Category Archives: News

Managing in tough times – risk assess your business

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One of the characteristics of recession is that it shakes out poorly managed businesses. It’s the commercial equivalent of Survival of the fittest.  Regrettably it often takes many well managed companies too, which are simply victims of unforeseen events or those events which are outside of their control.

Life in industry is tough and is going to be tough for some time. We have all become familiar with Health & Safety requirements and procedures. Many of us have cursed them and the red tape associated with them but despite that have to admit that they have prevented accidents and saved lives.

In the past I have met many business owners who, even in difficult times, have been obsessed with matters such as tax efficiency when in fact as a matter of priority they should have been focussing on cash flow and survival.  Those business owners with foresight are undertaking “risk assessments” on all aspects of their companies – a sort of SWOT analysis to identify what might threaten their very existence and then taking steps to minimise risks.

As the manager of any size business, what can you do?

The starting point is having quality management information – an essential management tool. Scientia potentia est – “knowledge is power“. Trading blindly without such information is a high risk strategy.

Examples of some of the many risks which are quite easy to identify –

  • heavy reliance on one customer or a very small number of major customers
  • one owner or key staff member with no succession in place
  • dependence on one supplier
  • a single source of credit
  • exposure to currency or interest rate fluctuations

Any exceptional dependence results in vulnerability. There isn’t always a quick fix but planning to spread concentrations, succession planning and using multiple credit lines and hedging products can help.

It is always worth considering outsourcing – either outsourcing current operations or bringing in-house services which are currently outsourced. If your management information is such that it can separate various operations into cost centres this is a huge benefit. Some areas which are worthy of consideration may be:

  • Transport and haulage – this often evolves, perhaps starting with an individual vehicle and growing into a small fleet to deliver your products. If your vehicles are either standing idle for prolonged periods or driving around empty it may be worth looking at outsourcing. Another alternative may be to hive the haulage into a separate business and seek additional customers to ensure the fleet is profitable.
  • Credit control – many businesses are either not very efficient at collecting money or have in-house credit controllers. If you happen to be looking for an additional line of credit it may be worth considering factoring. A good factoring company will have an efficient credit control function. The saving in paying a credit controller will off-set the cost of the factoring facility.
  • Marketing  – important to any business, but  smaller and medium sized companies who cannot justify the costs often ignore it completely  - and wait for the phone to ring. If your business is not actively marketing rest assured that your competitors will be.
  • Project Management – often a false economy to undertake in-house. What is frequently overlooked is the lost production of the member of staff allocated to the temporary role and the fact that professional project managers are generally more effective. If lost production isn’t an issue …do you really need that member of staff?

Outsourcing isn’t always the right option – each business is different. There may be functions which you currently outsource where you could add value by bringing in-house. If, for example, you find your business has surplus clerical staffing capacity, rather than consider redundancies it may be financially feasible to bring certain operations in-house, eg   Payroll processing. Inexpensive, off-the-shelf software is available which once set up makes processing payroll simple.

So, if you are running a business and you want to survive, the worst thing you can do is ….absolutely nothing. Inaction, inertia and complacency can result in disaster, whereas a good level of awareness and forward planning gives your company the best chance of seeing 2012 through.

For free confidential advice, please call Wilson Field on 0800 458 3320

 

Administration – a powerful & positive tool

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At a time when the economy is shrinking and unemployment is rising, many of the tools of trade of the insolvency profession exists to minimise the number of failed businesses which simply “disappear” and on the back of that to preserve jobs.

Unless you have chosen an insolvency-related career or you have been unfortunate enough to have experienced severe financial problems in the past, there is a good chance that you will have limited knowledge of what services are available from an insolvency practitioner.

Many people see headlines about large employers “going into Administration” and immediately assume the worst – it all sounds pretty grim and terminal. And some of it is – particularly if business owners fail to take early advice when they face financial difficulty. But the insolvency industry does much more than “bust” companies.

Administration is a powerful tool. It is a temporary arrangement whereby insolvency practitioners are appointed by the court to take control of the company. During their period of office they look into the viability of the business to see if part or all of it can be salvaged. And whilst the company is in Administration it is in a protective bubble – safe from potential actions taken by creditors, such as bailiffs seizing essential equipment, until a solution can be found.

