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How not to succeed in business

As advisers to the business community for many years, we are in a unique position to see the various pitfalls businesses encounter at different stages of their cycle - and how many of them occur with depressing regularity.

Some of the more common mistakes we have to deal with include:

• Poor financial planning - especially under-capitalisation in cyclical businesses, taking out expensive high-interest loans, and withdrawing cash that in reality belongs to creditors or the tax authorities
• General failure to manage debt and cashflow
• Poor tax planning leading to unnecessary tax bills
• Inadequate knowledge of the market - especially the needs and wishes of customers and emerging market trends
• Insufficient awareness of competitors' strategies
• Lack of long-term planning when it comes to entering new markets and exiting existing ones
• Taking decisions based on wishful thinking rather than verifiable research
• Getting bogged down in overheads - using funds to purchase property and/or equipment instead of renting or leasing and using the money to earn money
• Failure to recruit or retain good staff - especially at management level
• Lack of management skills - especially when it comes to motivating and managing people, and delegating tasks to others
• An unwillingness to dedicate the necessary hours to keeping the business going
• Inadequate knowledge of and failure to comply with key legislation, regulations, etc.
• Inadequate record keeping
• Trying to save money by scrimping on professional advice

Sometimes these difficulties can be overcome, sometimes they prove terminal - but in almost every case they can be avoided if professional advice is sought in time. This is why we recommend our clients to come in for regular business reviews.

If you have not had a review recently, contact us to arrange one today.

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VAT & IVA's

Insolvency Practitioners are to stop charging VAT on invoices for fees and disbursements in IVA's with immediate effect as these are exempt supplies.  IP's should also consider the current VAT quarter and whether any adjustments are required to reflect the exempt status of these supplies.

How to protect your business when your customers go under

Published 12/09/11

What would you do if one of your major customers went under, owing you a substantial sum? Would you be able to recover the outstanding debt - or reclaim goods they had not paid for?

Unfortunately, experience suggests that if you are an unsecured creditor you would be lucky to recover a few pence in the pound - and in most cases you would receive nothing at all.

Your best course of action is to take precautions now to limit your exposure and minimise the impact on your business of any customer insolvency.

Basic precautions

There are certain basic precautions every business should take. Though these are largely common sense, we are constantly surprised by how often they are overlooked:

• Maintain an honest and open relationship with your customers and encourage them to share information with you
• Establish clear credit control procedures, make sure your customers understand them, and be seen to implement them firmly and consistently
• Check credit references before offering credit terms
• Do not extend credit limits without good reason
• Monitor customer accounts regularly

One of the first signs of difficulty is that a customer's payment period begins to lengthen. If this happens, you need to act swiftly. You might, for example, arrange a visit to them to discuss the matter. Ask if you can see their accounts and projections. If you are still concerned, you might suggest that they take smaller deliveries more frequently until the situation improves.

Faster payment

Another way to limit your exposure is to speed up the payment cycle. You might, for example, consider:

• Restricting terms, say to 20 or even 15 days, and extending to 30 days only where there is a basis for confidence
• Specifying terms as 'payment received' rather than 'payment sent'
• Including a reminder of your terms on your invoice
• Sending out a letter before the invoice is due asking for confirmation that the order was received - this pre-empts the 'I mislaid/don't remember receiving your invoice' excuse

Contractual precautions

Other possible precautions include:

• Include Retention of Title clauses in your contracts to increase your chances of repossessing any unused stocks of your products held by an insolvent customer
• Where possible, obtain guarantees from directors or other group companies
• Where substantial sums are involved, consider taking out insurance against a customer's failure to pay

Tread carefully

If a customer does get in difficulty it is not always advisable to instigate proceedings too quickly lest you precipitate action by larger creditors who have a prior claim.

In general, you have much more chance of recovering monies owed if a rescue plan is put into place rather than the company going into liquidation.

We can help

As you can see, this is a complex area and professional advice is essential if you are to avoid taking unnecessary risks.

We can advise you on:

• Establishing effective credit control procedures
• Minimising the impact of customer insolvency
• Dealing with insolvent customers

Call us today if you would like to discuss this matter further.

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Making the most out of losses

Published 11/08/11

Even a trading loss presents opportunities. The ability to carry tax losses back or forward requires a planning approach that takes into consideration a number of factors, including your personal tax situation and the circumstances of your business. Special relief is available for businesses that incur losses in the first four years of trading.

Areas where we can help
• Managing debt and cash flow
• Planning your business start-up
• Your options for finance
• Finding investors
• Putting you in touch with patent and intellectual property law specialists
• Helping you to comply with government regulations and avoid fines, surcharges, penalties and interest
• Timing capital and revenue expenditure to maximum tax advantage
• Improving your invoicing and debt recovery systems
• Involving family members in the business
• Improving profitability
• Protecting your business from financial disaster
• Selling your business and grooming your business for sale
• Valuing your business
• Minimising employer and employee NIC costs
• Minimising tax costs, enabling you to keep more of the profit you earn
• Identifying and valuing unpaid bills and unbilled work at the year end
• Preparing yourself and your business for your exit, succession or retirement
• Changes in your business and in your personal life

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