Like the heading? Well it is Panto time of course (ours went very well since you ask) and it is nice to be seasonal occasionally, even if at times there is not much to smile about.
One area that is definitely causing frowns to form in a number of places is the subject of bank lending. “Banks must lend more” cry politicians and business organisations. “We want to lend and we are lending” say the banks. “Oh no you are not”, comes back the reply (see, this Panto lark is catching). And so the circle of claim and counter claim goes on.
So what is the truth? I recently went to a Surrey Chamber of Commerce event, where four representatives from each of the main high street banks braved the local professional services community for an enjoyable question and answer session. What became clear during the discussions was that there was a definite flight to quality, and businesses boasting good management teams, strong security and organic growth potential in attractive sectors were the ones they were looking to develop long term relationships with. There was an admission that there was limited appetite at present for smaller deals.
Although cash flow based lending was had been substantially reduced, banks were now looking to ensure they understood the cash flows in the business. There was a definite move away from traditional loans and overdrafts towards more asset based lending products, such as invoice finance. Covenants would be tighter, and these would be regularly monitored. They claimed that they had used the recession to get a lot closer to their clients.
The banks emphasised that they did want to lend, as that is their business. However they were finding that many of their clients were reluctant to borrow, even if offered a good opportunity, preferring where possible to pay down debt. Much of their recent “new” lending activity has often been refinancing and restructuring. However they said that the new Enterprise Finance Guarantee Scheme (EFG) was being used more widely than its predecessor, the Small Firms Loan Guarantee Scheme (SFLG).
On the thorny issue of pricing, they said that it was inevitable that spreads would increase, particularly compared to the current low Bank of England base rate, not least because the banks’ own funding costs were higher than this. Other factors currently influencing pricing were scarcities caused by the withdrawal of many foreign banks from the UK market, regulatory requirements, such as Basle II, and more focus on risk based pricing models.
The banks have been at pains to emphasise that their lending criteria have not changed and that they remain open for business. Anecdotal evidence however suggests that it is still extremely difficult to get money out of a bank for anything other than a “sure thing”.
This is not a “bash the bankers" piece as, in the main, the banks have been much more supportive of businesses battling the recession than they have been given credit for. Also, we probably don’t want to go back to the “cash machine” mentality that existed in those halcyon pre credit crunch days. However a little more pragmatism in bank lending in the current climate would be nice.
Tuesday 15 December 2009
Monday 7 December 2009
Breakfast with Bankers
I went off to a breakfast with Clydesdale Bank in Richmond last week to hear the views of Tom Vosa, who is the National Australia Banking (NAB) Group's Head of Market Economics, Europe. As NAB is one of the few remaining AA rated banks in the world, clearly they have been doing some things right, and it was a good opportunity to hear what one of their senior economists had to say, as well as renew acquaintances with our Clydesdale contacts, and meet other local business people.
Tom has a refreshing approach to all matters economic, and it is testimony to his communication skills that not only did a 72 slide presentation packed with detailed economic statistics and analysis seem to fly by, but we were all able to leave the room fully understanding what his views were for the economy in 2010 and beyond, and how they might affect our businesses and those of our clients.
In essence he believed that the recovery in 2010 would be patchy and would most likely resemble a W in shape than any of the other letters or symbols that have bandied about. While each quarter would show some growth, it would not feel like a recovery. There was still a significant wholesale funding gap, which along with the regulatory tightening that was taking place, would continue to limit the availability of finance. Unemployment and earnings would hold back any real increase in consumer spending, and the need to close the gap in the public sector deficit, through spending cuts and tax increases, would also be a dampener on recovery. Nonetheless, there would be a recovery in 2010, mainly led by the public sector activities currently in force, with the real economy taking up the slack in 2011.
In short the deepest recession since the 1930s, would be followed by the weakest of recoveries. London itself would remain the engine room for national recovery, not least because of the Olympics in 2012, although as with most Olympic cities, there will be a negative reaction in the following year.
Clydesdale very kindly makes available much of its research, which you can look at by clicking here . However, the presentation reinforced our view that businesses will have to create their own recovery stories rather than wait for any pick up in the economy.
Tom has a refreshing approach to all matters economic, and it is testimony to his communication skills that not only did a 72 slide presentation packed with detailed economic statistics and analysis seem to fly by, but we were all able to leave the room fully understanding what his views were for the economy in 2010 and beyond, and how they might affect our businesses and those of our clients.
In essence he believed that the recovery in 2010 would be patchy and would most likely resemble a W in shape than any of the other letters or symbols that have bandied about. While each quarter would show some growth, it would not feel like a recovery. There was still a significant wholesale funding gap, which along with the regulatory tightening that was taking place, would continue to limit the availability of finance. Unemployment and earnings would hold back any real increase in consumer spending, and the need to close the gap in the public sector deficit, through spending cuts and tax increases, would also be a dampener on recovery. Nonetheless, there would be a recovery in 2010, mainly led by the public sector activities currently in force, with the real economy taking up the slack in 2011.
In short the deepest recession since the 1930s, would be followed by the weakest of recoveries. London itself would remain the engine room for national recovery, not least because of the Olympics in 2012, although as with most Olympic cities, there will be a negative reaction in the following year.
Clydesdale very kindly makes available much of its research, which you can look at by clicking here . However, the presentation reinforced our view that businesses will have to create their own recovery stories rather than wait for any pick up in the economy.
Monday 30 November 2009
The wonder of a Woolworths administration – part three
Further to our recent blog on the challenges facing insolvency practitioners (ISPs) in the current business climate, it now seems that the corporate insolvency market is to be the subject of an Office of Fair Trading (OFT) enquiry .
Some of you will find it hard to have any sympathy for these under fire ISPs, reasoning that as they must be so rushed off their feet at present, a squeeze on their fees would not seem out of order. However it is not all sweetness and light in the world of insolvency. Yes, there may be rich pickings at the top end of the scale, which deserve to be scrutinised (Lehman Brothers anybody?) but at the lower end the picture is much less rosy. Due to the reluctance of the banks and HMRC, the two organisations most likely to put a business into insolvency, to pull the plug on businesses, ISPs, while busy, are not that busy.
Also, as so many businesses now operate on a virtual basis, there are very few, if any, realisable assets available. These barely cover the costs of insolvency never mind leave anything left to pay out to creditors.
I still have my doubts about the way the Woolworths administration was handled, but somebody has to clear up the mess that poorly managed businesses leave behind, and in that regard the insolvency profession in general still does a pretty good job.
Some of you will find it hard to have any sympathy for these under fire ISPs, reasoning that as they must be so rushed off their feet at present, a squeeze on their fees would not seem out of order. However it is not all sweetness and light in the world of insolvency. Yes, there may be rich pickings at the top end of the scale, which deserve to be scrutinised (Lehman Brothers anybody?) but at the lower end the picture is much less rosy. Due to the reluctance of the banks and HMRC, the two organisations most likely to put a business into insolvency, to pull the plug on businesses, ISPs, while busy, are not that busy.
Also, as so many businesses now operate on a virtual basis, there are very few, if any, realisable assets available. These barely cover the costs of insolvency never mind leave anything left to pay out to creditors.
I still have my doubts about the way the Woolworths administration was handled, but somebody has to clear up the mess that poorly managed businesses leave behind, and in that regard the insolvency profession in general still does a pretty good job.
Friday 20 November 2009
That’s football isn’t it?
Thierry Henry is a cheat. A fantastic footballer, and for all I know a pleasant and charming individual, but on the evidence of this week’s World Cup qualifying play off second leg match in Paris between France and the Republic of Ireland a cheat.
Football and sport are often used as metaphors for business, mainly in terms of teamwork and people management. However there is also a belief that the spirit in which any game is played is as important as the skill level, and this is another ethos that can be applied to business, as in other walks of life.
There is a way of doing things that is honourable and that does not involve using an unfair advantage to get ahead. You can of course have endless debates as to what is fair or not, but deep down most of us know what is right and what is wrong in business.
Listening to Ronnie Whelan and Alex McLeish two experienced professional football people who were on Sky Sports after the game, both said that while it was clearly heartbreaking for the Irish team, they understood why Henry had done what he’d done, and therefore the Irish had to accept it and move on. “That’s football” seemed to be their message, to which the only possible reply is “Well it damn well shouldn’t be!”
Football and sport are often used as metaphors for business, mainly in terms of teamwork and people management. However there is also a belief that the spirit in which any game is played is as important as the skill level, and this is another ethos that can be applied to business, as in other walks of life.
There is a way of doing things that is honourable and that does not involve using an unfair advantage to get ahead. You can of course have endless debates as to what is fair or not, but deep down most of us know what is right and what is wrong in business.
Listening to Ronnie Whelan and Alex McLeish two experienced professional football people who were on Sky Sports after the game, both said that while it was clearly heartbreaking for the Irish team, they understood why Henry had done what he’d done, and therefore the Irish had to accept it and move on. “That’s football” seemed to be their message, to which the only possible reply is “Well it damn well shouldn’t be!”
Thursday 19 November 2009
The wonder of a Woolworths administration – part two
Rumblings persist concerning the way that the administration of Woolworths was handled, something that we raised in our blog back in December 2008. Indeed Woolworth’s former management have now added their voices to those who believe that more efforts could have been made by the administrators, Deloittes, to keep the giant store group afloat questioning whether there was a conflict of interest in their provision of advice to the company’s banking syndicate prior to their appointment as administrators. Not surprisingly Deloittes have robustly defended their actions, pointing out that the business simply ran out of money, and that they had been called in with the management’s blessing.
Nobody is pretending that Woolworths was the best run company in the world. However the negative impact of its closure on many high streets up and down the country, and the fact that newly established imitators such as Alworths and Wellworths have seemingly thrived, indicate that the general public placed more value on Woolworths than the financial community apparently did.
With an upsurge in insolvencies expected in 2010, insolvency practitioners will face even more challenges in deciding how terminal the decline of such businesses is, and how far they can go in keeping them alive, whilst not being seen to reward poor management. I wish them all the luck in the world – they are going to need it.
Nobody is pretending that Woolworths was the best run company in the world. However the negative impact of its closure on many high streets up and down the country, and the fact that newly established imitators such as Alworths and Wellworths have seemingly thrived, indicate that the general public placed more value on Woolworths than the financial community apparently did.
With an upsurge in insolvencies expected in 2010, insolvency practitioners will face even more challenges in deciding how terminal the decline of such businesses is, and how far they can go in keeping them alive, whilst not being seen to reward poor management. I wish them all the luck in the world – they are going to need it.
Tuesday 17 November 2009
Non-execs – pain without the gain?
One of the biggest questions to emerge from the current banking crisis is what were the non executive directors doing while top banking executives were running their companies into the ground. Indeed this has been a question asked after a number of corporate failures in the past 10 years, such as Enron and Worldcom.
Some of the arguments advanced as to why these non execs were so ineffective in preventing what occurred include lack of accountability, insufficient knowledge of the businesses they were directors of, the fact that they were not selected from a wide enough pool of candidates, and the implication that their high levels of remuneration had compromised their independence.
