If You Don't Give, You Won't Get - Use the Technology

According to new research from the Forum of Private Business whilst almost a third of the businesses surveyed relied on standard credit checks to monitor their own customers and suppliers, only thirteen per cent of them were prepared to provide their own latest management accounts to outside parties. And only six per cent were willing to supply their own audited accounts.

With respect, I have to say that in the present economic climate, that isn't a good stance to adopt. Anyone who wants credit or finance today must be willing and able to produce accurate up-to-date management accounts.

Because if you don't give, it's unlikely that you'll ever get.

Any accountant can produce management accounts for you - but you'll find it a lot cheaper to look at any one of the many, many, computer programmes or on-line systems that will allow you to produce them internally.

Use the technology!

HMRC - The Iron Fist is Coming Out of The Velvet Glove

As of December 2009, the Business Payment Support Service approved almost 250,000 time-to-pay arrangements worth almost £4.5 billion.

H.M. Revenue & Customs insists that the scheme will remain in place - but it is now dealing with more and more requests for repeat deferrals, so it is likely that the Department will take a tougher line, and that new deferrals will only be permitted for shorter periods and that there will be more stringent requirements to provide and adhere to repayment plans.

H.M. Revenue & Customs have also warned that action will now be taken against companies that default on time-to-pay agreements.
It is perhaps not surprising that the Department is tightening up. Time-to-pay arrangements are costing the Government tax revenues that it can't afford.

At the moment, it is still possible to come to an arrangement with HMRC if you are worried about being able to meet payments owed to it - or if you want to repeat deferral of payment.

But don't leave it too long to ask for either one...

Supermarkets - One Step Ahead of the New Code?

The new Groceries Supply Code of Practice will come into force on the 4th of February next, when the Government will begin a consultation as to how to best enforce it, and what the nature and powers of the Ombudsman will be.

In the meantime, suppliers are already receiving copies of the Code from some retailers - along with new Terms of Trade regarding purchases. Obviously, some companies will be in a position to refuse to accept new Terms of Trade - but most will not.

Draw your own conclusions.

The GSCOP - What Price Anonymous Complaints From Suppliers

I was reading my way around the Forum of Private Business site this morning, and I see that the Forum is concerned - as I am - that the new Groceries Supply Code of Practice may turn out to be as toothless as the old one if suppliers remain reluctant to complain for fear of being delisted.

The Forum suggests that a guarantee of anonymity in the complaints process could address this problem.

It be wonderful if the answer were that simple, but I foresee a host of problems attaching to the granting of such guarantees.

Effectively, a complaint to a Government Ombudsman is an accusation of wrongdoing which may carry a heavy penalty. The accused has the right to full disclosure in order to defend itself against the charge. Even were all the documentation to be designed to disguise or hide the identify of the complainant, full disclosure of all the facts leading up to the complaint would almost certainly allow the accused to identify the accuser.

Back to square one?

The Revised Grocery Supply Code of Practice - Missing the Point?

Back in May of last year I was writing about excuses for late payment, and I mentioned the 'we are your biggest customer' excuse which is - as I remarked at the time - less an excuse for late payment than a form of commercial blackmail, because it is usually accompanied by the unspoken threat that the customer will 'delist' the supplier, and take its business elsewhere if the supplier doesn't knuckle down and accept the situation.

At that time, there was a Grocery Supply Code of Practice - and it obviously wasn't working too well. Now - thanks to the fact that Consumer Minister Kevin Brennan has accepted the Competition Commission's recommendation that there ought to be 'a body' to enforce the Code - there is going to be a Revised Grocery Supply Code of Practice.

The revised Code will come into force on the 4th of February next - but the consultation as to how it is to be enforced, who and what that 'body' might be, and the powers that that 'body' should have, is also scheduled to begin in February.

In other words, the new Code will be in place as of February 4th 2010, but 'the body' that is intended to enforce it will not be in place until later - possibly much later - and, moreover, exactly what powers of enforcement that 'body' should have, remains undecided.

The aims of the new Code look good - but then so did the aims of the old one, and frankly it seems to me that the underlying problem remains the same, and that the revised Code has (as yet) made no attempt to address it.

Under the new Code, large grocery retailers that exert pressure on small producers through extra costs and late payment could face fines - but what small (or even very large!) supplier is going to risk 'delisting' to report a large customer to 'the body' and its new Ombudsman because it has infringed the Code?

Environment Secretary Hilary Benn stated that "The new Ombudsman will help strike the right balance between farmers and food producers getting a fair deal, and supermarkets enabling consumers to get the high quality British food that they want, at an affordable price."

