapers. My experiences over the last few weeks:

1. This morning I had a call from a RBS/NatWest Regional Director who I have known for many years. He is asking me if I can point him in the right direction to find people who want to borrow money from the bank. He tells me he has no restrictions on the amount he can lend - the hurdles in the credit approval department are a bit higher - but still nobody wants his money!

2. I have a long standing Client who has asked me to do more work for him - he runs an up-market bistro. His turnover is still increasing month on month. We had to abandon our meeting last Wednesday as the rest of the place was so full and he needed the table for paying customers!

3. I was in a meeting with the Chairman of the Peak District Tourist Board earlier this month and he was telling me that bookings for 2009 are already up on 2008.

4. I have friend who owns a pub/restaurant in the Peak District and he had his best year ever in 2008. I called in for a bite to eat on my way home at around 7.00pm one Monday evening last month (my wife was at work so I decided on the best option!) and he had only one table free!

5. Our eldest son's girlfriend works at Thompson Holiday's head office. She is working at weekends to keep up with demand.

6. I am trying to get some Turnaround work out of the banks and, other than complete basket cases, there is hardly any work going!

7. I have a friend who runs a large independent bus company. He tells me they have had 5% real growth in 2008 and continuing into 2009.

8. I have a cousin who runs the fleet of trucks which delivers the food to a very well known high street name. He had to put on a full extra shift - nationwide - just before Christmas or their shelves would have been empty.

In fairness, anybody involved in house building and associated businesses, the motor industry and some parts of the retail industry are finding it really tough out there. It might be cold up here in the frozen Midlands, but the economy is far from being a lost cause.


Tuesday 10 February 2009

Employment Law 2009

Legislation relating to employment, can be a minefield.

Here are some of the areas where changes are expected this year:

:: Statutory Redundancy Pay as well as the increase in tribunal awards. Since 1 February, redundancy pay has increased to a maximum of £350 per week.

:: Statutory Dismissal Procedure, which will be replaced by a new approach using the revised ACAS code.

:: A bill will be introduced to tidy up all the various bits of equality and discrimination legislation.

:: From 1st April, Working Time Regulation changes are implemented to increase the minimum holiday entitlement to 5.6 weeks (28 days).

:: The right to request flexible working is extended to parents who have children aged 16 or under from 1 April 2009.

:: On 5 April 2009, the standard rate of pay for maternity, paternity and adoption leave will increase to £123.06 a week.

:: On 6 April 2009, the Statutory Sick Pay rate increases to £79.15.
:: The right to request time off for training will be introduced during the course of the year.

:: The National Minimum Wage rules will be changed to stop tips being included in staff wages in the leisure and hospitality industry.


Will Interest Rate Cut Support Small Business?

FSB warns that a further interest rate cut will not work

The Federation of Small Businesses (FSB) is calling for the Bank of England (BoE) to hold fire on any further interest rate cuts ahead of the Monetary Policy Committee's decision on Thursday (5 February 2009).

Figures from a survey of over 4,000 small businesses show that the recent rate cuts have not provided the boost to the economy that many hoped for.

According to the poll almost two thirds (63 per cent) want the BoE to keep rates at their current level of 1.5 per cent. Only a quarter (24 per cent) said they would like a rate decrease – down from 58 per cent who called for a rate cut in a similar survey conducted in December 2008.

This indicates small businesses are not feeling the impact of the interest rate cuts and that access to finance, rather than the cost, remains a key problem.

John Wright, FSB National Chairman, said:

"These figures suggest that the recent interest rate cuts are not having the desired effect and other means of economic stimulus are required.

"Small businesses are clearly worried that this monetary policy has been used extensively over the last few months yet they are still struggling to access cheaper finance.

"The concern now is that if rates are cut any further there may not be too much more room for manoeuvre in the economy. The onus is really on the banks to start promoting these lower rates to fire up the economy."

