Business week in brief: 23rd March 2012
Budget 2012: a 5 minute summary for businesses
As a business, we focus on generating real savings on your bottom line, so we thought it would make sense for us to give you a breakdown of how yesterday's Budget might have an impact your business.
Tax and VAT
Corporation tax to be reduced
Corporation tax will be reduced to 24% with the overall aim to reduce to 22% by 2014.
Simplified tax system
New simplified tax system for more than 3 million small businesses with an annual turnover of up to £77,000.
Higher rate reduction
From April 2013 the higher tax rate will be reduced from 50% to 45%.
Tax free allowance
The tax free allowance will increase to £8,105 this April and will rise to £9,205 next April.
Boost to business
Lower interest rates
Lower interest rates will be passed on to small businesses through the National Loan Guarantee Scheme.
Support for young entrepreneurs
The government is considering introducing Enterprise Loans to encourage business start-ups amongst young entrepreneurs.
Faster broadband connections
Ultra-fast broadband and wifi will be funded in ten of the UK’s largest cities.
Relaxed Sunday trading
Legislation to be introduced to relax Sunday trading laws for eight Sundays around the Olympics.
State pension age review
Automatic review of state pension age to ensure it keeps pace with increasing lifespans.
Higher rate relief
No change to pension relief for higher rate tax payers.
No change to fuel duty
No change to existing plans on fuel duty - the planned 3p rise in August will go ahead.
Vehicle excise duty
Vehicle excise duty to rise by inflation, but frozen for road hauliers.
So, in a nutshell this Budget has some good headline measures that will support business and growth, that is if you ignore the 3p rise in fuel duty. But let's face it,that isn't new news - we just hoped George Osbourne might have had the common sense to ease off a bit, inflation definitely going to be a concern now.
Let's just hope it's enough to keep the us safe from the double dip which is continuing to knock on the door.
The National Loan Guarantee Scheme: the death of Project Merlin
Today sees the start of another new scheme from the Chancellor in an effort to get the wheels of British commerce moving again - the government's National Loan Guarantee Scheme.
Over the next six months the government plans to make a select few banks provide cheaper loans to SMEs. Cheaper means that the banks will offer a decrease in around 1% on the APR they had previously been charging.
How does the scheme work?
Well, under the terms of the National Loan Guarantee Scheme, government backing will allow the few banks to borrow more cheaply in the wholesale money markets. So basically because the tax payer is being a guarantor to these loans the banks get the money more cheaply.
The Chancellor said the full benefits of lower interest rates would be passed on to businesses, many of whom have been unhappy since the start of the financial crisis five years ago about the availability and cost of borrowing.
Five banks – Barclays, Santander, Lloyds, RBS and the much smaller Aldermore.
What about HSBC?
Because HSBC is much stronger and more stable than the other banks involved it's already able to take advantage of the lower interest rates which will now be available to the others. So HSBC already has access to cheap credit but isn't making that available to businesses. What will make it start now, surely not just some competition?
Some might argue that this new scheme goes to show what a complete flop Project Merlin turned out to be. Banks didn't do enough then to help small businesses before and what will change now? In truth, I'm not quite sure. Trading conditions are still tough and there isn't a desire to take onboard lots of debt which arguably caused this problem in the first place.
But one thing is for for sure. The government believes our economy can still borrow its way out of trouble. Wise? Only time will tell.
The Business Bucket List
‘A bucket list for my business? What?!’
The concept of a bucket list is probably nothing new; you might well know it from the film starring Morgan Freeman and Jack Nicholson where two terminally ill men suffering from cancer escape from a hospital ward and head off on a road trip with a wish list of to-dos before they die. A very funny film which ends, as you would expect in tragedy.
The idea of a bucket list for your business might seem a bit strange, perverse even. However, this isn’t a collection of fun experiences to have before you go bankrupt, it’s a list of steps you can take to stop the rot and get your business on track.
This list isn’t going to solve all your problems by any means, but hopefully it may just give you some food for thought when it comes to reducing your overheads, cutting costs and getting your business back in the black.
1. Cut the money you pay for your gas and electricity
As you would expect from a commercial energy broker this one has to be top of the list or I wouldn’t be doing my own business justice.
