UK SMEs let £2 billion of expenses slip through their fingers – What??

UK SMEs let £2 billion of expenses slip through their fingers

British SMEs will have failed to claim an estimated £2 billion in expenses for the 2011 / 2012 financial year, according to new research.

One of the biggest failures of small businesses is not claiming the full amount of VAT they’re entitled to. Sloppy management of expenses in this area alone means they’re failing to claim for a quarter of all potential VAT refunds, at a combined annual cost of nearly £1.2bn.

Poor standard of expense management

The standard of expense management by SMEs is so poor that:

- 40% aren’t confident their expense records are accurate enough to allow them to claim all the tax deductions;
- 40% don’t know the size of the monthly expenditure bill;
- one third don’t know how much their employees claim in expenses every month;
- for many small businesses, the time spent managing expenses (13 day per annum, on average) exceeds that spent generating new business or investing in new markets.

Even SMEs who retain an accountant to manage the process could still miss out on identifying patterns in expense claims which could help streamline processes or identify potential cost inefficiencies.

….read the full article.

10 Steps To Success In 2012

10 Steps To Success In 2012

With 2012 upon us and all the doom and gloom in the press about the economy, the Euro and anything else they can come up with a negative slant on to depress us – does all this news actually impact what you are doing and can do for your business?

I think not.

There is still money out there being spent. Mercedes-Benz had record sales in 2011 with an increase in sales of 8% worldwide and Rolls Royce had an increase of 31% in their sales – and neither are the cheapest of cars!

So here are 10 steps for you to consider in order to be successful (or more successful) in your business over the next 12 months:

1. Market – be clear who your ideal target prospect is. This can be based on a number of factors: geography, turnover, number of staff, role, industry sector, etc.

2. Competitive Advantage – what is your USP (Unique Selling Proposition)? What distinguishes you out from your competitors that would compel customers to buy from you?

3. Message – armed with your ideal prospect and USP, you can now focus on your marketing message, being clear about the benefits of why people should do business with you.

4. Method – this refers to the means by which you get your message out to the market. This should be an ongoing process and through multiple channels.

5. Measure – whatever channels you use, make sure you are measuring your return on investment. This enables you to do more of what is working and less of what isn’t.

6. Price – often a contentious point, but on the whole, customers do not buy on price; they are looking for the right value proposition that either provides pleasure for them in some way or that alleviates a pain they have. If you have the right product or service to fulfil the need, price is not an issue.

7. Profit – “profit is sanity, turnover is vanity” – focus on the bottom line, not the headline figure.

8. Cashflow – as mentioned in an earlier article, lack of cash is the biggest threat to a business. Know your income and expenditure looking ahead.

9. Outsource – you are not an expert in everything (no one is), therefore concentrate on what you are good at and what works for your business and outsource other services; either by employing staff or engaging an external service provider.

10. Plan – if you don’t know where you are heading, how do you know when you’ve got there? Write things down in an action based plan with measurable targets in line with the objectives you have for the business.

(This is the much abridged version of the full document – available as a free download here: www.tipsforsuccess.co.uk)

3 Numbers Every Business Owner Should Know

3 Numbers Every Business Owner Should Know

If you are serious about developing and growing your business, then there are certain measurements that you should have in place so you know where your business is heading.

If you can’t measure it, you can’t manage it!

Break Even Point

This is the minimum level of sales that you need to make, to cover all your business costs and start to get into a profitable situation. Assuming you know your fixed costs (e.g. salaries, rents, rates – often referred to as overheads) and variable costs (these relate to the cost of production and vary with quantity e.g. raw materials) within the business, the simplest way to work this is as follows:

Work out your gross profit (GP) = Total sales – Variable Costs
Calculate your GP percentage = Gross Profit ÷ Sales
Break Even Point = Fixed Costs ÷ GP Percentage

For example, if your sales turnover is £500k, your fixed costs are £100k and your variable costs are £200k – your break even point will be £167k; meaning that once you have achieved £167k of sales revenue, you are in a profitable situation – below this number you are making a loss.

(Use the free break even point calculator to calculate your break even point)

Cashflow

Cash is the biggest killer of businesses – large and small. Knowing what money is coming in and when and what money is going out and when is vital. Unfortunately most accountants only provide historic information on your finances; often at least a few weeks if not months after the end of your accounting period. This doesn’t allow you to do much about a cashflow situation.