This view on payment levels was expressed forcefully in last Sunday’s Mail on Sunday. And yet, when one takes into account the risks associated with being a director, the time and effort required to do the job in a way that discharges the legal duties of a director as well as satisfies the requirements of external stakeholders, and the knowledge and experience required to carry out the role properly, the question moves towards not whether non-execs are paid too much but are they actually paid enough to ensure that the right calibre of individual undertakes the role.
That is not to say that independence argument does not have merit, because it clearly does, but surely one of the reasons that a non executive is brought on board is for their ability to think and act independently, something that can obviously be established during the selection process. It is also difficult to establish what level of remuneration is excessive, in that £30,000 for some individuals would be a considerable sum whilst for others it would be pocket money.
We at Orchard have always been big fans of non-execs for all companies, and have had our own from the start. Good non-execs add considerable value bringing experience and knowledge to the party as well as providing a vital sanity check for executive directors and managers, and standing up for the interests of outside shareholders. One of the reasons that we have a strong relationship with the Non Executive Directors Association (NEDA) is the desire to promote good corporate governance through a strong non executive presence on company boards.
We all want knowledgeable, experienced, independent, diverse non executive directors in big and small companies who are willing to stand up to and challenge executive managers where necessary. We also expect these non execs to make available the necessary time to undertake their role, and to take full director risk and responsibilities when carrying out their role. We therefore cannot be surprised when they start to demand remuneration that reflects their skills, their time and the risks that they take.
Some of the arguments advanced as to why these non execs were so ineffective in preventing what occurred include lack of accountability, insufficient knowledge of the businesses they were directors of, the fact that they were not selected from a wide enough pool of candidates, and the implication that their high levels of remuneration had compromised their independence.
This view on payment levels was expressed forcefully in last Sunday’s Mail on Sunday. And yet, when one takes into account the risks associated with being a director, the time and effort required to do the job in a way that discharges the legal duties of a director as well as satisfies the requirements of external stakeholders, and the knowledge and experience required to carry out the role properly, the question moves towards not whether non-execs are paid too much but are they actually paid enough to ensure that the right calibre of individual undertakes the role.
That is not to say that independence argument does not have merit, because it clearly does, but surely one of the reasons that a non executive is brought on board is for their ability to think and act independently, something that can obviously be established during the selection process. It is also difficult to establish what level of remuneration is excessive, in that £30,000 for some individuals would be a considerable sum whilst for others it would be pocket money.
We at Orchard have always been big fans of non-execs for all companies, and have had our own from the start. Good non-execs add considerable value bringing experience and knowledge to the party as well as providing a vital sanity check for executive directors and managers, and standing up for the interests of outside shareholders. One of the reasons that we have a strong relationship with the Non Executive Directors Association (NEDA) is the desire to promote good corporate governance through a strong non executive presence on company boards.
We all want knowledgeable, experienced, independent, diverse non executive directors in big and small companies who are willing to stand up to and challenge executive managers where necessary. We also expect these non execs to make available the necessary time to undertake their role, and to take full director risk and responsibilities when carrying out their role. We therefore cannot be surprised when they start to demand remuneration that reflects their skills, their time and the risks that they take.
Thursday 24 September 2009
It's a VAT trap......
I tend to count myself as one of life’s optimists (supporting Spurs tends to do that to you), and I have no doubt that sooner or later we will be out of recession, and enjoying a period of steady, if maybe not exciting, economic growth. The creativity, determination and energy that I have seen over the past twelve months, as business people old and new have faced up to the reality of the economic situation and looked at how to improve their way of doing business, and the goods and services that they provide, has left me convinced of that.
However the accountant in me can never stop looking at potential downsides, so that I can ensure that I have some contingency plans in place to cope. One big lurking downside, along with dealing with the government deficit and the requirement to slash (there is no other word for it) public expenditure, with its consequent impact on unemployment, is the end of the VAT rate cut stimulus that the government put in place at the end of last year.
I fear that this has been forgotten among the various sightings of green shoots and the FTSE index rocketing over the 5,000 mark, but come 1st January 2010 VAT will be back up to 17.5% (or even 20%). Once again systems will need to be changed, wasting valuable time and money, but what will be more interesting is how many businesses will increase their prices as a result. I am sure that most of you will have noticed that since the much trumpeted “point of sale” VAT reductions that major store groups put in place last Christmas, prices have more or less drifted back to their pre-reduction levels. Will there be an increase in prices over and above their pre-VAT cut level, or will firms have to swallow the increase putting even more pressure on profits and cash?
Savvy businesses will have used the VAT reduction to squirrel away some cash (something that I advised clients at the time, believing that this was a better use of the rate reduction rather than adding to the discounts that were already in place for bargain hunting consumers), which they can use to support their businesses in 2010. For other businesses the VAT jump is going to be yet another hurdle for them to overcome. Hopefully it won’t be one too many.
However the accountant in me can never stop looking at potential downsides, so that I can ensure that I have some contingency plans in place to cope. One big lurking downside, along with dealing with the government deficit and the requirement to slash (there is no other word for it) public expenditure, with its consequent impact on unemployment, is the end of the VAT rate cut stimulus that the government put in place at the end of last year.
I fear that this has been forgotten among the various sightings of green shoots and the FTSE index rocketing over the 5,000 mark, but come 1st January 2010 VAT will be back up to 17.5% (or even 20%). Once again systems will need to be changed, wasting valuable time and money, but what will be more interesting is how many businesses will increase their prices as a result. I am sure that most of you will have noticed that since the much trumpeted “point of sale” VAT reductions that major store groups put in place last Christmas, prices have more or less drifted back to their pre-reduction levels. Will there be an increase in prices over and above their pre-VAT cut level, or will firms have to swallow the increase putting even more pressure on profits and cash?
Savvy businesses will have used the VAT reduction to squirrel away some cash (something that I advised clients at the time, believing that this was a better use of the rate reduction rather than adding to the discounts that were already in place for bargain hunting consumers), which they can use to support their businesses in 2010. For other businesses the VAT jump is going to be yet another hurdle for them to overcome. Hopefully it won’t be one too many.
Monday 14 September 2009
To engage or disengage, that is the question…
Having sat through a thought provoking session on employee engagement last Friday at the IOD West Surrey People Forum, it was somewhat dispiriting to come across a survey in this morning’s paper that, in spite of the fact that their companies have lost on average almost a third of their value, executives at Britain’s top companies earned 10% more than in the previous year. This compares to the overall 3.1% increase that ordinary workers “enjoyed”.
No doubt these executives will use the “L’Oreal” defence (“because I’m worth it”) to justify their largesse, whilst exhorting their employees (those who are left after the most recent round of downsizing) to buckle down and take one for the company, but to use a phrase that has been much used already in respect of politicians and bankers “they still don’t get it do they?”.
Had they been at my people forum last week, they would have heard from Jonathan Scott of em(ic)* about engaged employees i.e. people who enjoy the work they do and “who unlock their discretionary effort to create a winning organisation”, and the potential of such employees to outperform on sales, growth and profit by 2:1, a compelling business case you might think. However the continuing divide between what bosses say and what they do, as evidenced by the pay statistics above, is much more likely to lead to employee disengagement, which one would think was not what is required in the current climate.
Yes top people will earn, and deserve to earn, more based on the skills and responsibilities that go with their jobs, and entrepreneurs in particular deserve to be recompensed for their risk taking. However too many senior executives, both in the private and public sectors, take no risk and little responsibility in their roles, and it is about time their pay packets recognised this. Chances are that their employees already have…..
No doubt these executives will use the “L’Oreal” defence (“because I’m worth it”) to justify their largesse, whilst exhorting their employees (those who are left after the most recent round of downsizing) to buckle down and take one for the company, but to use a phrase that has been much used already in respect of politicians and bankers “they still don’t get it do they?”.
Had they been at my people forum last week, they would have heard from Jonathan Scott of em(ic)* about engaged employees i.e. people who enjoy the work they do and “who unlock their discretionary effort to create a winning organisation”, and the potential of such employees to outperform on sales, growth and profit by 2:1, a compelling business case you might think. However the continuing divide between what bosses say and what they do, as evidenced by the pay statistics above, is much more likely to lead to employee disengagement, which one would think was not what is required in the current climate.
Yes top people will earn, and deserve to earn, more based on the skills and responsibilities that go with their jobs, and entrepreneurs in particular deserve to be recompensed for their risk taking. However too many senior executives, both in the private and public sectors, take no risk and little responsibility in their roles, and it is about time their pay packets recognised this. Chances are that their employees already have…..
Monday 31 August 2009
Trust Me - I'm An Accountant
A number of surveys over the past few years have indicated that accountants remain many business’ most trusted advisors.
This is something that we as finance directors take pride in of course, although it does not make us complacent.However the reaction to the recent survey by the Institute of Chartered Accountants, which suggests that confidence among business professionals has moved into positive territory for the first time in two years, thus indicating that the UK economy may well be showing signs of recovery, seems to have taken this trust to new levels, with the stock market rising to new year on year highs last week.
It seems that politicians, bankers and economists can chunter on as much as they like about future economic prospects, but it is humble beancounters rather than these masters of the universe that are most effective in moving markets.
So does this mean that the recession is over?
Well to misappropriate a well worn phrase, this may not be the beginning of end or even the end of beginning (there are still some nasty macro issues out there, such as the banks willingness and ability to lend, the need to rein in government spending and increase taxes to reduce the ballooning public sector deficit and the lagging indicator that is unemployment), but if there is a chance that some confidence is returning to the economy, it might just provide the encouragement needed by those business owners and managers who have been frustrated by their relative inaction since the start of the year, and who want to start moving things forward again in the last third of the year.
Now that would be an achievement for us beancounters to be proud of.
This is something that we as finance directors take pride in of course, although it does not make us complacent.However the reaction to the recent survey by the Institute of Chartered Accountants, which suggests that confidence among business professionals has moved into positive territory for the first time in two years, thus indicating that the UK economy may well be showing signs of recovery, seems to have taken this trust to new levels, with the stock market rising to new year on year highs last week.
It seems that politicians, bankers and economists can chunter on as much as they like about future economic prospects, but it is humble beancounters rather than these masters of the universe that are most effective in moving markets.
So does this mean that the recession is over?
Well to misappropriate a well worn phrase, this may not be the beginning of end or even the end of beginning (there are still some nasty macro issues out there, such as the banks willingness and ability to lend, the need to rein in government spending and increase taxes to reduce the ballooning public sector deficit and the lagging indicator that is unemployment), but if there is a chance that some confidence is returning to the economy, it might just provide the encouragement needed by those business owners and managers who have been frustrated by their relative inaction since the start of the year, and who want to start moving things forward again in the last third of the year.
Now that would be an achievement for us beancounters to be proud of.
Tuesday 18 August 2009
Credit where credit’s due...
Abbreviated accounts filed ten months after the year end.
"At last! What a horrible year it was, glad that’s out of the way. Well, that is all my accounting done for another year apart from a few other bits and pieces to keep the taxman happy. Still the accountant and bookkeeper take care of all that. Job done, next!”
“What’s that? Our main supplier has cut our credit lines? Why? Because our latest set of accounts as filed at Companies House aren’t very good and are out of date? But that was ages ago! What about those new orders we’ve just won in the teeth of the recession? A couple of them gave us some cash up front and we’ve just banked some large receipts on a profitable old job so we’re quite flush at the moment. However we really need those additional supplies. You want a set of management accounts? What are they when they're at home?”