David Kern, Chief Economist at the British Chambers of Commerce (BCC), said:

"British business is not surprised by the MPC’s decision today. With the recession worsening, and deflation a distinct risk, there is still scope for further interest rate cuts in the next few months, to almost zero.

“But, with rates at very low levels already, the focus of UK monetary policy must now inevitably shift towards forceful quantitative and credit easing measures, with the aim of increasing the money supply and removing blockages in the credit markets.

“Given the Bank’s unduly cautious record in the early stages of the credit crisis, UK businesses must be reassured that the Bank will be prepared to implement unconventional techniques. This is vital in order to alleviate the recession, counter threats of deflation, and underpin falling confidence.”

Monday 9 February 2009

The State Of Women's Enterprise In The UK

This report is an overview of the state of women’s enterprise
across the UK, updating data and statistics previously published
by Prowess in 2005. Its key messages are that to fuel economic
growth in the UK, more must be done to encourage female
entrepreneurship and, importantly, that existing women-led
businesses need more appropriate assistance towards greater
long-term sustainability. It argues that although much has
been achieved over the last four years to support female
entrepreneurs at a national and at a regional level, female
entrepreneurship remains resolutely low at just under half
of male entrepreneurial activity and this represents a real
challenge for all those engaged in raising the profile of women’s
enterprise in the UK.

The report includes an analysis of the attitudinal and
perceptional drivers of entrepreneurship at a regional level.

Full report available here: http://www.prowess.org.uk/documents/StateofWomensenterpriseintheukfinal.pdf

http://www.ukba.co.uk

Thursday 5 February 2009

How much does a business advisor cost?

What does it cost to engage a business advisor to support your business?

Find out by region, sector and specialism: click here for a report on consultancy fees in 2008. (Courtesy of Skillfair).

To contribute to this year's survey, please click here

http://www.ukba.co.uk

Tuesday 3 February 2009

Entrepreneurs seek to set up new bank to bypass crisis

A group of Cambridge entrepreneurs and businessmen are so outraged by the behaviour of the banks that they are setting up their own.

Telecoms guru Dr David Cleevely said: "We are sick to death of the way the banks are operating. They are offering people almost nothing for deposits but charging small businesses up to 15 per cent for their credit facilities. There is something fundamentally wrong." Dr Cleevely, the founder of Cambridge Wireless and Abcam, the world's biggest catalogue for antibodies, is working with a number of businessmen on plans for a bank serving depositors and commerce.

Read more at The Independent - click here.


http://www.ukba.co.uk

Monday 2 February 2009

Anderson Review - Government Regulatory Guidance for SMEs

The 2008 Enterprise Paper asked Sarah Anderson to undertake an independent Review of how to improve the regulatory guidance that the Government gives to business.

As part of this Review, Sarah and the Anderson Review Secretariat met over 90 SMEs, at a number of group discussions and one-to-one interviews, between March and July 2008. These SMEs represented a range of different sectors and sizes, from sole traders to medium sized businesses with over 200 employees.

The primary aim of these meetings was for the Review to gain a better understanding of how businesses felt about guidance and how they went about achieving regulatory compliance. Specifically, these meetings looked to establish:

· how SMEs felt about government guidance in general;
· to what extent businesses felt they were able confidently to comply with regulation using government guidance;
· if there existed specific regulatory areas where businesses found guidance particularly difficult or complicated;
· to what extent businesses felt current government guidance provisions were effective.

Findings:

Businesses had positive views of some areas of government guidance.

· guidance available from regulators websites attracted positive comments.
· the telephone and web support available from HMRC was considered to be very good.
· comments from businesses which used the businesslink.gov.uk website varied from useful to very good.
· the guidance relating to the smoking ban was felt to have been very effective.

Businesses had concerns around certain areas of government guidance and
regulation. Businesses:
· found that the volume of, and regular changes to, regulation and guidance made it more difficult for them to run their business effectively.
· highlighted employment and health and safety regulations as areas where they found compliance most difficult.
· found that even when guidance was available it was difficult to be certain that following it would mean they were complying with the law.
· had concerns about where and how to access guidance.
· found that guidance was often not written clearly, in plain English, and that this complexity made compliance problematic.
· said regulatory change was not communicated to them effectively and that inspectors focused on enforcement rather than on helping SMEs comply.