That would be nice - but I'm not holding my breath on this one.

Some Good News

According to research carried out by credit insurer Euler Hermes UK small companies with shareholder funds of less than £100,000 are less likely to fail than businesses with larger resources.

The research also seems to indicate that 'younger' businesses are less likely to fail than older ones - particularly older ones that have been sold once or twice.

I knew there had to be a plus factor for SME's in there somewhere...

Come to An Arrangement With HMRC if You Can't Meet Payments Due

According to Hacker Young, Accountants, H.M. Revenue & Customs is still the number one creditor petitioning to wind-up companies in order to recover moneys owed to it - and that's despite the fact that there is a time-to-pay scheme in place.

There's a surprise! When I was still trudging down to the Companies Court to file Petitions years ago, the H.M. Customs & Excise representative was not the person you wanted to be behind in the queue.

It's possible to come to an arrangement with HMRC if you are worried about being able to meet payments owed to it.

And if that is the case then you should get in touch with Business Payment Support Service immediately to negotiate a realistic time-to-pay agreement whilst the scheme is still available - and before access to it becomes a lot tougher than it is at the moment which, alas, seems likely. Staff will review your circumstances and discuss temporary options tailored to your business needs - and you can call them Monday through Friday 8.00 a.m. to 8.00 p.m., and Saturday and Sunday 8.00 a.m. to 4.00 p.m. on 0845 302 1435.

Please don't rely on the understanding and goodwill of HMRC representatives if you are late with your payments. Understanding and goodwill are not in the manual.

Fraud and Theft - Small Means Vulnerable

In June of last year I talked about fraud, and the fact that hard times increase the temptation for customers, suppliers or staff to steal.

I also mentioned in that post that whilst many small businesses feel that they are too small, and know their staff, their suppliers and their customers too well to be potential victims, it is actually small business rather than large ones that attract predators simply because large companies tend to be hypersensitive to their vulnerability to to fraud and theft and their vetting and other systems are consequently tighter and more stringent.

According to figures collected by accountancy firm BDO, fraud cost business and the public sector £2 billion plus last year - and BDO's Group Head of Fraud expects reported fraud to treble over the next two years as managers uncover more and more theft in the process of clamping down on costs and cashflow.

As usual, the vast majority of fraud reported in 2009 was carried out by white collar workers between the ages of 20 and 39 in order to fund a lavish lifestyle, or was linked to alcohol, gambling or drug problems. Only five percent was motivated by debt, and only one percent by real 'need' for extra cash.

Small and medium-sized companies are very vulnerable to fraud. Don't let it happen to you.

I included some advice as to how to identify potentially vulnerable areas - and potential fraudsters - in my post entitled 'Fraudsters are Equal Opportunity Opportunists'. You can find it by going to the archives for June 2009, or typing the word 'fraud' into the 'Search this Blog' box on the right.

Do it! A leaky boat is the last thing you need when it's so difficult to stay afloat to start with.

Pay in Order to be Paid?

Going back to the cheque-less existence envisaged for us in eight years time by the Payment Council, I think it's worth mentioning that card processing services cost money. In fact one or two of them cost so much money to process each transaction that some traders can't afford to deal with them at all.

Obviously, therefore, and unless card processing services suddenly become free services - and I think you know how likely that is! - new or small businesses who are lucky enough to get card processing services in the first place will have to pay in order to get paid. And inevitably, in order to sustain a viable profit margin, those businesses will have to increase their prices - and may or may not price themselves out of the market in the process.

Where are we going here?

So What if There are No More Cheques?

I've just read my way through the Payment Council's decision on the future of cheques - and you can give yourself that doubtful pleasure by clicking on the link I've provided for you.

Whilst I'm all for going paperless, I do have one small question here.

If, by the target date of 31st October 2018, banks and payment processing intermediaries are still refusing to provide card processing services to new or small businesses - as they frequently do now - what are those businesses to do? Ask customers to put the cash in the post? Cease trading?

I know I seem to be saying this a lot of late - but I really do think that somebody somewhere isn't thinking too clearly at the moment...

Cross Border VAT - Claiming Repayments

As of January 1st 2010, the system for claiming repayments of VAT incurred in other member states will be moved online. It is hoped that the new system will be more efficient and speedier than the old paper-based system.

Prior to January 1st this year, reclaiming VAT payments made in other member states involved submitting a claim to the VAT authority of the member state in question - a time-consuming (and sometimes expensive) exercise. Under the new system, claims must be made online to H.M. Revenue & Customs. It will not be necessary to submit invoices to support the claim, and it is hoped that standardised codes will reduce the amount of information to be supplied in another language.