Genuine quotes from a small business owner? Maybe not yet, but they soon could be. Research by Graydon, the credit management specialists indicates that the lack of publicly available financial information could lead to many SMEs being refused credit by key suppliers. Therefore such businesses may need to have up to date financial information available to share with credit rating agencies. Indeed Graydon have teamed up with Validis to develop their own enhanced credit information service based around validated up to date management accounts.
The increasing number of financial reporting obligations that are likely to be imposed on SMEs don’t end there. Debate is raging within financial reporting circles as to when and how SMEs can be brought into the International Financial Reporting Standards (IFRS) net. Indeed, if the Accounting Standards Board has its way, it could be that our much loved UK GAAP will soon be a feature of history textbooks rather than accounting textbooks, as companies will ultimately be expected to adopt either full IFRS, IFRS for SMEs or the FRSSE for smaller entities.
Funnily enough, during a recent clearout, I came across an old exam paper that posed the question as to whether the future should be “accounting for everyman” i.e. simple and understandable or a highly specialised profession. It seems to have gone in the direction at the latter, with accounts being increasingly detailed and complex and requiring an in depth study by experts in order to fully understand what they are actually saying. This was particularly brought home to me when analysing the accounts of a couple of quoted US companies for a client recently (although ironically the disclosure requirements for unquoted companies in the US would appear to be minimal).
Perhaps another anguished cry can be added to the list of quotes above. “International Accounting Standards? But we don’t do any export business! Help!”
"At last! What a horrible year it was, glad that’s out of the way. Well, that is all my accounting done for another year apart from a few other bits and pieces to keep the taxman happy. Still the accountant and bookkeeper take care of all that. Job done, next!”
“What’s that? Our main supplier has cut our credit lines? Why? Because our latest set of accounts as filed at Companies House aren’t very good and are out of date? But that was ages ago! What about those new orders we’ve just won in the teeth of the recession? A couple of them gave us some cash up front and we’ve just banked some large receipts on a profitable old job so we’re quite flush at the moment. However we really need those additional supplies. You want a set of management accounts? What are they when they're at home?”
Genuine quotes from a small business owner? Maybe not yet, but they soon could be. Research by Graydon, the credit management specialists indicates that the lack of publicly available financial information could lead to many SMEs being refused credit by key suppliers. Therefore such businesses may need to have up to date financial information available to share with credit rating agencies. Indeed Graydon have teamed up with Validis to develop their own enhanced credit information service based around validated up to date management accounts.
The increasing number of financial reporting obligations that are likely to be imposed on SMEs don’t end there. Debate is raging within financial reporting circles as to when and how SMEs can be brought into the International Financial Reporting Standards (IFRS) net. Indeed, if the Accounting Standards Board has its way, it could be that our much loved UK GAAP will soon be a feature of history textbooks rather than accounting textbooks, as companies will ultimately be expected to adopt either full IFRS, IFRS for SMEs or the FRSSE for smaller entities.
Funnily enough, during a recent clearout, I came across an old exam paper that posed the question as to whether the future should be “accounting for everyman” i.e. simple and understandable or a highly specialised profession. It seems to have gone in the direction at the latter, with accounts being increasingly detailed and complex and requiring an in depth study by experts in order to fully understand what they are actually saying. This was particularly brought home to me when analysing the accounts of a couple of quoted US companies for a client recently (although ironically the disclosure requirements for unquoted companies in the US would appear to be minimal).
Perhaps another anguished cry can be added to the list of quotes above. “International Accounting Standards? But we don’t do any export business! Help!”
Wednesday 29 July 2009
As if by magic...
Hot on the heels of my last post, here is a recent article from the Financial Times by serial entrepreneur, Luke Johnson, which should serve as a checklist for anybody using a finance director (which should be everybody!).
Numbers guys you can count on gives it to you straight. As Luke says "a proper company cannot function without a decent finance director at the helm, supervising, informing and warning." Ignore him at your peril!
Numbers guys you can count on gives it to you straight. As Luke says "a proper company cannot function without a decent finance director at the helm, supervising, informing and warning." Ignore him at your peril!
Saturday 18 July 2009
FDs taking the centre stage – is yours up to it?
Yet another study has revealed that CFOs and FDs are now coming into their own. All right, it comes from the Chartered Association of Certified Accountants so maybe there is a hint of vested self interest, but even so, there is enough anecdotal evidence out there to suggest that the principles of sound financial management and good business practise are not mutually exclusive in the way that they seemed to be during the recent bubble years. At last we downtrodden finance folk are being given the chance to do what we do best, and save our businesses in the process.
But wait a minute what is this other sound? Desk being cleared and doors slamming shut behind you? Whisper it but some CFOs and FDs are now being “found out”, and that the qualities that made them adequate during the boom years are not suitable for the tough times that are now upon us. At a recent conference I attended, the Managing Director of a respected local business told of how, when faced with a downturn in business last year, he quickly realised that his FD was not up the task and as a result very quickly got himself a new one.
Studies show that 80% of the value of an FD comes from 20% of their time. Much of an FD’s time in many organisations is often spent on managing other functions, such as IT and HR which may not fit their skillsets, or indulging in internal politics. In situations like this, the question a value for money becomes more and more pertinent. If you are paying somebody a package in excess of £100k you would expect them to be performing at this time and showing their true worth. If they are not, it may be time to consider other options.
But wait a minute what is this other sound? Desk being cleared and doors slamming shut behind you? Whisper it but some CFOs and FDs are now being “found out”, and that the qualities that made them adequate during the boom years are not suitable for the tough times that are now upon us. At a recent conference I attended, the Managing Director of a respected local business told of how, when faced with a downturn in business last year, he quickly realised that his FD was not up the task and as a result very quickly got himself a new one.
Studies show that 80% of the value of an FD comes from 20% of their time. Much of an FD’s time in many organisations is often spent on managing other functions, such as IT and HR which may not fit their skillsets, or indulging in internal politics. In situations like this, the question a value for money becomes more and more pertinent. If you are paying somebody a package in excess of £100k you would expect them to be performing at this time and showing their true worth. If they are not, it may be time to consider other options.
Wednesday 15 July 2009
When the going gets tough, it is time to show real leadership
Leaders. Overused, abused, misunderstood?
Possibly, although I think these words are more apt when they apply to the term leadership. Never in the field of business education has there been a more analysed and yet arguably more poorly taught discipline. Many would-be business leaders on leadership courses end up being put through all sorts of self analysis tools, pumped full of the most up to date leadership theories and encouraged to seek their examples from the sporting and military world. And yet in spite of this, leadership in the UK remains of varying quality, and most business failures tend to be the result of poor leadership.
I recently attended a Surrey Chamber of Commerce breakfast which had leadership as its theme, and featured Simon Hazeldine of Mentor Group as its main speaker. Simon’s theme was that leadership was about results and that basically without great results, you cannot have great leadership. He noted that the quality of a leader was reflected in the quality of the team that they led, and that an employee’s behaviour will often be determined by that of their leader. He saw employee engagement as the key to avoiding the not insignificant costs of poor performance, and that leaders needed to use logic and emotion to win the hearts and minds of their people. All very good stuff, and well worth the early morning trip to Epsom Downs racecourse.
As highlighted by Simon above, the best leaders invariably have the best teams, and it is often how these teams develop their own leadership qualities that will shape their success. Regardless of position, job content or (dare I say it) salary level, nearly everybody is expected to show leadership in some way, and it is organisations that recognise this, and train their people accordingly, that are more likely to be successful in the long run.
But leadership training should not just be the preserve of big corporates. Dealing with SMEs as I do, I am often struck by how the assumption that entrepreneurs are natural leaders is accepted without question. Sure, some entrepreneurs do show the right aptitude for leadership, but many begin to flounder the moment their businesses start to gain any sort of momentum, or worse, they believe that because they are the boss, and that it is their company, they will automatically have leadership status conferred upon them without the need to do anything to justify it. Such businesses invariably underachieve, which is a shame, as they often have the potential to become real contributors to the future growth of our economy.
Leadership has probably been quite easy over the past few years as it has been relatively simple to be successful. However, given that success is much harder to come by in the current climate, now more than ever good quality leadership will be the key, not only to surviving, but to being well prepared for the upturn when it arrives.
Possibly, although I think these words are more apt when they apply to the term leadership. Never in the field of business education has there been a more analysed and yet arguably more poorly taught discipline. Many would-be business leaders on leadership courses end up being put through all sorts of self analysis tools, pumped full of the most up to date leadership theories and encouraged to seek their examples from the sporting and military world. And yet in spite of this, leadership in the UK remains of varying quality, and most business failures tend to be the result of poor leadership.
I recently attended a Surrey Chamber of Commerce breakfast which had leadership as its theme, and featured Simon Hazeldine of Mentor Group as its main speaker. Simon’s theme was that leadership was about results and that basically without great results, you cannot have great leadership. He noted that the quality of a leader was reflected in the quality of the team that they led, and that an employee’s behaviour will often be determined by that of their leader. He saw employee engagement as the key to avoiding the not insignificant costs of poor performance, and that leaders needed to use logic and emotion to win the hearts and minds of their people. All very good stuff, and well worth the early morning trip to Epsom Downs racecourse.
As highlighted by Simon above, the best leaders invariably have the best teams, and it is often how these teams develop their own leadership qualities that will shape their success. Regardless of position, job content or (dare I say it) salary level, nearly everybody is expected to show leadership in some way, and it is organisations that recognise this, and train their people accordingly, that are more likely to be successful in the long run.
But leadership training should not just be the preserve of big corporates. Dealing with SMEs as I do, I am often struck by how the assumption that entrepreneurs are natural leaders is accepted without question. Sure, some entrepreneurs do show the right aptitude for leadership, but many begin to flounder the moment their businesses start to gain any sort of momentum, or worse, they believe that because they are the boss, and that it is their company, they will automatically have leadership status conferred upon them without the need to do anything to justify it. Such businesses invariably underachieve, which is a shame, as they often have the potential to become real contributors to the future growth of our economy.
Leadership has probably been quite easy over the past few years as it has been relatively simple to be successful. However, given that success is much harder to come by in the current climate, now more than ever good quality leadership will be the key, not only to surviving, but to being well prepared for the upturn when it arrives.
Thursday 9 July 2009
The Only Way Is Up?
Testing times, unprecedented times, uncertain times.
That was the general message of the 5th Hart Brown Annual Economic Forum entitled “Navigating The Recession” which I recently attended at the University of Surrey in Guildford.Now that is clearly not an unusual message in today’s economic climate, but maybe what was less usual was the quality of the speakers that Hart Brown, the Surrey based firm of solicitors had brought together to provide that message. Mark Curtis, managing director of key Surrey manufacturers Vision Engineering, Giles Keating, Global Head of Research at Credit Suisse, and everybody’s favourite politician Vince Cable offered a range of insights that left the 300 plus attendees in no doubt that they would need to be bold and brave if they were to take advantage of the post recession world.