The full summary is available here: http://www.ukba.co.uk/file49882.pdf

The full report is available here: http://www.ukba.co.uk/file49881.pdf


http://www.ukba.co.uk

Sunday 1 February 2009

Spread your risk

A lot of smaller businesses rely on just one or two customers and one or two products and services. In an economic downturn all it takes is for one customer to move to a cheaper supplier or even go under and the business is no longer viable.

Who earns you the most profits?

Identify your most profitable customers – then seek to bring in new customers with a similar profile.

Watch your back

While trying to pull in new customers do not neglect those vital 20% who earn you the most profits. It costs four or five times as much to get a new customer as it does to keep an existing one.

Spread your risk

Expanding your prospects One way to attract a wider customer base is to make the most of the internet.

What to watch out for

• If you are expanding into new markets or need new equipment to remain competitive, avoid using cashflow to finance this – you may need this cash to keep you afloat. Use alternatives such as asset finance.

• Avoid taking on more than you can handle. This is known as overtrading – an imbalance between the work you take on and your capacity to do that work. Once again you can run out of cash to finance these new orders.


[Extract from Trading Through The Economic Downturn - published by NatWest - full Guide available by clicking here]

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Profit is sanity

‘Turnover is vanity, profit is sanity’ – so the business saying goes. But what does that mean in practice? In an economic downturn, sales often start to fall and so businesses scramble to replace this lost turnover.

Competition intensifies and prices are cut to win business. But instead of replacing lost turnover to help cover your costs, you have unwittingly taken on unprofitable business that will leave you with a loss.

Is that new business worth it?

• Cost each product or service: do not take on business if it does not make a profit
• Look at ways to reduce costs: this will allow you more scope to reduce prices
• Be wary of big orders: this can lead to overtrading when the business takes on more work than it can handle and runs out of money to finance it

Maintain Profit Margins

The flip side of price is cost – you can maintain profit margins even if you are reducing prices, provided you also reduce the cost of what you are making or providing.

It is vital to keep overheads down but avoid cutting:

• Stock levels to such a low point that you cannot fulfil new orders
• Staff you need to run your business
• Sales and marketing expenditure which you need to attract new business
• Investment in equipment or product development that enables you to remain competitive
• Insurance as you could leave your business inadequately covered

On cutting costs...

• Don’t get emotionally involved. Make hard-headed business decisions. You may want to keep a particular office open because it was where you started or a certain product line because you created it. If it is losing you money, you have to lose it – or risk losing your business.
• Make decisions based on the facts. A “gut feel” is not good enough. It is only when you see what is profitable and what is not that you can make a decision.
• Start with non-essential expenditure – then tackle fixed costs such as utilities, stationery and other outgoings.
• Pass on price cuts. If you are under pressure to cut your prices ask your suppliers to do the same – if you can. If they won’t negotiate on price ask for longer payment periods or shop around.

Are you making the most of management information?

Knowing which products are going to sell best and bring in the most profits and which costs are rising and could hit your margins, is vital. For that, you need to have the right management information.

The key difference between this economic downturn and the recession of the early 1990s is information technology.

The Key Barometers

There are usually four or five barometers that indicate the health of any business. You need these to be annual rolling totals either on a monthly or even a weekly basis. Check the actual figures against those forecasted and against the previous year’s. These key indicators will vary from business to business but could include:

• Turnover – not just the total but some key figures.
• Enquiries – or foot traffic, number of visits to your website or another key indicator of interest in your product or service.
• Stock – if too much of one item is piling up it is a reflection that sales of that particular product are falling. The danger is that too much cashflow will be tied up when you need it for day-to-day needs.
• Costs – keep track of how these are rising. As has been seen in recent months, some costs – such as fuel – can rise rapidly.
• Late payments – you need to keep a daily eye on how quickly money is coming in so you can spot potential problems early on.