VAT and Cross Border Services - New Rules

If you supply cross border services, then you may need to seek help from a specialist to ensure that you understand the new rules relating to VAT.

Prior to January 1st, the basic rule was that VAT was payable where suppliers were established. Now, the basic rule is that the opposite will apply, and VAT will be payable by the customer where it is established - unless, that is, services relate to:

• land or property;
• intermediary services;
• transport;
• restaurant and catering services, or
• performance services

each one of which is now subject to specific VAT regulations.

If your Company supplies any of those services, then you really should take specialist advice, because - as usual! - any failure to apply or adhere to the rules correctly is likely to cost you money. And even if you don't supply any of those services - or believe that the services you supply do not fall within those categories - then it would still be good idea to seek advice to make sure that you understand everything that you will now need to do.

If, for example, you supply cross-border services to any EU member State where VAT is payable by the customer rather than your Company, then your Company will have to submit monthly or quaterly EC Sales Lists detailing those services despite the fact that you will not have to account for VAT. You can do this on on-line at H M Revenue & Customs , where you will also be able to find an explanation of the new rules in pdf form.

Bad Ideas and Bad Timing

In case you've forgotten, the temporary reduction in the standard VAT rate ended on the 31st of December last year. So once again everything from brochures to systems will have to be revised to show the new rate - seventeen and a half per cent.

And that isn't the end of the administrative and other costs that face VAT registered businesses this year. Further changes are planned for April 1st which will mean that all existing businesses with a VAT exclusive turnover of £100,000 - and all newly VAT registered businesses - will have to file their VAT returns online and pay their VAT electronically. In many cases, this could involve changes to existing systems or the purchase of new software.

When you consider that National Insurance, income tax, utility bills - and in many cases, rent - will all fall due shortly, or have fallen due already, I can't help but think that somebody, somewhere, isn't thinking very clearly at all.

The Software Feeding Frenzy

Last year I met - virtually or in person - a lot of people who wanted to talk to me about debt collection or credit control related software. And I read a lot about it, too.

When I thought it was interesting, useful, worthwhile, and something you may not have heard of, read of, or come across yourself, I mentioned it here. And when I didn't think it was any of those things, I forgot it about it.

I'm not the most computer literate person in the world - but I've been in the world now for quite a long time now, and I think I can recognise a bandwagon when I see one. Sadly, I think that the Crunch and the problems it has caused for SME's has become a bandwagon.

Obviously, software packages have become an essential part of the credit management and collection process, but you should buy - or subscribe - carefully if you buy or subscribe at all, and if you are in any doubt as to what is right for you, contact The Institute of Credit Management. Advice is free.

Virtually a Credit Circle

I had a very interesting exchange of e-mails last year with a Mr. Russell Lawley Gibbs of Enigma Marketing Services Limited about a on-line service they had developed, and which they hoped would act as a 'virtual' credit circle.

Mr. Gibbs was kind enough to let me have access to the service - which is called Creditlook incidentally - and in many ways it does work in the same way as a regular Credit Circle.

Basically, members of Creditlook provide information on their defaulting customers (or customers that are trading outside of their Terms) by logging into the system and inputing the relevant information. That information becomes available to other members within twenty four hours (along with with a year’s worth of history) thus enabling them to make a more informed decision as to whether to grant credit or change credit limits.

The only real fault I could find with the system was that members remained anonymous and therefore could not contact each other directly by telephone or e-mail to ask questions - as members of traditional Credit Circles do - but in fact that safeguards the system from abuse, and ensures that members don't overstep the mark so far as the Competition Act is concerned, so I suppose it's for the best.

When last I spoke to Mr. Gibbs he was selling Creditlook into Federations in the building trade with a good deal of success. If you are in that trade you might want to look into the matter further. You can contact Mr. Gibbs by e-mail at russell@enigma-marketing.co.uk.

Happy New Year!

It would be easy to say that things can only get better, but I really do think that we are going to see signs of improvement shortly - despite the gloomy forecasts I seem to see every day!

And every cloud has a silver lining. The Crunch has brought about some very important changes in perspective in some very influential areas. SME's are finally starting to get the recognition, attention and help they deserve - and that recognition and attention, and those services, will survive when the Crunch is history.

There's still a long way to go - but the ball is rolling down the hill, and it's gathering momentum all the time. I hope and believe that new technology, new ideas, and new attitudes will make 2010 a better year for all SME's who take full advantage of all of them.

I wish you a happy and prosperous New Year and a brighter future. If you've survived thus far, you've earned it!