Far too many businesses pay over the odds for the gas and electricity that they use. Often business owners don’t appreciate that they do have a choice and that they don’t have to accept renewal prices that are thrust at them by their existing supplier.
Money saved here will go straight on your bottom line. Remember - revenue is vanity, profit is sanity! Give us a call on 0800 688 8568 or get us to call you to find out more.
2. Look at your insurance products when they come up for renewal
You might be surprised how many different elements you have to your business insurance:
- public liability,
- employee liability (mandatory),
- premises (buildings cover),
- motor vehicle (might be mandatory),
- employee travel (if your employees go abroad),
- fidelity guarantees,
- key person,
- contents cover,
- plant and business equipment,
- goods in transit,
- money (if you handle cash, cheques and other negotiable documents),
- trade credit,
- business interruption,
- product liability,
- professional liability,
- directors and officers.
This list isn’t exhaustive; what cover you need depends on what type of business you have. But it is easy to see that these things can easily get out of control. Start digging out that paperwork, make sure you know what you need and what you don’t. When each policy comes up for renewal make sure you check if you need the policy, then shop around if you do, and cancel it if you don’t.
3. Do you have too many staff?
The topic of redundancies is never a nice one. No one wants to make people redundant and you must remember that in the short term it costs more money to make people redundant.
It is important not to underestimate the devastating impact that redundancies can have on a business, destroying morale and making remaining staff feel insecure. However, if by taking this measure it secures the longer term life of the business then there might always be the opportunity to get those staff back on board once you enter a growth phase again.
4. Hold off from big purchases
If there is some new piece of manufacturing equipment you planned to buy, ask yourself ‘do I need it right now?’ The long and short of the matter is that if you need this equipment then it will need to be bought in order for you to keep trading, but longer you can wait to buy it, the better.
If you do need, look at other ways to get it. For example, is there a way to finance so you aren’t immediately going to feel the full impact of the purchase? Could you just lease it it rather than buy it?
5. My desk is bigger than your desk!
How much space are you occupying? Do you need it all? As much as we would all love to have the windowed corner office on the 20th floor with the walnut desk and private washroom we need to be realistic.
Think realistically about whether you can squeeze your business into a smaller space. If you can, you could rent out the space you’ve created. This might not be so easy if you don’t own the premises, but on longer term leases you might be fine. Site and data security will need to be catered for, but the idea is worth exploring, even if it’s only for a short period of time.
6. ‘We’re supposed to haggle!’
You may or may not have seen Monty Python’s Life of Brian. But I would like to draw your attention to a scene where Brian is trying to escape some soldiers and runs off to the market place.
Never, ever, ever accept the first price that‘s offered to you. If you were going to buy a new house you wouldn’t offer the asking price would you? Well, not at first anyway.
When was the last time you tried to negotiate rates for the items you purchase from your suppliers? You may have been with them for years but that doesn’t mean you aren’t within your rights to ask for a better deal.
In theory the worst that can happen is that you end up paying the same price as you are already paying. Here are some haggling tips:
- Don't be afraid to ask. You don’t ask you don’t get. Be explicit about what you want and what you don’t.
- Never negotiate against yourself. If you’ve made an offer, wait for a response before making another offer.
- Get it in writing. As Samuel Goldwyn once said: ‘An oral agreement isn't worth the paper it's written on.’
- Know your bottom line. It needs to meet your needs or you might as well not bother. You need to know when to stop and what your drop-dead point is.
- Establish a fall-back plan. Know your best alternative if you face an unsuccessful negotiation. Without a fall-back position, you are left with no alternative but to negotiate until a deal is reached, even if that agreement is unacceptable.
7. Talk to someone who knows
Don’t delay, speak to someone who can give you financial and legal advice as soon as your business starts getting into trouble. This will give you time to assess the alternatives open to the business.
You should seek professional advice immediately if:
- you cannot cover your debts;
- the business receives a County Court summons;
- you can't pay staff wages;
- there is an acute lack of working capital.
Your accountant, who may already be familiar with your business, may be able to advise you. But if they’ve allowed to you to get to this position you’re in, you’ve got to ask whether or not they are the right person to help. Don’t be afraid to find someone else who you can have full confidence in.