Then you need to act on the information. For example, by selling off surplus stock or putting up prices to reflect rising costs.

[Extract from Trading Through The Economic Downturn - published by NatWest - full Guide available by clicking here]

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Dealing with bad debts

On average small and medium sized businesses write off £14,000 in bad debts each year, according to the Credit Management Research Centre. If they have a 5% profit margin that means they need additional sales of £280,000 just to make up for this loss.

Think about how a bad debt could impact on your business. How much extra turnover would you need to cover this loss? And would your businesses be able to survive?

Prevention is best

• Know your customer – a simple check with Companies House can confirm they are who they say they are and enable you to check their accounts.
• Check they are a good risk – by checking with a credit reference agency, by asking for bank and trade references and by searching the Registry of County Court Judgments to reveal if those running the business are in financial difficulties.
• Set clear credit limits for every customer – to limit potential losses.
• Consider credit insurance – it will cover the debts owed to you.

Watch out for warning signs

• Mistakes on cheques – they forget to sign, words or figures differ, or cheques are wrongly dated. These may be genuine errors or may be a means of buying extra time.
• Constant queries – about the product or service or about the invoice. Again these could be delay tactics.
• Excuses – like the cheque is in the post.
• Rumours – staff often pick up on these first.
• Trading at their credit limit – if a customer is continually trading up to the limit or asking to exceed it, it should ring alarm bells. However, it may be that they are buying more from you and so need an increased limit.

When faced with a late payment that could become a potential bad debt

• If it’s won’t pay, is it worth the fight? If you are going to get nothing back, don’t waste your time or money.
• If there is a chance they will pay, consider court action – but send a solicitor’s letter first. In around half of cases this works. You can use an online service to send a solicitor’s letter ‘before action’ for as little as £5.If that does not do the trick then you can start proceedings. For debts over £750, you can issue a statutory demand. Alternatively try the Small Claims Track (for debts up to £5,000) or the fast-track procedure in the County Court (for claims up to £15,000). The Small Claims limit in Scotland is £3,000.

For more information go to Business Debtline at www.bdl.org.uk or call 0800 197 6026.

If the worst happens: talk to your bank if you need additional funding and tell HMRC – you may be able to reclaim the VAT on bad debts.

The other side of the coin

Cashflow does not just involve getting money into the business. The other side of the coin is paying money out.When the economy takes a downturn suppliers may want to protect their financial position by:

• Reducing the amount of trade credit they will advance you
• Asking for payment more quickly
• Asking for stage payments or even cash on delivery
• To ensure that you are not being squeezed on both sides you need to manage this side of the cashflow equation and remain a low risk for your suppliers.
• Make sure you know when you are expected to pay – not all suppliers have clear terms and conditions.
• Pay on time – and if you can’t do so, contact your suppliers to explain why.
Protect your credit rating – don’t wait until the start of court proceedings to pay.
• Once your credit rating is damaged, you may find it hard to get any credit at all.
• Try to negotiate longer payment terms if you are finding your customers are taking longer to pay you – if not, see if you can get a discount for prompt payment.


[Extract from Trading Through The Economic Downturn - published by NatWest - full Guide available by clicking here]

http://www.ukba.co.uk

Cashflow forecasts

A cashflow forecast is an essential management tool. You need to know what monies are owed to you at any one time and when payment is likely to be received. You then need to know what bills you have to pay and when – and reconcile the two to make sure you have enough cash to meet your outgoings.

What we often find is that businesses come in asking to extend their overdraft facility because they are not being paid on time or they have suffered a bad debt. Often they leave this until the last minute – when they need the money rather than arranging an adequate facility well in advance. The reason why they are in this situation is usually because they don’t have an adequate cashflow forecast – or any at all. If you cannot prepare one of these yourself, ask your business advisor.”
Mike Ford, Senior Business Manager, North Staffordshire Business Centre.

Calculate the worst case scenario in terms of cashflow – and that is the facility you should be trying to arrange.