You should be able to forecast what cash is coming in through the orders that you currently have and hopefully can forecast. Be realistic about when the invoices will be paid and look at the worse case scenario rather than the best so you are not left with any shortfalls or surprises if money doesn’t come in on time. Likewise you can look at your outgoings, your fixed and variable costs for the business. Particularly take note of tax bills such as VAT or NI contributions as these are often a big chunk out of any business’s cashflow when these fall due.

(Forecast your cashflow using a free cashflow template)

Conversion Rate

In order to survive in business, you need new customers doing business with you. Only you know how many customers you want over the next 12 months – for some it will be 1000s, for others maybe only 10s. Either way, you need to be aware of your sales pipeline or funnel. This allows you to track a potential customer from the prospect stage right through to the point at which an order is placed or a buying transaction occurs.

Now whilst there may be a number of stages in the sales process for your business, for simplicity lets just look at prospect through to initial engagement, followed by proposal and finally order placement.

Working this backwards, the first important measure to know is your conversion rate. Of the potential clients that you get to make an offer to or engage with in a sales conversation, how many of those lead to business? For the sake of argument lets say you close 1 in 5.

Now, of the prospects that you initially engage, how many of those carry on to the next stage and are willing to accept a sales proposal. So, for example, if you are conducting a telemarketing campaign to your target market, where the aim is to get an appointment – what is your success rate here? Again, for this exercise, let’s say 1 in 10.

Finally, looking at the initial stage of the process – how do you identify your prospects in the fist place and is there a process of qualification before you start the telemarketing or next step of engagement? Maybe for your business only 1 in 10 actually get past these initial hurdles before becoming a qualified lead that you feel worthy of following up.

So what this now means is….if you want 10 new customers in the next 12 months and we use the above numbers by way of an example…you need to propose to 50 prospects, telemarket to 500 in the first place and have an initial prospect list of 5000.

Now whilst there will be variations for your particular sector, the principle is the same for any business and knowing these numbers for your business will help you much more effective in your marketing; as well as looking to improve your success rate at each of these stages.

10 Steps To Success in 2012 – Step 8: Cashflow

10 Steps To Success in 2012 - Step 8: Cashflow

Cash is the biggest killer of businesses – large and small. Lack of cash within a business (or extensive borrowing and the inability to repay it) cuts off the lifeblood within an organisation and ultimately will lead to its failure. Knowing what cash is coming in and out of your business and when is essential. Invoice regularly – there is no need to wait for the end of the month and chase invoices before they are due. 

Doing this ensures there are no issues that would prevent payment, that you are on the payment run and to keep your bill in the mind of the debtor – sometimes it’s who shouts the loudest gets paid the soonest. 

Manage relationships with creditors and negotiate better payment terms that benefit your business. Have a cashflow projection that looks forwards not backwards, so you can manage bills that will become due in the future; like VAT for example. 

(Download a free cashflow template)

Download the full guide: 10 Steps To Success in 2012

Or alternatively, you can use Facebook or Twitter to get your copy:

10 Steps To Success in 2012 – Step 7: Profit

10 Steps To Success in 2012 - Step 7: Profit

No doubt you have heard the expression: “Turnover is vanity, profit is sanity“? There is no point, as a business owner, having a high turnover but only a few pounds profit – or worse still, a loss. Understand the break even point in your business and keep control of your costs; whether it is staff, raw materials, utilities, rates, etc. 

Have regular management accounts generated (at least monthly) by your finance person that provide you with the key financial measures that are important to your business (including a cashflow forecast). 

Knowing where you are in your business from a ‘bottom-line’ perspective enables you to make more informed decisions about the direction of your business. 

Download the full guide: 10 Steps To Success in 2012

Or alternatively, you can use Facebook or Twitter to get your copy:

10 Top Tips To Better Manage Your Cashflow

Cash is king in any business – being on top of what money is coming in and what money is going out and when is essential.

As they say, “every little helps”, so here are 10 tips to help you manage your cash more effectively:

1.            Plan the cash flow year – If the business experiences peaks and troughs in demand, prepare for these and put in place measures to ensure the cash flow reflects the changes.