Looking at some of the previous blog entries, there is a danger that we are becoming cheerleaders for the Lib Dem Shadow Chancellor, but when he continues to offer the clear, concise and reasoned arguments that he did at the forum, then it is hard not to keep cheering and waving. Pointing out that the current problems stem from a collapse in asset prices, a reduction in credit and a global recession he took the view that rather than suffering from a dose of flu, the economy had suffered a very big heart attack, which would necessitate a radical change in lifestyle once recovery was underway.He saw three obstacles to recovery: the need for high interest rates to combat potential inflationary pressures, the size of the deficit being run up by the current government and the fact that the banks were still not functioning properly. Nevertheless, positive signs included the fact that governments globally were doing all that they could to combat recession, that many UK companies were still doing well, including many world class ones, and that there was a high level of flexibility in the labour market and a willingness to accept short time working and pay cuts to preserve cash and jobs.
Giles Keating had flown over from Zürich especially for this forum and began by saying categorically that the recession would be over this year. He focused on four questions during his presentation, namely how robust the recovery was, whether the emerging markets would replace the US consumer as the driver of growth, will inflation surge and are we seeing the start of a new equity bull market? He was armed with an impressive array of charts and statistics which he used to indicate that there was some substance to the recovery, that he believed that the world that emerged would be vastly different and that the emerging markets would be the dominant forces in the new economy, that inflation could be contained and that there was every chance of a return to a bull market in equities.
Having heard from a politician and an economist, it was nice to get a view from a real business. Vision Engineering is a manufacturer of optical instrumentation, much of which is exported, and its managing director, Mark Curtis, professed to be baffled by macro economics, preferring to focus on achievement based on an honest day’s work. He outlined some of the actions, both precautionary and emergency, that his company had found necessary to take to cope with the significant fall in orders that his company had faced. He emphasised the need for developing strategies based on clearly defined problems in each of his key markets, and then using leadership to instil the confidence required to move the business forward. His conclusions centred upon what should now be considered as realistic growth and the importance of not being beholden to the banks or uninformed shareholders, along with some pithy comments about the lack of joined up thinking at government level.
All in all a very interesting and enjoyable evening, and one which left plenty to think about as we drifted off into the night after our drinks and canapés.
That was the general message of the 5th Hart Brown Annual Economic Forum entitled “Navigating The Recession” which I recently attended at the University of Surrey in Guildford.Now that is clearly not an unusual message in today’s economic climate, but maybe what was less usual was the quality of the speakers that Hart Brown, the Surrey based firm of solicitors had brought together to provide that message. Mark Curtis, managing director of key Surrey manufacturers Vision Engineering, Giles Keating, Global Head of Research at Credit Suisse, and everybody’s favourite politician Vince Cable offered a range of insights that left the 300 plus attendees in no doubt that they would need to be bold and brave if they were to take advantage of the post recession world.
Looking at some of the previous blog entries, there is a danger that we are becoming cheerleaders for the Lib Dem Shadow Chancellor, but when he continues to offer the clear, concise and reasoned arguments that he did at the forum, then it is hard not to keep cheering and waving. Pointing out that the current problems stem from a collapse in asset prices, a reduction in credit and a global recession he took the view that rather than suffering from a dose of flu, the economy had suffered a very big heart attack, which would necessitate a radical change in lifestyle once recovery was underway.He saw three obstacles to recovery: the need for high interest rates to combat potential inflationary pressures, the size of the deficit being run up by the current government and the fact that the banks were still not functioning properly. Nevertheless, positive signs included the fact that governments globally were doing all that they could to combat recession, that many UK companies were still doing well, including many world class ones, and that there was a high level of flexibility in the labour market and a willingness to accept short time working and pay cuts to preserve cash and jobs.
Giles Keating had flown over from Zürich especially for this forum and began by saying categorically that the recession would be over this year. He focused on four questions during his presentation, namely how robust the recovery was, whether the emerging markets would replace the US consumer as the driver of growth, will inflation surge and are we seeing the start of a new equity bull market? He was armed with an impressive array of charts and statistics which he used to indicate that there was some substance to the recovery, that he believed that the world that emerged would be vastly different and that the emerging markets would be the dominant forces in the new economy, that inflation could be contained and that there was every chance of a return to a bull market in equities.
Having heard from a politician and an economist, it was nice to get a view from a real business. Vision Engineering is a manufacturer of optical instrumentation, much of which is exported, and its managing director, Mark Curtis, professed to be baffled by macro economics, preferring to focus on achievement based on an honest day’s work. He outlined some of the actions, both precautionary and emergency, that his company had found necessary to take to cope with the significant fall in orders that his company had faced. He emphasised the need for developing strategies based on clearly defined problems in each of his key markets, and then using leadership to instil the confidence required to move the business forward. His conclusions centred upon what should now be considered as realistic growth and the importance of not being beholden to the banks or uninformed shareholders, along with some pithy comments about the lack of joined up thinking at government level.
All in all a very interesting and enjoyable evening, and one which left plenty to think about as we drifted off into the night after our drinks and canapés.
Monday 6 July 2009
Other People’s Money
I have just been reading yesterday’s Mail On Sunday about the extraordinary expenses claimsof former JJB Sports chief Chris Ronnie, which recall the worst excesses of disgraced US CEOs such as Bernie Ebbers of Worldcom.Most of the expenses mentioned in the report from top accountants Deloitte referred to planes and helicopters but coming hot on the heels of the lurid stories of expenses claims by MPs, BBC executives using public money to shower its highly paid talent with gifts and dinners and the current focus on the revival of the lavish salary and bonus culture that permeates the City, it is easy to take the view that our leaders, be they public sector or private sector are seized by an extraordinary level of greed the moment they get the keys to the executive bathroom.
And yet are those of us that make up the lower reaches of the scale untainted by all of this? Fiddling expenses is sadly not uncommon within the work environment, and even those of us that would never dream of being dishonest will invariably make the most of any opportunity to help ourselves if our employers are paying. The temptation to enjoy the benefits of other people’s money remains strong.
Even owner managers, who are the closest to business people who actually do spend their own money, are not immune from such temptations, particularly when you consider that much of their funding comes from third party creditors and funders, such as banks, and that many such owners have difficulty distinguishing between the company’s funds and their own.
Actually what we are seeing here is what can be termed as a warped sense of entitlement, often borne of resentment at inadequate pay and rations or some other perceived employer slight. The inner justification of “I deserve it. It is my money really” is what drives this desire to maximise the use of other people’s money. In the case of the MPs, it was their view that their pay was not commensurate with their status and therefore it was right to use their generously lax expenses system to supplement it. In the case of Chris Ronnie, it was “I am important and therefore it is right that the company spends this money on me” and in the case of the average employee it is often “they don’t care about me so I will take them for everything I can get”.
I am not sure if we will ever reach a stage where people treat business expenditure in the way they treat the money that they have to shake out of their own personal piggy banks, but maybe the key to reducing this sense of entitlement, apart from implementing strong financial controls (including in the case of senior executives a robust non executive presence) and creating awareness of the fact that excessive use of other people’s money is plain wrong, is to make them feel more valued in the first place.
And yet are those of us that make up the lower reaches of the scale untainted by all of this? Fiddling expenses is sadly not uncommon within the work environment, and even those of us that would never dream of being dishonest will invariably make the most of any opportunity to help ourselves if our employers are paying. The temptation to enjoy the benefits of other people’s money remains strong.
Even owner managers, who are the closest to business people who actually do spend their own money, are not immune from such temptations, particularly when you consider that much of their funding comes from third party creditors and funders, such as banks, and that many such owners have difficulty distinguishing between the company’s funds and their own.
Actually what we are seeing here is what can be termed as a warped sense of entitlement, often borne of resentment at inadequate pay and rations or some other perceived employer slight. The inner justification of “I deserve it. It is my money really” is what drives this desire to maximise the use of other people’s money. In the case of the MPs, it was their view that their pay was not commensurate with their status and therefore it was right to use their generously lax expenses system to supplement it. In the case of Chris Ronnie, it was “I am important and therefore it is right that the company spends this money on me” and in the case of the average employee it is often “they don’t care about me so I will take them for everything I can get”.
I am not sure if we will ever reach a stage where people treat business expenditure in the way they treat the money that they have to shake out of their own personal piggy banks, but maybe the key to reducing this sense of entitlement, apart from implementing strong financial controls (including in the case of senior executives a robust non executive presence) and creating awareness of the fact that excessive use of other people’s money is plain wrong, is to make them feel more valued in the first place.
Tuesday 5 May 2009
Everybody Needs Help Sometimes
Talking to lots of businesses, as I do in my line of work, their problems and issues currently seem to fall into the following categories.
· We are doing badly - we are being screwed by the economic conditions, government, market, customers, suppliers, bank (tick those that apply). We are not sure that we can survive.
· We are doing OK - it’s not brilliant, and it’s a struggle sometimes, but we are coping with the current situation and looking at how to develop our business to take advantage of the upturn when it comes
· We are doing really well - we are almost apologetic about the fact, as if we should not be doing so well in the current climate, but we are, and we now need to take out business to the next level
All of the businesses above have one thing in common, even if they won’t admit it. They need help. More importantly they need help and advice from people who are not working in the business.
Yes I know this seems like vested self interest and I can hear you all shouting out “hey, he would say that wouldn’t he”. External advisors, be they called consultants, professional service providers or non-executive directors often get a bad press, some of which is definitely deserved. We often read about poorly managed consultancy projects that cost far more that was originally envisaged and do not deliver what was promised.
And yet on the whole external advisors do their utmost to provide the best service they can to their clients and add as much value as possible. There are good and bad advisors in the same way that there are good and bad businesses. The key, as in any business relationship, is to get things right from the start, which means proper planning, careful selection and managed expectations on all sides.
External advisors do not need to be expensive. For example, Business Link is a good source of free basic advice. However, even they will still refer you to their supplier matching system for more specialised in depth advice. Also, like all businesses at present, advisors are having to be imaginative, and there are some good deals around at present, such as the Orchard FD for £12k promotion. However it needs to be borne in mind that they need to eat, pay the mortgage and pay for their own training and development to maintain service levels, so sides need to be reasonable when negotiating an agreement.
There is a tendency for businesses to believe they know it all, or can do it all, which is often based on cost and cash considerations. However too many businesses are being held back by not getting the right advice at the right time.
With a clear written agreement and identified deliverables, an external advisor could be a very worthwhile investment, even in these troubled times. Give it a go - you might be pleasantly surprised!
· We are doing badly - we are being screwed by the economic conditions, government, market, customers, suppliers, bank (tick those that apply). We are not sure that we can survive.
· We are doing OK - it’s not brilliant, and it’s a struggle sometimes, but we are coping with the current situation and looking at how to develop our business to take advantage of the upturn when it comes
· We are doing really well - we are almost apologetic about the fact, as if we should not be doing so well in the current climate, but we are, and we now need to take out business to the next level
All of the businesses above have one thing in common, even if they won’t admit it. They need help. More importantly they need help and advice from people who are not working in the business.
Yes I know this seems like vested self interest and I can hear you all shouting out “hey, he would say that wouldn’t he”. External advisors, be they called consultants, professional service providers or non-executive directors often get a bad press, some of which is definitely deserved. We often read about poorly managed consultancy projects that cost far more that was originally envisaged and do not deliver what was promised.
And yet on the whole external advisors do their utmost to provide the best service they can to their clients and add as much value as possible. There are good and bad advisors in the same way that there are good and bad businesses. The key, as in any business relationship, is to get things right from the start, which means proper planning, careful selection and managed expectations on all sides.