Also look at ways of reducing your need to borrow such as:

• Reviewing who you are extending credit to – and how much credit you are extending to each customer
• Reviewing how long you are allowing your customers to pay you – and seeing if this can be shortened
• Negotiating longer payment terms yourself – so you have longer to pay


Financing cashflow: the options


Overdrafts: Ideal for day-to-day cashflow needs – but you may need to consider other options if you are near your limit, cannot arrange a larger facility, or want to reduce the monthly cost or free up your facility for working capital.

Loans: These spread the cost of borrowing over a longer period – consider putting the element of your overdraft that is “solid debt” into a loan to free up your working capital.

Invoice discounting: This will release cashflow more quickly. Invoice Finance can give you up to 90% of the invoice value when it’s issued, and the rest (less fees) when it is paid. It can provide bad debt protection too as the invoice discounter can assess your customers and set credit limits for each of them. If a customer becomes formally insolvent, you will be paid 100% of what is owed provided you trade within these limits.

Asset financing/leasing: This can release cashflow tied up in depreciating assets such as company cars, computers and machinery and equipment. The finance is secured on the asset itself, freeing up your other security (often your property) to secure and raise other forms of finance. Installation, maintenance, servicing and insurance can all be included, making your life easier.

For free business planning software - click here.

For a free business plan template, click here.

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[Extract from Trading Through The Economic Downturn - published by NatWest - full Guide available by clicking here]

http://www.ukba.co.uk

Managing your cashflow

‘Cash is king’. It is a cliché – and like many clichés it is true. The reason why most businesses fail is that they run out of cash to pay their bills. They run out of cash because they have failed to keep on top of cashflow.

To keep in control of cashflow businesses need to have the right management information and systems in place – and to act on warning signs before they become problems.

Of course all businesses have systems in place. It is just that in an economic downturn these may need to be tightened, particularly as 8 in 10 businesses say they are seeing an increase in the number of their customers paying late.

Remember being paid – and paid on time – is not a given

• If you are worried about the customer paying on time – or at all – consider stage payments or even cash on delivery to reduce your risk of bad debts
• Set your terms of business before doing business – and put them in writing. You will not be paid in 30 days unless your customers know that’s what you expect
• Do credit checks before doing business – and monitor late payments. If companies are taking longer and longer to pay, find out if there is a problem. Do not wait until they leave you with a bad debt
• Encourage prompt payment. Consider charging interest on late payments (your legal right on debts outstanding after 30 days) or – if your profit margins allow – offering a discount for prompt payment
• Invoice promptly – and once again make payment terms clear
• Check the customer is happy – there may often be a reason for late or non payment. Never give a customer a reason not to pay
• Make it easy for them to pay by offering as many ways of getting paid as you can. BACS payments are fast and attract lower bank charges. Or a standing order can be used if they pay the same amount regularly. With cheques your late payers can always use the excuse “it’s in the post”
• Contact customers to check they received the invoice and then find out when they are going to pay


The key thing is certainty – knowing when you are going to get paid so that you can adjust your cashflow forecasts accordingly. If you know a customer is going to take 75 days to pay, you can plan ahead. If you expect payment with 30 days and the payment takes 75 days your business risks running out of cash to pay its outgoings – and that is when businesses run into difficulties.”
Phillip King, Director General, Institute of Credit Management.


Smart credit management is…
• Ringing on day 40 to check you will be paid on day 60

Lax credit management is…
• Waiting until day 65 to ask why you were not paid on day 60

Getting it right
• Many businesses concentrate on getting orders in, but getting paid should also be a priority

Communication is key

• At times like this you need to cement your key relationships with customers – as well as your suppliers and your bank – as this could be vital to the survival of your business. It is not just about keeping customers happy. It is about working together and understanding their needs. Good communication will also help you to find out if
they are having problems that could impact on your business.


[Extract from Trading Through The Economic Downturn - published by NatWest - full Guide available by clicking here]

http://www.ukba.co.uk