10 financial mistakes all new business should avoid 1

Stress business woman

Starting a new business is always a challenge but there are some common financial mistakes that all start ups should avoid.

  1. Lack of Planning – Businesses normally start with a great idea but you need to have business model that works and to at least have a basic business plan and cash flow.
  2. Over Trading – this happens when a business expands too quickly for its working capital, when you start a new business its tempting to accept every order without considering whether you can have the resources and the cash to deliver.
  3. Wasted Marketing and Advertising – new businesses are an easy target for marketing companies but its important to stick to the essentials to start with, having a website, e mail and business cards are essential, magazine advertising and other things can be done as the business grows, in the early stages you are experimenting and finding your market so if you spend too much too soon you might promote the wrong things at the wrong price.
  4. Wrong Business Structure – Before you start your business get some advice from your accountant, its important to choose the right structure not just for tax reasons but also for investment and ownership.
  5. Wrong Staff – Choosing the right team is critical for business success, choose staff that have the right skills, the right attitude and are dedicated to the success of the business.
  6. Over Ambitious – All too often businesses plans are over ambitious with sales growing rapidly, often they prove to be unrealistic, when preparing a sales forecast start with your order book and be cautious in your assumptions.
  7. Overheads – Many businesses over spend on overheads for example renting premises too early, work from home, if you can, to minimise costs.
  8. Stock Problems – Buying the wrong stock, under or over stocking are also issues for start ups, try to adopt a ‘just in time’ stock policy.
  9. Getting Paid – A sale is only a sale if you get paid, any one can give things away, make sure you manage your clients and get paid on time.
  10. Competition – Keep an eye on your competitors, they will be watching you and responding to maintain their market share.

steve@bicknells.net

10 creative ways to cut your overheads 3

Businessman struggling with large Expenses

Making a profit and generating cash is vital to all businesses and a key way to improve profit is to reduce overheads, here are a few ideas:

  1. Re-think your office/premises requirements – Premises are big cost for most businesses, could you operate in a smaller space and sub-let part of your offices? could you work from home?
  2. Telecommute – Technology effectively reduces distance, so there is no need to require administrative people or specialists to be physically located together. Use VOIP, Skype and Video Conferencing.
  3. Cars – Company Cars can be expensive, time consuming to manage and emotive, why not consider car allowances
  4. Staff – Generally the biggest overhead is people, consider outsourcing rather than having the fixed overhead of in house staff
  5. Shop around – Are you getting the best deals on Stationery, Printing, Insurance, Light & Heat…..
  6. Students – Students, apprentices and interns are eager to learn and will be less expensive then experienced employees
  7. Refinance Debt – Could you reduce the cost of borrowing? could you borrow from your Self Invested Pension Plan?
  8. Paper –  Sorting, filing, and finding files requires time and space. Purchase a scanner and scan all important papers and keep them in well organised electronic files to save space and administrative costs.
  9. Go Green – Reducing waste and saving energy will save money too
  10. Buy Second Hand – Second hand office furniture is plentiful and its cheaper than buying new

steve@bicknells.net

Will Temp Agencies avoid Auto Enrolment by using Postponement? 1

Pension background concept

The date workers are enrolled depends on the size of the company they work for and is being rolled out over the next six years (this is called a staging date).
  • Large employers (with 250 or more workers), have started automatically enrolling their workers and will continue to February 2014 (some employers may choose to start earlier)
  • Medium employers (50 – 249 workers) will have to start automatically enrolling their workersfrom April 2014 to April 2015
  • Small employers (49 workers or less) will have to start automatically enrolling their workers from June 2015 to April 2017
  • New employers (established after April 2012) will have to start automatically enrolling their workers from May 2017 to February 2018
  • Employers who chose to use Defined Benefit or Hybrid Schemes can delay their staging date until 30 September 2017

You can postpone the start of Auto Enrolment for up to 3 months and then re-test for eligibility using this method could mean that Temporary Staff Agencies could avoid Auto Enrolment for their temps. This also means that many agencies will use NEST because other pension schemes will not want to sign them up as they many not actually receive any contributions.