External advisors do not need to be expensive. For example, Business Link is a good source of free basic advice. However, even they will still refer you to their supplier matching system for more specialised in depth advice. Also, like all businesses at present, advisors are having to be imaginative, and there are some good deals around at present, such as the Orchard FD for £12k promotion. However it needs to be borne in mind that they need to eat, pay the mortgage and pay for their own training and development to maintain service levels, so sides need to be reasonable when negotiating an agreement.
There is a tendency for businesses to believe they know it all, or can do it all, which is often based on cost and cash considerations. However too many businesses are being held back by not getting the right advice at the right time.
With a clear written agreement and identified deliverables, an external advisor could be a very worthwhile investment, even in these troubled times. Give it a go - you might be pleasantly surprised!
Tuesday 14 April 2009
Not Just A Swallow?
It would seem that those on green shoots watch have had a whale of a time over the past couple of weeks with a number of positive bits of economic news emerging, as well as the apparently successful G20 summit in London.
The banking situation seems to be improving, with the news of record profitability for Wells Fargo in the US, and reports of a marked increase in the amount of loans being written under the Enterprise Finance Guarantee Scheme.
There are continuing signs of relatively robust consumer activity, and with property prices seemingly within sight of the bottom, cash buyers are interested again. A 90% mortgage product has recently been introduced by HSBC which could provoke a small boost to the housing market.
Also, although they have significantly increased, insolvencies and repossessions have not reached the predicted levels.
Then there are the many people who are securely in work and have been benefiting from significantly reduced mortgage payments. Once they have paid off some debt, they will be looking to spend again, although without necessarily borrowing to do so.
All the above would seem to support the idea that there are some signs of confidence returning, and as we all know it is confidence rather than credit which will drive economic recovery.
This blog has made no secret of its belief that the economy, or more pertinently the ordinary people and businesses that inhabit the real economy, is more resilient and positive than the various media outlets have given it credit for, and that many businesses have acted decisively and imaginatively to combat the impact of the downturn (one reason perhaps that the retail apocalypse predicted for the quarter rent day of 25th March did not come to pass was that fact that many businesses had already negotiated better deals with their landlords).
However there are still a number of macro economic clouds on the horizon, including the number of large corporate refinancings that are due over the next year or so, the state of government finances and the medium term action that will be required to improve them, and the feeling that for all the talk of deflation, the underlying inflation rate remains at a persistently uncomfortable level. Unemployment is also likely to increase further during the rest of the year.
As Aristotle is credited with saying “One swallow does not a summer make”. The selection of positive news above does not mean that the current economic problems have gone away. Careful planning and flexible use of resources remains the key, whether it is developing a new product, investing in new capacity or taking on new people, particularly at a senior level. There are some reasons to feel good at last, but that does not mean caution should be thrown to the wind.
The banking situation seems to be improving, with the news of record profitability for Wells Fargo in the US, and reports of a marked increase in the amount of loans being written under the Enterprise Finance Guarantee Scheme.
There are continuing signs of relatively robust consumer activity, and with property prices seemingly within sight of the bottom, cash buyers are interested again. A 90% mortgage product has recently been introduced by HSBC which could provoke a small boost to the housing market.
Also, although they have significantly increased, insolvencies and repossessions have not reached the predicted levels.
Then there are the many people who are securely in work and have been benefiting from significantly reduced mortgage payments. Once they have paid off some debt, they will be looking to spend again, although without necessarily borrowing to do so.
All the above would seem to support the idea that there are some signs of confidence returning, and as we all know it is confidence rather than credit which will drive economic recovery.
This blog has made no secret of its belief that the economy, or more pertinently the ordinary people and businesses that inhabit the real economy, is more resilient and positive than the various media outlets have given it credit for, and that many businesses have acted decisively and imaginatively to combat the impact of the downturn (one reason perhaps that the retail apocalypse predicted for the quarter rent day of 25th March did not come to pass was that fact that many businesses had already negotiated better deals with their landlords).
However there are still a number of macro economic clouds on the horizon, including the number of large corporate refinancings that are due over the next year or so, the state of government finances and the medium term action that will be required to improve them, and the feeling that for all the talk of deflation, the underlying inflation rate remains at a persistently uncomfortable level. Unemployment is also likely to increase further during the rest of the year.
As Aristotle is credited with saying “One swallow does not a summer make”. The selection of positive news above does not mean that the current economic problems have gone away. Careful planning and flexible use of resources remains the key, whether it is developing a new product, investing in new capacity or taking on new people, particularly at a senior level. There are some reasons to feel good at last, but that does not mean caution should be thrown to the wind.
Thursday 26 March 2009
Green Shoots? Maybe we can work it out after all….
Hooray! I have at last found those elusive green shoots. There is a landscape gardener based in Guildford who is really busy at the moment. I know this is probably an example of the DIY syndrome which normally occurs in housing recessions i.e. if you can’t move to a new house you do up the old one (although B&Q, Homebase et al should be so lucky), but normally the gardener is one of the first cuts made by a cash strapped household, so maybe these are green shoots that really have taken root. It seems that Barack Obama thinks so as well.
I met the aforesaid landscape gardener at a breakfast seminar entitled “Preparing For The Next Upturn” organised by the Surrey Economic Partnership where the speaker was the ever ebullient Beermat man Mike Southon. His presentation compared the life cycle of an entrepreneurial business with the career of the Beatles, and mixed great music with amusing anecdotal snippets and a great deal of common sense advice. Mike kept the whole audience entertained for more than an hour and I think everybody left the seminar believing that they will get through the current economic downturn, and emerge well equipped to take advantage of the upturn.Maybe we are having a hard day’s night at present but if we can work it out and help each other rather than let it be, perhaps we will see the economy getting better in the end.
I met the aforesaid landscape gardener at a breakfast seminar entitled “Preparing For The Next Upturn” organised by the Surrey Economic Partnership where the speaker was the ever ebullient Beermat man Mike Southon. His presentation compared the life cycle of an entrepreneurial business with the career of the Beatles, and mixed great music with amusing anecdotal snippets and a great deal of common sense advice. Mike kept the whole audience entertained for more than an hour and I think everybody left the seminar believing that they will get through the current economic downturn, and emerge well equipped to take advantage of the upturn.Maybe we are having a hard day’s night at present but if we can work it out and help each other rather than let it be, perhaps we will see the economy getting better in the end.
Wednesday 18 March 2009
Help from Top to Bottom
Real help for people and businesses is a phrase that is being bandied about an awful lot at the moment, particularly by the Government as it seeks to find ways to support the economy during the present downturn. This help currently includes the various funding schemes that have been put in place such as the Enterprise Finance Guarantee Scheme, business health checks courtesy of Businesslink, skills training for individuals and businesses, and many sources of advice to assist with personal debt, redundancy and getting back to work. Full marks for effort although clearly these are top down initiatives, and it will take time for this help to get through to those who need it and have some real impact on the economy.
However there are also some bottom up initiatives being launched, such as the one that I saw when I visited the Spelthorne offices of the Surrey Chamber of Commerce recently. Known as the Enterprise Zone (or EZone), it is a scheme intended to help new businesses through their start up period, and is designed to be a credible and more professional alternative to a home office. Along with a fully equipped office area with reception and secretarial support, there is also access to business services and advice, and perhaps more importantly the chance to share ideas and get peer support from like minded business people, who have decided for either economic or lifestyle reasons to strike out on their own. In short it is a practical, efficient and effective solution for new businesses looking to get going, and hopefully will quickly generate some benefits for all concerned as well as the economy as a whole. All in all a very good idea, which like all good ideas it just needs a little push, something I am more than happy to do.
However there are also some bottom up initiatives being launched, such as the one that I saw when I visited the Spelthorne offices of the Surrey Chamber of Commerce recently. Known as the Enterprise Zone (or EZone), it is a scheme intended to help new businesses through their start up period, and is designed to be a credible and more professional alternative to a home office. Along with a fully equipped office area with reception and secretarial support, there is also access to business services and advice, and perhaps more importantly the chance to share ideas and get peer support from like minded business people, who have decided for either economic or lifestyle reasons to strike out on their own. In short it is a practical, efficient and effective solution for new businesses looking to get going, and hopefully will quickly generate some benefits for all concerned as well as the economy as a whole. All in all a very good idea, which like all good ideas it just needs a little push, something I am more than happy to do.
Wednesday 4 March 2009
A battle the optimists have to win
We received an e-mail this morning from the Birmingham Chamber of Commerce seeking member views on a new BBC documentary “Recession Britain”. The aim of the programme is focus on one firm that is struggling to survive the recession and how that struggle will impact on their supply chain, particularly the smaller firms that are part of it.
My immediate thought was why don't they follow it up with a programme on businesses that are actually doing well at the moment? There are more of these businesses around than people might think, and such a programme would provide encouragement for struggling and nervous businesses, rather than their proposed programme which will surely just exacerbate the situation.
People are more positive than is generally recognised in the media at present (witness today’s figures on consumer confidence which show an improvement since January), something that was reconfirmed at a breakfast seminar I attended organised by the accountants Smith and Williamson. Two well known names in the entrepreneurial world, Guy Rigby, Head Of Entrepreneurs at SandW and an old friend of Orchard, and Mike Southon, founder of the Beermat series of entrepreneur guides and regular FT columnist, combined in an entertaining double act to emphasise that there are always reasons to be optimistic as long as the basics of good management are adhered to.
Admittedly their optimism was tempered by a more pessimistic (or realistic? - take your pick) view from Mark Garnett, Director of Financial Services at SandW about the state of the British economy and its future prospects. OK we know it is not fun out there, and it seems that the BBC and other media take every opportunity to remind us of this. However we also all know deep down that the current economic battle is one that the optimists have to win.
My immediate thought was why don't they follow it up with a programme on businesses that are actually doing well at the moment? There are more of these businesses around than people might think, and such a programme would provide encouragement for struggling and nervous businesses, rather than their proposed programme which will surely just exacerbate the situation.
People are more positive than is generally recognised in the media at present (witness today’s figures on consumer confidence which show an improvement since January), something that was reconfirmed at a breakfast seminar I attended organised by the accountants Smith and Williamson. Two well known names in the entrepreneurial world, Guy Rigby, Head Of Entrepreneurs at SandW and an old friend of Orchard, and Mike Southon, founder of the Beermat series of entrepreneur guides and regular FT columnist, combined in an entertaining double act to emphasise that there are always reasons to be optimistic as long as the basics of good management are adhered to.
Admittedly their optimism was tempered by a more pessimistic (or realistic? - take your pick) view from Mark Garnett, Director of Financial Services at SandW about the state of the British economy and its future prospects. OK we know it is not fun out there, and it seems that the BBC and other media take every opportunity to remind us of this. However we also all know deep down that the current economic battle is one that the optimists have to win.
Tuesday 3 March 2009
Look after your suppliers? No really - look after your suppliers….
The announcement that Zavvi, the music, games and DVD retailer is to close down for good, has brought home a salient point about the recession that often gets overlooked in those “top tips on surviving the recession” listings.