2.            Don’t bulk buy – hold as little stock as possible and turn it over quickly. Agree with suppliers a right of return of unsold stock.  Look at getting ‘stock on consignment’ (you do not pay before it is sold).  Can suppliers deliver to customers on the company’s behalf?  Careful planning should eliminate this potential drain on cash.

3.            Keep costs down – Review all cost items (including products and energy) and relate this to efficiency. Turning off one PC overnight can save over £50 a year.

4.            Run a credit check on customers and potential customers – look at the credit histories with a view to eliminating late or non-payment.  Try to instil in staff the thought that ‘a sale is only valid when the cash is in the bank’.  Before accepting an order ensure the customer/potential customer accepts the payment terms – in writing.  It is also essential to enforce payment terms and if a customer doesn’t pay, put them on a stop.

5.            Invoice promptly – issue them as soon as is practical. Soon after they are issued contact the customer by phone or email ensuring they have the invoice in their system and that they have no problems with the supply – record this. Get them used to paying on time.  Remember “a sale is only valid…”

6.            Ensure that systems advise you of late customer payments – keep an eye on debtors’ days (trade debtors’ ÷ sales for the previous 12 months) × 365).  An increase could indicate a credit control issue.

7.            Take precautions – consider taking out insurance to cover all trading with a large or doubtful customers or even against individual invoices.

8.            Negotiate or re-negotiate credit terms with suppliers – Ask for early settlement discounts (if cash is available) and try to split annual costs into monthly payments.  This will probably be easier than paying a large bill at the end of the year. Consider what would happen to the business if a supplier failed?  Too much reliance on any one supplier could leave the company extremely vulnerable.  Use credit checks and find alternate source(s).

9.            Review wages and salaries – In times where cash is tight, these (usually) monthly payments are strain on cashflow.

10.          Consider invoice finance – These facilities can bring in a value of up to 90 per cent issued invoices – but it has a cost. It can assist as the cashflow income then grows in line with sales, and bridges the gap between issuing an invoice and receiving payment.

Source: Barry Hill of www.ukba.co.uk

The UK needs alternative solutions for SME funding

The previous few years have been a rocky road for the UK’s banks. UK SMEs have felt the effects of the stumbles in the banking industry more than most, with bank lending to the SME sector becoming especially restrained in an economic environment that has heightened the need for working capital to support day to day business operations.

However, although generally failing to meet the credit needs of SMEs the big 4 UK banks (Lloyds Banking Group, Royal Bank of Scotland, Barclays and HSBC still manage to retain nearly 80% of all SME accounts.

Read full article.

For some innovative funding solutions, take a look at the following:

£500k interest free loan

Funding from 0.9-2%

Lessons from a recession veteran: Cash is king and don’t you forget it!

It is possible, even desirable, to start up in tough times, but your chances of success increase if you are prepared to listen to those who’ve been there before and survived. For John Sollars, founder of Stinkyink.com, this is his second recession and he’s on his third business; the first two failed but the third is thriving. In a series of articles John highlights the lessons he has learnt. The first covers management of cash flow which is critical to keeping tabs on the health of a business.

How Do Businesses Survive A 23% Rise In Costs?

With tight margins that many businesses experience; often with bottom line profits in single figures, it is amazing that over the last 5 years more businesses have not gone under with costs rising by 23%.

A study by ‘savings advisor’ Make It Cheaper and the Centre for Economic and Business Research found that small business overheads have risen by a staggering 22.8% in the past five years, with as many as 55% of SME bosses now warning that their company won’t survive much longer if things keep going at the current rate.

Cashflow, or lack of it, is the main killer of businesses.

If you are a struggling business, then a review of your finances may be in order.

Read more: http://www.managementtoday.co.uk/news/1081971/smes-rising-costs-shocker/

Cashflow problems a persistent headache for UK business

The following article is interesting as cashflow is the biggest killer of businesses, small and large.

If you don’t have a handle on cash coming in and out of business then you are taking a risk with the future of your business.

Managing your finances is key and as a minimum you should have a cashflow forecast (free template download).

http://www.freshbusinessthinking.com/news.php?NID=9013&Title=Cashflow+problems+a+persistent+headache+for+UK+business

Related articles:

The Late Payment Cycle
Are You Still Having Cashflow Problems?