8. Cash is king
If there are people who owe you money, what are you doing about it? You should be invoicing people as soon as possible and expecting them to pay on the terms which you agreed with them. If the payments haven’t been forthcoming, what have you been doing to follow them up? Once again don’t be afraid to ask. Just make sure you don’t get angry, because that won’t help anyone, especially you. Some basic steps to follow should include:
- make your payment policies clear at the time your services are agreed;
- accept all forms of payment and encourage credit card payment;
- get a deposit in advance;
- always let the customer pay when they offer;
- make arrangements for payment before you deliver the final product;
- follow up every day until you receive your money;
- apply your payment policies to every single customer;
- contact the credit agencies, make sure people know if some is a non-payer.
9. Don’t over-trade
Over-trading happens when businesses take on work, but don’t have enough current assets or working capital to meet the needs of the customer. This is usually common in young, rapidly-expanding businesses and it can be extremely serious, even fatal. This problem is often exacerbated because,although you pay suppliers on credit, your customers may well pay you on credit too and it doesn’t take much to upset the equilibrium. (Hence the importance of point eight.)
10. When all else fails...
If you have done everything you can to pull in the purse strings and you still can’t seem to sort it out, you have one more option before ending up insolvent. Explore getting a company voluntary arrangement (CVA).
You can use an insolvency practitioner to prepare and negotiate a company voluntary agreement between you and your creditors. This is a breakdown of how and when you need to make repayments to creditors.
A meeting will be held to present your proposals to creditors; 75% - by value of debts - of the creditors present or voting by proxy must vote in favour of the arrangement for it to be binding on all both you and all the creditors. Recently there have been some changes to insolvency rules that mean the meetings, voting and communications can be made electronically as well as in person.
You can find an insolvency practitioner with The Insolvency Service which is a quango provided by the Department of Business, Innovation and Skills.
I hope that you have found the points listed above a useful prompt to think about your business and what you can do to ensure that you stay on track and continue to trade in a successful way.
If I can just reiterate one more thing, it would be please don’t suffer in silence; if you need help ask for it. Even though things can seem tough, it is possible to recover and thrive again.
Business week in brief: 2nd March 2012
Why we’re supporting Get Britain Trading
Today the Forum of Private Business (FPB) is launching its get Get Britain Trading campaign.
The idea behind Get Britain Trading is to raise awareness of the huge contribution that small businesses make to the UK economy, and also to lobby the government to take action to support these firms.
This year, the campaign is focusing on five specific areas:
1) Improving cashflow
2) Making tax simple and proportionate
3) Creating employment and improving skills
4) Reducing business costs
5) Creating opportunities for growth
We think the campaign is a great idea and we’re proud to champion small businesses. We can all provide specific support on two of the areas of focus this year too: improving cashflow and reducing business costs.
How? Well, many businesses don't pay much attention to their business energy contract; it's just one of those costs that you have to pay. However, you can make significant savings by switching your business electricity and gas. We save businesses with low energy consumption an average £320.70, those with medium consumption an average of £706.66 and those with high consumption an average of £1774.67.* If you don't shop around for your business energy each time your contract comes up for renewal, that's money you're needlessly throwing away, year in, year out.
We can also help you improve your cashflow, by making sure you get the right billing and payment plan, or account management options. It could be something as simple as setting up Direct Debits which give you a discount on your bill, or signing up for an online account where you can give meter reading online so you get accurate bills. We could also help you get a smart meter so you don't have to worry about meter readings or checking bills, and get you access to data about your energy consumption online which can help you be more energy-smart.
We’ll save you time too. It’s a cliche, but when you’re running a business, time really is money. And let’s face it, business energy isn't very exciting - no one wants to spend hours online or on the phone getting quotes from different suppliers. With us, all it takes is one phone call to compare prices from across the market, and we can handle the paperwork and admin too.
You can get involved in Get Britain Trading too:
- Join the campaign;
- Play a part in the discussion on LinkedIn
- Follow the FPB on Twitter and use the #BritainTrading hashtag
*Average savings for all businesses switching their gas and/or electricity with uSwitchforBusiness.com for the period January- November 2011. Low users are classed as using less than 19,000 kWh a year, medium users 19,000-49,999 kWh a year and high users 50,000 kWh a year or more.