Nearly everybody will suggest that you imagine a scenario when one of your top customers goes bust, but very little emphasis is put on the situation when one of your main suppliers goes the same way. Yet that is precisely what has happened in this case, where the key supplier in question was Entertainment UK, which was a casualty of the Woolworths demise. Not only did Zavvi lose its key supplier at a time when it desperately needed stock i.e. the run up to Christmas, but more importantly it lost valuable credit facilities, which could not be replaced as new suppliers demanded immediate payment.
A salutary lesson for everybody - when your key supplier goes down not only do you lose products that you need for your business, you potentially lose a valuable source of finance. One to add to those key financial relationships that have to be managed.
Nearly everybody will suggest that you imagine a scenario when one of your top customers goes bust, but very little emphasis is put on the situation when one of your main suppliers goes the same way. Yet that is precisely what has happened in this case, where the key supplier in question was Entertainment UK, which was a casualty of the Woolworths demise. Not only did Zavvi lose its key supplier at a time when it desperately needed stock i.e. the run up to Christmas, but more importantly it lost valuable credit facilities, which could not be replaced as new suppliers demanded immediate payment.
A salutary lesson for everybody - when your key supplier goes down not only do you lose products that you need for your business, you potentially lose a valuable source of finance. One to add to those key financial relationships that have to be managed.
Look after your suppliers? No really - look after your suppliers….
The announcement that Zavvi, the music, games and DVD retailer is to close down for good, has brought home a salient point about the recession that often gets overlooked in those “top tips on surviving the recession” listings.
Nearly everybody will suggest that you imagine a scenario when one of your top customers goes bust, but very little emphasis is put on the situation when one of your main suppliers goes the same way. Yet that is precisely what has happened in this case, where the key supplier in question was Entertainment UK, which was a casualty of the Woolworths demise. Not only did Zavvi lose its key supplier at a time when it desperately needed stock i.e. the run up to Christmas, but more importantly it lost valuable credit facilities, which could not be replaced as new suppliers demanded immediate payment.
A salutary lesson for everybody - when your key supplier goes down not only do you lose products that you need for your business, you potentially lose a valuable source of finance. One to add to those key financial relationships that have to be managed.
Nearly everybody will suggest that you imagine a scenario when one of your top customers goes bust, but very little emphasis is put on the situation when one of your main suppliers goes the same way. Yet that is precisely what has happened in this case, where the key supplier in question was Entertainment UK, which was a casualty of the Woolworths demise. Not only did Zavvi lose its key supplier at a time when it desperately needed stock i.e. the run up to Christmas, but more importantly it lost valuable credit facilities, which could not be replaced as new suppliers demanded immediate payment.
A salutary lesson for everybody - when your key supplier goes down not only do you lose products that you need for your business, you potentially lose a valuable source of finance. One to add to those key financial relationships that have to be managed.
What do you mean you’ve never had it so bad?
Thursday 26 Feb 09 - Just come back from an excellent breakfast presentation at Clydesdale Bank given by NAB (their parent company) head of markets strategy Nick Parsons, a man well known to Sky News viewers.
Nick is someone who seems to have developed a habit of getting it right when it comes to economic forecasting, so when he says that 2009 is going to be horrible and that recovery won’t start until 2010 you tend to take a bit of notice. He sees the UK economy declining by about 2.6% in 2009, with growth returning in 2010 at about 1.4%. His long term view is that the normal annual growth trend will settle at about 2%. Not brilliant but still enough encouragement for businesses, while still remaining cautious, to start focusing on how to get the best of the upturn when it arrives.
By the way, if you think it is bad for us over borrowed consumption obsessed Brits, have a glance at the poor Germans and Japanese, those nations that actually still make things (as opposed to money) and still put their euros and yen aside for a rainy day. Their export driven economies have fallen off a cliff over the past few months and their pain in 2009 is likely to be greater than that of the UK. Maybe there is a moral there somewhere, although it gets confused when you look at the two economies that are going to expand more that 5% in 2009, China and India. Learning to export may still have its advantages so UK companies should take note and start looking at how they can.
Nick is someone who seems to have developed a habit of getting it right when it comes to economic forecasting, so when he says that 2009 is going to be horrible and that recovery won’t start until 2010 you tend to take a bit of notice. He sees the UK economy declining by about 2.6% in 2009, with growth returning in 2010 at about 1.4%. His long term view is that the normal annual growth trend will settle at about 2%. Not brilliant but still enough encouragement for businesses, while still remaining cautious, to start focusing on how to get the best of the upturn when it arrives.
By the way, if you think it is bad for us over borrowed consumption obsessed Brits, have a glance at the poor Germans and Japanese, those nations that actually still make things (as opposed to money) and still put their euros and yen aside for a rainy day. Their export driven economies have fallen off a cliff over the past few months and their pain in 2009 is likely to be greater than that of the UK. Maybe there is a moral there somewhere, although it gets confused when you look at the two economies that are going to expand more that 5% in 2009, China and India. Learning to export may still have its advantages so UK companies should take note and start looking at how they can.
Is it a bird? Is it a plane? It’s SuperFD!
Wednesday 18 Feb 09 - Forget your Brad Pitts and George Clooneys. Don’t even mention Barack Obama. The new superheroes for our time are going to be Finance Directors. For from being fazed by the biggest economic downturn since the 1990/1980s/ 1970s/1930s/ever (take your pick), these normally meek and mild creatures say they are in a confident mood and ready to fight the recession.
According to a wide ranging survey from Financial Director magazine , 2009 is likely to be the “Year of the FD”. Already, say FDs, along with collecting cash and providing reliable and timely financial information, their boardroom colleagues are putting pressure on them to look for cost cuts with prime targets being staff and travel and expenditure. However they also have half an eye on the eventual upturn, with many of them saying maintaining staff morale and confidence was at the forefront of their minds.
Other issues that emerged from the survey included the fact that wholesale changes in banking relationships had yet to take place, that the downturn had forced a majority of their businesses to change their overall strategy, and the a fair number of FDs would like the government to “stop tinkering” with the economy and let nature take its course. Interestingly 68% had found something positive about the current climate (although precisely what was not revealed!).
Meanwhile another snippet from the same magazine listed the qualities that those that aspire to be FDs are going to need if they are going to achieve their goal. Polling around 4,000 companies, Professor Colin Coulson-Thomas found that they would need to exhibit “integrity, determination, independence, objectivity, balance, commitment, individuality, sensitivity, strategic and ethical awareness and a sense of accountability and responsibility.” Wow! Is that all? However he also said that “being able to explain financial forecasts and results was more important than any of the other traits.” Oh that’s all right then. For a moment we were all off down to the fancy dress shop to get our outfits before stepping off into a phone box and flying off to our next client appointments……
According to a wide ranging survey from Financial Director magazine , 2009 is likely to be the “Year of the FD”. Already, say FDs, along with collecting cash and providing reliable and timely financial information, their boardroom colleagues are putting pressure on them to look for cost cuts with prime targets being staff and travel and expenditure. However they also have half an eye on the eventual upturn, with many of them saying maintaining staff morale and confidence was at the forefront of their minds.
Other issues that emerged from the survey included the fact that wholesale changes in banking relationships had yet to take place, that the downturn had forced a majority of their businesses to change their overall strategy, and the a fair number of FDs would like the government to “stop tinkering” with the economy and let nature take its course. Interestingly 68% had found something positive about the current climate (although precisely what was not revealed!).
Meanwhile another snippet from the same magazine listed the qualities that those that aspire to be FDs are going to need if they are going to achieve their goal. Polling around 4,000 companies, Professor Colin Coulson-Thomas found that they would need to exhibit “integrity, determination, independence, objectivity, balance, commitment, individuality, sensitivity, strategic and ethical awareness and a sense of accountability and responsibility.” Wow! Is that all? However he also said that “being able to explain financial forecasts and results was more important than any of the other traits.” Oh that’s all right then. For a moment we were all off down to the fancy dress shop to get our outfits before stepping off into a phone box and flying off to our next client appointments……
AIM and PLUS - The future beckons…
Monday 9 Feb 09- As 2009 continues to battle its way through snow, ice and the morass of gloomy economic statistics, two key elements of London’s financial infrastructure for smaller entities AIM and PLUS are both looking ahead off of the back of two contrasting 2008s.
For AIM the year ended on a somewhat low note with new admissions down on previous years and questions being raised about the suitability of the market for small cap shares. For PLUS based on 2008 the future looks extremely rosy, with admissions at a record level and their share trading platform going from strength to strength.
PLUS are old friends of ours and last year we ran two successful seminars with them and Orange Corporate Finance in Cambridge and Guildford . There is no doubt that PLUS is now a very serious option for companies seeking their first float and looking to raise funds for expansion.
But we support AIM too, and have viewed with interest a recent survey by top accountancy firm Mazars. The survey canvassed the opinions of both AIM quoted companies and a wide range of professional advisors and concluded that, whilst AIM had been tremendously successful in raising over £34 billion for companies from all around the world since its formation in June 1995, the market could provide more liquidity for companies if the market listed fewer but higher quality companies. With nearly 1,600 companies listed on AIM, over 60% of the AIM companies and advisors who responded to the survey said the sheer numbers of companies made it hard for individual businesses to raise their profiles and attract investors.
London needs both AIM and PLUS to give growing companies the best chance to continue to grow by issuing shares to a wider pool of investors. The challenge for both markets remains the need to create sufficient opportunity and liquidity to ensure that there is actually a market for those shares. Equally there is a responsibility for advisors to work closely with their clients in selecting the market that best suits them clients and give them the best opportunity to be successful. If this can be achieved then both markets can confidently move forward in the future, thus providing a much needed boost to our battered economy.
For AIM the year ended on a somewhat low note with new admissions down on previous years and questions being raised about the suitability of the market for small cap shares. For PLUS based on 2008 the future looks extremely rosy, with admissions at a record level and their share trading platform going from strength to strength.
PLUS are old friends of ours and last year we ran two successful seminars with them and Orange Corporate Finance in Cambridge and Guildford . There is no doubt that PLUS is now a very serious option for companies seeking their first float and looking to raise funds for expansion.
But we support AIM too, and have viewed with interest a recent survey by top accountancy firm Mazars. The survey canvassed the opinions of both AIM quoted companies and a wide range of professional advisors and concluded that, whilst AIM had been tremendously successful in raising over £34 billion for companies from all around the world since its formation in June 1995, the market could provide more liquidity for companies if the market listed fewer but higher quality companies. With nearly 1,600 companies listed on AIM, over 60% of the AIM companies and advisors who responded to the survey said the sheer numbers of companies made it hard for individual businesses to raise their profiles and attract investors.
London needs both AIM and PLUS to give growing companies the best chance to continue to grow by issuing shares to a wider pool of investors. The challenge for both markets remains the need to create sufficient opportunity and liquidity to ensure that there is actually a market for those shares. Equally there is a responsibility for advisors to work closely with their clients in selecting the market that best suits them clients and give them the best opportunity to be successful. If this can be achieved then both markets can confidently move forward in the future, thus providing a much needed boost to our battered economy.
I've got the brains, you've got the looks....
Wednesday 21 Jan 09 - Back in the 80s the Pet Shop Boys banged on that "There's a lot of opportunities, if you know when to take them, if there aren't, you can make them".