Recently the retail group, Peacocks, went into administration. Part of that group is the women’s clothing retailer Bonmarché and this has been sold for an undisclosed sum. Although there will be some job losses, 2400 jobs will be preserved. Historically, the alterative would have been that the company would have simply ceased to exist and all the staff would have been unemployed.

The outcome of administration varies tremendously. In theory, the administrators could manage the business until it has recovered and then hand it back to the directors. In reality there are usually underlying problems which frequently result in the healthy parts of the business being sold on. Once no further improvements or sales can be brought about the administrators role is completed and they usually then take on the role of liquidators.

Running a business is not easy. If you are running a business, whatever the size, and are worried about any issues, the worst thing you can do is nothing. Discuss the problems without delay with a licensed insolvency practitioner. They have a number of tools at their disposal including access to private investors and specialist lenders.

For free confidential advice, please contact Wilson Field.

A good time to start a business?

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Self-employment can be hugely rewarding, not just in financial terms but the having independence and the satisfaction of being your own boss. With as many as 1 in 3 new businesses failing within the first three years it is certainly not for the feint-hearted. But that also means that 2 out of 3 survive.

Is 2012 a good time to start your business? The reality is that there are businesses out there now which are not only surviving but thriving. It is also true that many businesses fail when the economy is booming. But there is no doubt that starting a business in such economic conditions is much tougher.

Nobody goes into business expecting it to fail but if you are looking to start a business and want to survive it’s worth knowing common factors which often occur in failed businesses.

• Lack of professional advice. You need an accountant and a solicitor before you start trading to advise you on issues such as VAT and your legal responsibilities. You also need to decide whether to be a sole trader or form a partnership or to trade your business as a limited company. There are many reasons to incorporate, not least of which is to protect personal assets, such as your home, should things go wrong.

• Poor cash flow. Each business which ceases to trade will have its own reasons, but whatever the underlying cause, the crunch comes when a business grinds to a halt because of a lack of cash. You need sufficient cash to continue trading until the business becomes established. Don’t assume that it will be easy to raise finance – it would be almost impossible for a new business in the current climate.

• Concentrations. Being heavily dependent on one or a small number of customers, suppliers, products, staff, etc., makes your business vulnerable.

• Lack of planning and monitoring. Well managed businesses invariably plan well and are constantly monitoring their results. It enables a business owner to identify and address problems at an early stage and even foresee some and take evasive action.

If, despite your best efforts your business runs into financial difficulty don’t delay taking specialist advice. The sooner you ask for help the better chance of survival your business will have. And a good sense of humour and a “can-do” attitude will help you survive the ups and downs.  For free advice please contact Wilson Field.

Checking the vitals

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Have you ever undertaken a first aid course? If not, you should. It’s a selfless act which might save a life.

If you have been trained and come across somebody with a gaping wound, then you’ll know that one of the first things to check is that your patient is breathing. The logic? If you don’t breathe, it won’t take long for your heart to stop pumping oxygen-carrying blood around your body (including to the gaping wound). This is not to say the gaping wound isn’t serious – it could be life-threatening. It’s a matter of priorities. And just so with the economy.

The International Monetary Fund has warned that the global economy has entered what it calls a “dangerous new phase” of low growth and high public debt. Everybody knows that there is too much public debt. It’s a serious gaping wound which won’t go away and needs treating. But before that receives treatment the government needs to stimulate growth and restore confidence. It is for this reason that the media is suddenly full of suggestions to pump money into developing the country’s infrastructure. This will create employment and pump more money into the economy.

Following the Great Depression in the US in the 1930s, the ‘New Deal’ was launched which involved projects to build roads, dams and electric systems. The main purpose was to create new jobs and combat 25 per cent unemployment. While some economists would not agree, it was generally deemed a success.

The state of Eurozone and slowing growth in both Europe and the US have magnified the vulnerability of the world’s economy even further. And what does that mean here? Well, in the third quarter of 2011, the FTSE 100 index in the UK recorded its worst quarterly performance since 2002, and the fourth worst quarterly performance since its launch in 1984.