Pinsent Masons blogged:

Agency workers are different from other workers and so present particular challenges. Many are seeking work for only a short period. Many will register with a number of different agencies and will, in fact, only be ’employed’ by a particular agency for a short period. The auto-enrolment obligation applies to all workers who meet the age and earnings thresholds, but there are options which may assist those employing high churn groups of workers.

Employers can make workers wait up to three calendar months before enrolling them into a pension scheme. If the worker has left by the end of that three-month period, then there is no need to provide that worker with a pension.

If you do postpone, make sure you follow the rules otherwise there could be harsh penalties under the Pension Act 2008 Section 45

Offences of failing to comply(1)An offence is committed by an employer who wilfully fails to comply with—

(a)the duty under section 3(2) (automatic enrolment),

(b)the duty under section 5(2) (automatic re-enrolment), or

(c)the duty under section 7(3) (jobholder’s right to opt in).

(2)A person guilty of an offence under this section is liable—

(a)on conviction on indictment, to imprisonment for a term not exceeding two years, or to a fine, or both;

(b)on summary conviction to a fine not exceeding the statutory maximum.

steve@bicknells.net

10 things your Finance Director should be doing…. Reply

Flying Superhero

SME’s often mis-understand the purpose of a Finance Director and the value they can bring to a business.

The job of a finance director is not just about producing regular accounts: they can help your company with strategy and development. If you want a small, stable business, then you can settle for a risk-averse book-keeper. But a good FD is key if you are growing your business because FDs develop future financial forecasts and push business growth. [Smarta]

So what should your Finance Director be doing for your business…..

  1. The FD should be able to look into to future to see what the future financial needs of the business will be
  2. He/She should negotiate funding facilities to ensure the business can manage its cash flow needs
  3. The FD should be able to foresee the future tax consequences and risks of decisions
  4. He/She should help the business to achieve the best possible credit scores
  5. Identify ways to reduce costs and improve profitability
  6. Understand the business owners objective and focus the business on achieving those objectives
  7. Ensure financial and regulatory compliance
  8. Ensure accurate and timely reporting of management information
  9. Evaluate growth opportunities
  10. Apply corporate governance

steve@bicknells.net

15 ways to improve profitability 5

Profitability

Profit is vital to every business, what is the point of being in business if you don’t make a profit?

So here are my tips on how to improve your profitability:

  1. Weed out loss making products, clients and departments – concentrate on high margin products and services
  2. Reduce Employment Costs – use Freelancers instead of Permanent Employees where appropriate
  3. Use Virtual Communication Technology – meetings can be held over the internet with Skype or other systems, it will cut traveling time and costs
  4. Use Social Media and Networking – marketing can be costly and the results can be hard to measure, use your contacts to generate leads and sales and always ask for referrals
  5. Increase Productivity – eliminate wasteful and unnecessary processes, I was told it used to take 17 people in the NHS to change a light bulb on a hospital ward (requisitions, approvals, payments, changing the bulb…) the solution to cut wasted processes was to keep a stock of bulbs on the ward
  6. Negotiate with suppliers – always look at ways to reduce cost including using alternative suppliers
  7. Understand your clients requirements – the client knows what he wants and what represents value, if you deliver value you will get more business
  8. Seek add on sales – what other products or services might be useful to your existing clients
  9. Keep an eye on your competitors – competitor analysis will enable you to understand differences in price, distribution, market and demand
  10. Find New Markets – use market research to expand into new areas
  11. Decrease Overheads – analyse all of your overheads including Rent, Rates, Utilities – could you sub-let part or your premises or reduce waste
  12. Reduce Stock Levels – can you turnover your stock more quickly or buy to order
  13. Improve your Cash Cycle – reduce slow payment by debtors, invoice promptly and settle disputes quickly
  14. Invest in Technology – automate processes with ERP systems
  15. Use Key Performance IndicatorsKPI’s help you achieve your goals

steve@bicknells.net