It is easy to think at the moment that opportunities are in short supply but talking to Henry Camilleri of independent financial advisors Camilleri Associates this morning at a breakfast seminar organised by Clydesdale Bank, it was interesting to hear that he has used the current wave of redundancies by major insurance and investment firms to increase his network of experienced financial advisors. As he said, the chance to bring on board some highly talented people that would not normally be available to him was too good to pass up, and has enabled him to add some weight to the strategy that he has set out for himself to improve his business in 2009. This was one of the points we made in our recent SMART presentation so it was good to hear of a practical example.
The topic today’s seminar was 'Doing business in a slowing economy' with Terry Irwin of TCii Strategic and Management Consultants, a common enough theme perhaps, but the point that companies need to get back to the basics of financial management in order to survive and thrive in the current market bears repeating again and again. Our hosts Clydesdale Bank also made this point in relation to the fact that their parent company National Australia Bank is currently one of the few banks that is relatively unscathed by the current banking turmoil. Terry Irwin believes that we should hit the bottom of this recession during 2009, with some small signs of recovery starting at the end of 2009 or beginning of 2010. Given the speed that the economy is unravelling, I would agree with his assessment about reaching the bottom, but would suggest that businesses adopt the advice of the Pet Shop Boys regarding opportunities in order to plot their own course to recovery outside of any general economic improvement. Henry’s actions above are good start along this road.
It is easy to think at the moment that opportunities are in short supply but talking to Henry Camilleri of independent financial advisors Camilleri Associates this morning at a breakfast seminar organised by Clydesdale Bank, it was interesting to hear that he has used the current wave of redundancies by major insurance and investment firms to increase his network of experienced financial advisors. As he said, the chance to bring on board some highly talented people that would not normally be available to him was too good to pass up, and has enabled him to add some weight to the strategy that he has set out for himself to improve his business in 2009. This was one of the points we made in our recent SMART presentation so it was good to hear of a practical example.
The topic today’s seminar was 'Doing business in a slowing economy' with Terry Irwin of TCii Strategic and Management Consultants, a common enough theme perhaps, but the point that companies need to get back to the basics of financial management in order to survive and thrive in the current market bears repeating again and again. Our hosts Clydesdale Bank also made this point in relation to the fact that their parent company National Australia Bank is currently one of the few banks that is relatively unscathed by the current banking turmoil. Terry Irwin believes that we should hit the bottom of this recession during 2009, with some small signs of recovery starting at the end of 2009 or beginning of 2010. Given the speed that the economy is unravelling, I would agree with his assessment about reaching the bottom, but would suggest that businesses adopt the advice of the Pet Shop Boys regarding opportunities in order to plot their own course to recovery outside of any general economic improvement. Henry’s actions above are good start along this road.
Green shoots or just some moss?
Friday 16 Jan 09 - Speaking with a local bank manager from HSBC yesterday at the Hounslow Chamber of Commerce lunch, he said he was amazed at resilience of the economy in his area and at the number of new business accounts that were being opened. Indeed according to an article in Business Matters magazine owning a business is good for your health. That is of course as long as you avoid February which according to Paul King of Ark Commercial Finance is statistically the peak month when businesses run out of cash and fail.
Meanwhile a new survey from the Forum of Private Businesses reported that a third of members surveyed actively sought finance during the last quarter but in spite of the government bank bailouts and active lobbying by the SME business community almost half had their applications partially or completely rejected. It is against statistics like this that success of the new Government loan scheme that was announced yesterday will need to be measured.
Of course new money, however it arrives, is to be welcomed, but the challenge for SMEs is going to be to understand and manage the processes that will need to be gone through in order to get that money. It will be still be necessary to produce credible business plans to support applications, and to provide lenders, even those with the comfort of a government guarantee, with evidence that proper financial control, cash management and reporting systems are in place. They are just not going to give the money away, but if the right approach is taken there is a good chance of success. Assuming of course you survive February…….
Meanwhile a new survey from the Forum of Private Businesses reported that a third of members surveyed actively sought finance during the last quarter but in spite of the government bank bailouts and active lobbying by the SME business community almost half had their applications partially or completely rejected. It is against statistics like this that success of the new Government loan scheme that was announced yesterday will need to be measured.
Of course new money, however it arrives, is to be welcomed, but the challenge for SMEs is going to be to understand and manage the processes that will need to be gone through in order to get that money. It will be still be necessary to produce credible business plans to support applications, and to provide lenders, even those with the comfort of a government guarantee, with evidence that proper financial control, cash management and reporting systems are in place. They are just not going to give the money away, but if the right approach is taken there is a good chance of success. Assuming of course you survive February…….
Enterprise zone strikes a chord
Tuesday 6 Jan 09 - Leafing through last Sunday’s Mail on Sunday newspaper I was interested to see how many articles on pages 66-67, the “Enterprise Zone” struck a real chord with what we are looking to achieve in 2009.
Pride of place went to our good friends at BCMS Corporate who had their “refreshingly different approach to selling companies” and their current successes in what conventional thinking would have you believe was a difficult climate for buying and selling businesses featured in this article. A very SMART business in our view.
Not so encouraging however was the news that 38% of small businesses do not expect to survive 2009 because of the downturn. Commenting on the survey carried out by Financial Mail and its sister site thisismoney.co.uk, Nick Palin from the Forum of Private Businesses said that he believed that the survival of many businesses will depend on the banks, who he maintains “are often still bracketing all small firms as high risk despite pressure from the Government and the small business lobby.” Banking relationships are crucial and are something that we will be covering in a presentation to Surrey Chamber of Commerce members on 3rd February in Shepperton (booking details).
Interestingly though, according to a report on a survey by Tenon Recovery, businesses that have been trading for between five and nine years are most likely to benefit from opportunities in the downturn. 37% of companies in this category say the economic downturn has provided opportunities for their business, including “taking clients from competitors, purchasing assets and stocks at a good price and increasing their client and customer base compared with only 29% overall”.
The basic message from these Mail on Sunday articles remains that existing SMART companies will continue to prosper, but equally it is not too late for companies to get themselves SMART to give themselves every chance of not only surviving but thriving.
Pride of place went to our good friends at BCMS Corporate who had their “refreshingly different approach to selling companies” and their current successes in what conventional thinking would have you believe was a difficult climate for buying and selling businesses featured in this article. A very SMART business in our view.
Not so encouraging however was the news that 38% of small businesses do not expect to survive 2009 because of the downturn. Commenting on the survey carried out by Financial Mail and its sister site thisismoney.co.uk, Nick Palin from the Forum of Private Businesses said that he believed that the survival of many businesses will depend on the banks, who he maintains “are often still bracketing all small firms as high risk despite pressure from the Government and the small business lobby.” Banking relationships are crucial and are something that we will be covering in a presentation to Surrey Chamber of Commerce members on 3rd February in Shepperton (booking details).
Interestingly though, according to a report on a survey by Tenon Recovery, businesses that have been trading for between five and nine years are most likely to benefit from opportunities in the downturn. 37% of companies in this category say the economic downturn has provided opportunities for their business, including “taking clients from competitors, purchasing assets and stocks at a good price and increasing their client and customer base compared with only 29% overall”.
The basic message from these Mail on Sunday articles remains that existing SMART companies will continue to prosper, but equally it is not too late for companies to get themselves SMART to give themselves every chance of not only surviving but thriving.
The wonder of a Woolworths administration
Wednesday 24 Dec 08 - It maybe just me but there is something about the current Woolworths administration that leaves a very nasty taste in the mouth. Maybe it is the cynical timing i.e. maximum stock and creditors leading up to the maximum cash generating period ensuring maximum return to secured creditors, the somewhat cavalier treatment of staff , the vulture like circling by major retail chains looking at taking on the prime store sites or the general fact that this has all the appearance of a liquidation rather than administration.
Whatever it is I think there may be grounds for an official enquiry into the whole process, from examining in particular the behaviour of the secured creditors and the administrators, to seeing if there are ways during an administration to better serve the unsecured creditors, employees, the economy and the wider community. Maybe Woolworths was an idea who time had been and gone, and that this was a mercy killing, but if that is the case I think it deserved to die with a lot more dignity that it has.
Whatever it is I think there may be grounds for an official enquiry into the whole process, from examining in particular the behaviour of the secured creditors and the administrators, to seeing if there are ways during an administration to better serve the unsecured creditors, employees, the economy and the wider community. Maybe Woolworths was an idea who time had been and gone, and that this was a mercy killing, but if that is the case I think it deserved to die with a lot more dignity that it has.
2012 and all that
Friday 19 Dec 08 - There may be doubts as to whether the Chancellor’s VAT stimulus is the best way to get the economy going, given its consumer focus rather than business one, but there is another massive injection of cash taking place targeted directly at businesses that should have them salivating.
I refer of course to the 2012 London Olympics. To investigate these opportunities further a couple of us pitched up to a briefing held at Lords Cricket Ground (it’s a tough life etc…..) run by the London Business Network. There we listened to speakers from the London 2012 Forum, UKTI and even the British Columbia Ministry of Technology (I am sure I don’t need to tell you that the 2010 Winter Olympics are taking place in Vancouver).
Case studies were also presented and it was worth noting that it is not just businesses that are involved in construction and sports services that will benefit. Examples were given of small local florists and catering companies who have also won contracts.
One other point that emerged from the Lords briefing was that Olympic and sporting opportunities should persist long after the flame has been put out on the London games due to the transferable skills that will be gained in the infrastructure and support industries. There are world and regional championships being held on a frequent basis that could provide business opportunities for those that keep their eye on the ball.
I am sure that SMART businesses have already registered with the opportunities website but for those that have not quite got round to doing so the link is below.
London 2012 Opportunities
I refer of course to the 2012 London Olympics. To investigate these opportunities further a couple of us pitched up to a briefing held at Lords Cricket Ground (it’s a tough life etc…..) run by the London Business Network. There we listened to speakers from the London 2012 Forum, UKTI and even the British Columbia Ministry of Technology (I am sure I don’t need to tell you that the 2010 Winter Olympics are taking place in Vancouver).
Case studies were also presented and it was worth noting that it is not just businesses that are involved in construction and sports services that will benefit. Examples were given of small local florists and catering companies who have also won contracts.
One other point that emerged from the Lords briefing was that Olympic and sporting opportunities should persist long after the flame has been put out on the London games due to the transferable skills that will be gained in the infrastructure and support industries. There are world and regional championships being held on a frequent basis that could provide business opportunities for those that keep their eye on the ball.
I am sure that SMART businesses have already registered with the opportunities website but for those that have not quite got round to doing so the link is below.
London 2012 Opportunities
Haslemere - The revolution happened here (honest)
Friday 28 Nov 08 - Back on the road again!The genteel Surrey town of Haslemere may not on the face of it seem the most obvious place for a revolution, but that may be about to change. The 21 businesses that were represented at the lunchtime Peal Networking Club event showed increasing belligerence as they castigated the media for focussing on the negative aspects of the current situation and not acknowledging the many businesses who are still doing very well. Perhaps that is the answer - a bottom up revolt - maybe it will have more effect on boosting the economy that any top down Government action. Power to the people, as John Lennon used to say.