No matter what side of the politico-economic fence you sit on, these results are alarming and I believe the time has come to make the stimulation of growth the main thrust forward rather than reducing public debt at any cost.

Confidence is so important in addressing growth. Quite simply, lack of confidence inevitably leads to lack of growth – for example consumers “tightening their belts” and changing their spending habits. This is driven by worries about job security, fear of increased interest rates and the effect of 4.5 per cent inflation eroding spending power. This initially impacts on retail and leisure businesses but gradually passes along the food chain to wholesalers and trade service suppliers. And lack of confidence results in expansion plans being scrapped.

Companies would normally turn to banks for support but the banks are still licking their own wounds from the recession and are not in great shape themselves. At a time when they are risk-averse, they are not going to look favourably on a company with a weak balance sheet. So, unless alternative forms of lending such as invoice finance or private investment are available to plug the financial gap, businesses potentially face failure.

The road to financial recovery is going to be fraught with challenges and the coming months will be both crucial and revealing in equal measure. Arguably, the biggest challenge will be for world leaders, in politics and banking, to look beyond reactive debt crisis solutions. If they can balance the value of investment and infrastructure against the headline-making growth of public debt, there is the potential for growth, restoration of confidence and achievable recovery. But it is a big ‘if’.

To speak to an expert from Wilson Field’s free advice line call 0800 458 3320 or visit the website at www.wilsonfield.co.uk.

 

Insolvency and Rescue Awards 2011 Update

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Wilson Field have recently entered for ‘Corporate Recovery Firm of the Year’ through the Insolvency and Rescue Awards 2011.  This award is open to UK Corporate Insolvency Firms with four to twenty appointment taking Insolvency Practitioners and we are delighted to find out that we have been shortlisted for this award.

The companies shortlisted in this category are yet to be revealed but we’re thoroughly excited to be a part of this.  Click here for more information and update of the event.

Are You a Shadow Director?

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A recent story in the news covered the sentencing of a man who received 50 weeks imprisonment suspended for two years, disqualification from being a director for eight years and an order to pay prosecution costs of £2,000 for contravening an undertaking not to take part in the management of a limited company. Whilst he had not been a registered director of any limited company after signing the undertaking, it was concluded that he had in fact been acting as a shadow director.

So, what is a shadow director and how could it affect you in an insolvency situation?

As described in the definitions of the Insolvency Act 1986, a shadow director is a person in accordance with whose directions or instructions the directors of the company are accustomed to act.

In an insolvency situation, this distinction is important, as a shadow director is considered to be just as accountable for the company as any formally appointed director.

If you think that this describes your position within a company, you are equally as responsible as the formally appointed directors and that you have a duty to act in the best interest of the company at all times.

Bankrupts are not allowed to act as company directors, but if they are acting as shadow directors they could fall foul of the law.

If you are worried that you may be a shadow director please contact Wilson Field Limited now  on 0800 458 3320 or visit our web site at www.wilsonfield.co.uk and we’ll be happy to provide further information.

High Street Retail Casualties

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Rather predictably, there has been a flurry of retail casualties on the High Street. This sector obviously depends directly on the public and consequently is now feeling the effects of poor consumer confidence. With job insecurity, the VAT increase and government cutbacks all starting to bite and the fact that inflation has eroded spending power, the public are cutting back with a vengeance. Higher fuel prices have also contributed to the equation as a result of which retail sales in clothing and non-food have tumbled.

Statistics for the first quarter of this year showed the number of retail companies going into administration increased by a massive 30% compared with the same period last year. Well known operators Focus DIY, Habitat, Jane Norman and now T J Hughes have all recently suffered and HMV and JJB Sports are known to be experiencing problems.

It is only the well known names which hit the press but many smaller retailers are similarly suffering. If you own a retail business and are worried, visit our website at www.wilsonfield.co.uk or for free advice ring Freephone 0800 458 3320 .

Time to Become a Company Director?

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Many small business owners are sole traders or partners. Frequently, perhaps in the excitement of starting their new venture, they fail to seek professional advice to look at the alternatives.