Small business loan checklist: business skills
Most small businesses will need a loan at some point, it’s rare for someone starting a business to have all the capital they need to get up and running, or to pay for expansion further down the line. Getting the right finance can be a make or break issue for some businesses, so here are some tips to help you find the right loan.
Small business loans: a checklist
When you come to a point where you need a loan for your small business, use this checklist to help make sure you get the right one:
- Know how much you want to borrow and for how long. Really think about how much you need to borrow to get your business where you want it to be. Think realistically about what you can repay and what period you can repay it over. Remember that if you borrow too little and have to change the loan agreement later on to borrow more, there may be charges.
- Bring your business plan. Your business plan will be really useful for showing what you’ll use the money for and how you’ll be able to repay it. (Don’t have one? Find out about business plans and forecasting.)
- Do your homework. It’s essential that you shop around if you want to make sure you’re getting the best deal. (But of course we’d say that - comparing prices is in our nature!)
- Be bold and negotiate. Do your research and make sure you know what’s available on the market. The lender is likely to give you a better offer if they know you’ve found other deals. Don't forget to negotiate over terms and fees as well as the interest rate.
- Always read the small print.
- Choose your security carefully. The lender will ask you you to nominate assets as security in case you’re unable to repay your loan. Avoid using your home as security at all costs.
Other options for small business loans
Many people think that they have to get a small business loan from their bank, but that’s not necessarily the case. There are plenty of different places you can go for finance, which is good news, because it means you’ve got a better chance of finding a loan that will fit you and your business.
One alternative to a traditional loan provider is peer-to-peer lending, where people with money to invest lend their money to businesses that need a loan. Businesses like Funding Circle act as an intermediary and put potential lenders in contact with potential borrowers. Sound interesting? We’ll be back with with more information about peer-to-peer lending networks like Funding Circle in the next few weeks.
Business week in brief: 3rd February 2012
Our top blog posts of 2011
£75 million boost for high-tech SMEs
It’s been a busy few days at the Department for Business Innovation and Skills (BIS) - as well as the Green Investment Bank announcement which I mentioned in my last blog post, the Department has also unveiled a £75 million package to help high-tech SMEs as part of the new Innovation and Research Strategy for Growth.
The key points of the strategy are:
- “£75 million of new government investment for the Technology Strategy Board to give high-tech innovative businesses better access to the facilities and finance they need to develop and commercialise products.”
- “£25 million to help companies develop large scale prototypes that will showcase their ideas to potential investors.”
- “Piloting a new innovation vouchers scheme delivered by the Technology Strategy Board that will give SMEs the opportunity to get free academic support from colleges and universities.”
- “Supporting SMEs by doubling the size of the Designing Demand Programme by £650,000 to £1.3 million a year. This is a mentoring programme run by the Design Council to help SMEs deliver improved products, services and brands to enhance their growth potential.”
- “Working with the National Endowment for Science, Technology and the Arts (NESTA), to establish a Centre of Expertise for running innovation inducement prizes, and a new Innovation Prize Fund, in which we will invest £250,000 a year.”
David Willetts, the Minister for Universities and Science commented: “Our new innovation and research strategy is the next step in ensuring the UK provides the best possible environment for entrepreneurs and innovators. Alongside the new Smart scheme, fresh initiatives like innovation vouchers for SMEs, more design mentoring and an Innovation Prize Fund will deliver help where it is most needed.
"A new innovation landscape, combined with continued investment and collaboration with business, will ensure the UK is a world leader in innovation.”
- The draft Energy Bill: a five-minute summary
- 60% increase in business energy costs as average turnover falls by 6%
- Business week in brief: 11th May 2012
- Ed Miliband and the Queen talk energy
- Interview with Steve Fitzsimons of new business energy supplier, Hudson Energy
- Business week in brief: 4th May 2012
- The see saw of corporate profit
- Business week in brief: 27th April 2012
- EDF Energy’s Business Customer Commitments: four key pledges
- Businesses buck the trend when it comes to smaller energy suppliers