Earlier at the IOD West Surrey branch breakfast we were all encouraged to think of skills that we had developed in 2008 and what we would be aiming to improve in 2009. My offering was working on my running skills to enable me to complete my first half marathon, a choice I justified when questioned by saying that it was an ideal way of pushing me beyond my comfort zone, improving my strategic planning (getting through 13.1 miles required a systematic approach in terms of running speed and time goals) and gaining the focus and determination to achieve a seemingly impossible target, all skills that could greatly assist my clients.
Suitably inspired my colleagues then decided that in 2009 they were going to focus on improving their juggling skills, unleashing their inner cartoonist and becoming the best know left handed bass guitarist since Paul McCartney. All in the best interests of our clients you understand………
Earlier at the IOD West Surrey branch breakfast we were all encouraged to think of skills that we had developed in 2008 and what we would be aiming to improve in 2009. My offering was working on my running skills to enable me to complete my first half marathon, a choice I justified when questioned by saying that it was an ideal way of pushing me beyond my comfort zone, improving my strategic planning (getting through 13.1 miles required a systematic approach in terms of running speed and time goals) and gaining the focus and determination to achieve a seemingly impossible target, all skills that could greatly assist my clients.
Suitably inspired my colleagues then decided that in 2009 they were going to focus on improving their juggling skills, unleashing their inner cartoonist and becoming the best know left handed bass guitarist since Paul McCartney. All in the best interests of our clients you understand………
What the VAT reduction means for small businesses
Wednesday 26 Nov 08 - This is a newsclip from the BBC website which shows very clearly what the VAT reduction currently means for small businesses.
http://news.bbc.co.uk/1/hi/business/7757966.stm
It should be required viewing for all Ministers, MPs and civil servants as to what happens in the real world!
http://news.bbc.co.uk/1/hi/business/7757966.stm
It should be required viewing for all Ministers, MPs and civil servants as to what happens in the real world!
So Alastair has spoken
Tuesday 25 Nov 08 - So Alastair has spoken. I am not going to go into the economic or political significance of his “mini budget” beyond noting that he appears to have taken a sizeable gamble, which if it fails could lead to considerable difficulties for the UK economy in the future. However there are a number of measures which will directly impact on our clients, both present and future, some of which are discussed below.
Firstly credit where credit is due. There are many things that will benefit small and medium sized business, as long as they actually do what they say on the tin. These include the small business finance scheme, the loan guarantee facility for small businesses who export, the possibility of negotiating flexible payment of tax liabilities in cases of hardship, empty property relief and the ability to carry back some business losses for up to three years. The delay in the increase in the rate of small business corporation tax and the deferring of proposals to tackle so called income shifting are also very welcome. We at Orchard will certainly be looking at how our clients can benefit from these measures.
Regarding the centrepiece of the Pre-Budget Report (PBR), the temporary reduction in the rate of VAT is particularly good news for those that cannot recover input tax such as charities, public sector bodies, health and education, and er banks and insurance companies. For other businesses there will be the administrative hassles of changing systems, prices and catalogues, especially in retail which is in the middle of its busiest period and where there is already selective discounting taking place. Indeed if I were a SMART retailer, rather than cutting prices across the board, I would the use the VAT cut both on targeted price reductions i.e. as part of the price element of my marketing mix and to squirrel some cash away.
However all businesses, particularly those working in the business to business sector will need to be mindful of the cash flow impact of the VAT reduction - firms that had budgeted VAT at 17.5% should now adjust their cash receipts downwards to reflect the new rate of 15%. This could be a useful argument to deploy if you are looking to agree a payment plan for taxes with HMRC.
The main sting in the tail going forward is the increase in NI rates for both employers and employees, which represent an extra cost and cash burden. However the impact of this could be mitigated by looking at flexible remuneration ideas such as share schemes and salary sacrifice options.
My view remains that it is confidence and job insecurity rather than cash that is the main break on people spending and it is not clear whether the measures outlined in the PBR will have an impact in this area. Clearly I hope for the sake of UK plc there is some positive benefit from all of this but I remain to be convinced. Meanwhile I would continue to urge businesses to follow the basic principles of financial management and look for the opportunities that are always going to be there for SMART businesses.
Firstly credit where credit is due. There are many things that will benefit small and medium sized business, as long as they actually do what they say on the tin. These include the small business finance scheme, the loan guarantee facility for small businesses who export, the possibility of negotiating flexible payment of tax liabilities in cases of hardship, empty property relief and the ability to carry back some business losses for up to three years. The delay in the increase in the rate of small business corporation tax and the deferring of proposals to tackle so called income shifting are also very welcome. We at Orchard will certainly be looking at how our clients can benefit from these measures.
Regarding the centrepiece of the Pre-Budget Report (PBR), the temporary reduction in the rate of VAT is particularly good news for those that cannot recover input tax such as charities, public sector bodies, health and education, and er banks and insurance companies. For other businesses there will be the administrative hassles of changing systems, prices and catalogues, especially in retail which is in the middle of its busiest period and where there is already selective discounting taking place. Indeed if I were a SMART retailer, rather than cutting prices across the board, I would the use the VAT cut both on targeted price reductions i.e. as part of the price element of my marketing mix and to squirrel some cash away.
However all businesses, particularly those working in the business to business sector will need to be mindful of the cash flow impact of the VAT reduction - firms that had budgeted VAT at 17.5% should now adjust their cash receipts downwards to reflect the new rate of 15%. This could be a useful argument to deploy if you are looking to agree a payment plan for taxes with HMRC.
The main sting in the tail going forward is the increase in NI rates for both employers and employees, which represent an extra cost and cash burden. However the impact of this could be mitigated by looking at flexible remuneration ideas such as share schemes and salary sacrifice options.
My view remains that it is confidence and job insecurity rather than cash that is the main break on people spending and it is not clear whether the measures outlined in the PBR will have an impact in this area. Clearly I hope for the sake of UK plc there is some positive benefit from all of this but I remain to be convinced. Meanwhile I would continue to urge businesses to follow the basic principles of financial management and look for the opportunities that are always going to be there for SMART businesses.
Antony on the road (6)
Sunday 22 Nov 08 - It seems that a reduction in VAT has emerged as the favourite for the main weapon to be used by the Government to stimulate the economy. (http://news.bbc.co.uk/1/hi/uk_politics/7744273.stm) I am a little sceptical as to how effective this is going to be as retailers are already falling over themselves to cut prices and tempt people to spend. I still think that lack of confidence driven by fear of unemployment will be the main reason for people not spending and unless firms boost cash flow by keeping the benefit of this VAT cut to themselves (for which they will be castigated by all and sundry) I can't see the cut doing much to address this. Let's see what tomorrow will bring.
Antony on the road (5)
Friday 21 Nov 08 - No events to attend today so a good chance to catch up with paperwork and the latest thinking of the media pundits on Monday’s pre budget statement. (No mention of client work I hear you say - well the reality is that client work is a priority whatever else I do and therefore continues to be dealt with expeditiously regardless of the other things that I do). Most seem to agree that it was the right thing although more and more were realising that it would require significant tax increases further down the line. (http://news.bbc.co.uk/1/hi/uk_politics/7741397.stm) Most of the suggestions (leaks?) coming out so far indicate that the Government is looking to put money in the hands of consumers to encourage them to spend. Maybe this is the answer although my own view is that it is lack of confidence and job security rather than lack of money that is stopping people spending. I would have though that a package of measures to help business cash flow and encourage job conservation would be cheaper and much more effective but I guess I am only an accountant so what do I know?
Antony on the road (4)
Thursday 20 Nov 08 - My turn to be star attraction this morning, turning up bright and early at Ashford Manor Golf Club in Surrey to give a seminar to the Surrey Chambers of Commerce (http://www.surrey-chambers.co.uk/) on how to survive and thrive in the current economic climate. The seminar is based on our Orchard SMART programme which has been specifically devised for the current situation and which aims to focus clients on looking for opportunities whilst ensuring that they tighten up on the basics financial control and management. In addition to finance, the programme also addresses sales, marketing and people issues and it intended to help business for whom financial management was not so important in the good time but is now essential in the current climate.More details can be found on the Orchard website (http://www.orchardgrowth.com/downloads.php) but what was encouraging was the positive attitude of many of the businesses there to the current situation and the belief that they could be SMART enough to survive and thrive.
Antony on the road (3)
Wednesday 19 Nov 08 - Attended a Tax briefing on investigations with Baker Tilly (http://www.bakertilly.co.uk/)in Guildford which among other things concentrated on the new penalty regime and appeals process.My head was buzzing as they rattled through a number of changes seemingly designed to simplify and improve matters, but given the number of issues that are yet to be clarified by HMRC would appear to mean that a considerable about of bedding in is going to be required.I freely admit that I am glad that I don’t do tax. Obviously I am aware of the major issues affecting businesses and am able to manage tax advisors on behalf of clients but I don’t provide advice or deal directly with HMRC on a day to day basis. Our tax system is in dire need of simplification, not least in that it would provide some certainty to taxpayers, advisors and HMRC frontline staff themselves. However given the need that the Government has for cash I can’t see it happening for some time to come.However it was great opportunity to catch up with a number of small practitioners, all of whom were sceptical that Alastair Darling would be able to do much to get his billions through quickly enough to make a difference in the short term.
Antony on the road (2)
Tuesday 18 Nov 09 - Breakfast courtesy of the Thames Valley Economic Partnership (http://www.businessinberkshire.co.uk/tvep/index.html) where the keynote speakers were John Whitely, the Bank of England’s agent for central and southern England, and Willie Walsh, chief executive of British Airways.John Whitely gave a very downbeat assessment of the current situation, backed up a formidable array of alarming looking graphs, and concluded that there was a “very high degree of uncertainty in unprecedented times”.Willie Walsh was Willie Walsh and said exactly what you would expect him to say (http://www.thamesvalley.co.uk/public_panel/economic_outlook.php)regarding BA’s response to the economic downturn and the requirement for a third runway at Heathrow.Fair play then to the guy from Imago (http://www.imagogroupplc.com/3D%20Telepresence/3DTelePresence.htm), a business that provide 3D telepresence facilities who stood up and proudly pointed out that they were over 100% ahead of their budget in the first few months of their business year. Clearly a SMART business and a good riposte to all the gloom and doom that had otherwise prevailed during the morning.
Monday 2 March 2009
Antony on the road "so you don't have to
Monday 17 Nov 08 - In the week before the all important pre-budget announcement that promises to pump billions into the economy, Orchard Principal Antony Doggwiler has been out and about at various business events gauging the mood and uncovering what is really happening in the business world. Remember he does all this so that you don’t have to.MondayUp in Coventry today manning our stand at TechnologyWorld 08, an exhibition organised by UKTI (https://www.uktradeinvest.gov.uk/) targeted at growth technology firms, both from the UK and overseas. Exhibitions are a good example of Forrest Gump’s assertion that life is like a box of chocolates in that you never what you are going to get in terms of visitors to the stand and any business opportunities that might arise. However we had many visitors to our stand and met some very interesting businesses. We also took the opportunity to talk to a number of UKTI advisors about our cost effective offering for companies setting up businesses in the UK.Talking of chocolates, Ash’s bright idea of putting chocolates on the stand meant an increasing stream of visitors during the afternoon as energy levels flagged, such that we were soon badging ourselves “The Official Chocolate Suppliers to TechnologyWorld08”. All good fun and an event I think we would do again.
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