Since April 2011 there have been a number of articles written by experts, advocating the benefits of incorporating small business for tax reasons. But there are other reasons to incorporate, not least of which is the protection to shareholders of limited liability. As far as the law is concerned, a limited company is a separate legal entity to its shareholders. As long as the directors and shareholders conduct themselves properly and do not commit themselves by signing such as guarantees they are not liable for the company’s debts. The concept of limited liability was created to encourage investment and entrepreneurial spirit. Without it, it is difficult to imagine how the stock market would exist

Nobody goes into business expecting it to fail. Regrettably, running a business can be a minefield, particularly for inexperienced owners. But in a period when in recent years huge companies such as Woolworths and Lehman Brothers have toppled, no business owners can be complacent.

So if you are starting up in business or are already a sole trader or partner, take professional advice about whether or not you would be better off incorporating. Don’t delay, do it now.

For free confidential advice call Wilson Field.

Local Bank Managers Have Hands Tied

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When the Bank of England revealed recently that lending to smaller businesses fell well short of pledges previously made, the Government warned the country’s major banks that it wants to see a “significant improvement”.

The importance of SMEs cannot be underestimated. They now account for 99.9 per cent of all enterprises. They also accounted for more than half of employment (59.1 per cent) and almost half of turnover (48.6 per cent) in the UK private sector, at the start of 2010, according to statistics issued by the Department for Business Innovation and Skills (BIS). So it stands to reason that the growth which our economy desperately needs is reliant on the wellbeing of SMEs.

With this in mind, you would imagine the banks would be suitably humble and would outline how they were going to address this. Instead their collective voice – The British Bankers’ Association – blamed ‘muted demand’.

But there is an abundance of anecdotal evidence from SMEs of lengthy delays by banks in responding to finance requests, of long shopping lists of pre-requirements, of unreasonable terms being offered or a straight forward answer of ‘no’. Many consider there to be little chance of the banks agreeing to lend.

Imagine there were a shortage of bread and each day you trudged from shop to shop, day after day, without success. Eventually you would give up and look for an alternative – or simply starve. And the bread shops would experience “muted demand”. SMEs are being forced to look elsewhere. Starved of cash they are turning to invoice finance, private investors or re-financing plant, equipment and other fixed assests.If none of these are available or appropriate then as a survival strategy business owners are turning to insolvency professionals rather than lose their businesses.

It’s time the banks honoured their pledges and started to support SMEs, which are not ‘blue chip’ but have a viable business plan to trade out of their difficulties. The banks have experienced staff at ground level who have the skills to manage the more marginal businesses but in most cases their hands are tied by reluctant senior bank executives.

Who’d Be a Shopkeeper?

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Latest statistics from the Insolvency Service suggest that now is not a good time to be “a nation of shopkeepers”. This supposedly derogatory remark is usually attributed to Napoleon but in fact was used earlier by the famous economist Adam Smith in The Wealth of Nations.

Corporate insolvencies (includes all processes) in Q1 of 2011 show an increase of some 55% compared to the same period last year for companies in the wholesale and retail sectors. Traditionally, businesses which are already struggling and are in the retail sector often see the busy Christmas and sales season as a last chance of survival. The quiet period which follows is when many businesses fail. But poor weather hit sales in the run up to Christmas 2010.

Perhaps the biggest issue is confidence by the public. The combination of high unemployment and concern over job security, the VAT increase in January and anxiety over the impact of government cutbacks has seen the man-in-the street tighten his belt.

The latest statistics have shown a substantial rise in the number of retail administrations and retail company voluntary arrangements (CVAs) for the first quarter of 2011, compared with the last quarter of 2010. Administrations in retail have seen a 55% jump from 80 in the Q4 2010 to 124 in Q1 2011, while CVAs in retail have risen by 30% from 23 in Q4 2010 to 30 in Q1 2011. The overall number of administrations was up by nearly a quarter from 642 in Q4 2010 to 782 for Q1 22%.

If you own a retail business and are worried, visit our web site at www.wilsonfield.co.uk or for free advice ring Freephone 0800 458 3320 .