The new Corporate Governance Code offers lessons for SMEs

legislation smes Aug 13, 2018

The mission of the FRC (Financial Reporting Council) is stated as being “to promote transparency and integrity in business”, a message that we should all reinforce.

This, it claims, is at the heart of the revisions to its Corporate Governance Code published last month.

One of the main changes to the Code is a requirement for boards to understand and address the issues of all stakeholders, not just shareholders, and to consider the longer-term impact of their decisions.

This includes consultation on board appointments, not just with shareholders but also involvement of the workforce, where they recommend that either a director be appointed from the workforce, a workforce advisory panel be set up, or at least a non-executive director be designated to represent the workers.

It also recommends that there should be a mechanism for the workforce to raise concerns in confidence or anonymously with arrangements for “proportionate and independent” investigation where...

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SMEs, cash flow forecasting and resilience

cash flow smes Aug 06, 2018

The CEO of a business finance provider, Richard Pepler, of Optimum Finance Ltd was recently reported by the publication Business Matters Magazine to have suggested that entrepreneurs should take a business competency test similar to the driving test before being allowed to set up and run a company.

In fairness this was in the context of his stressing that cash flow forecasting and up to date management accounts were essential documents for a business to produce and monitor regularly.

This makes sense given that a recent survey of SMEs by American Express revealed that 46% of “senior decision makers” had reported that cash flow issues were distracting them from focusing on elements of business growth such as product development and marketing.

As my regular readers will know, I, too, emphasise that regular preparation and scrutiny of management accounts and cash management schedules are fundamental to business survival, resilience and business growth.

Why cash flow...

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Insolvencies: business failures slowing but individual insolvencies climbing

insolvency smes Jul 30, 2018

I generally concentrate on the quarterly insolvency statistics for businesses since my blogs are designed to help SMEs.

However, there has been a worrying trend in the numbers of individual insolvencies and in the latest quarter’s figures, from April to June 2018, released by the Insolvency Service they had reached their highest level since the first quarter of 2012.

This could have implications for businesses, especially those that depend heavily on consumer spending.

Company insolvencies for Q2 2018

While company insolvencies are still higher than they were in the same quarter in 2017 decreases in compulsory liquidations, administrations and underlying creditors’ voluntary liquidations meant that the underlying numbers of insolvencies had decreased.

Total company insolvencies for April to June decreased by 12.4% compared to the first quarter of 2018 while the underlying number of insolvencies decreased by 2.0%. However, insolvencies were still 12% higher than for the...

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Leaders: Can you imagine turning off your phone when on holiday?

It is well-known that a third of SME business owners take fewer than 10 days off per year and on average work at least 50-plus hours per week compared with the average of 37 hours for employees.

Even those who do manage to take a holiday often keep in touch with their offices and would not dream of turning off the phone.

This is hardly likely to please your family or whomever you are holidaying with, but have you thought about the damage it may be doing to you and your business?

 

Why you should consider turning off your phone on holiday

The most obvious reason is that you need time to relax and recharge your mental batteries. You are hardly likely to be able to do this if you are constantly attuned to the possibility that you need to be available to answer questions by phone or email.

Many business owners also suffer from a need to be constantly in control of every aspect of their operation and find it hard to delegate to others in their organisation. This means that too many...

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How do you resolve a boardroom conflict?

It is not unusual when I am called in to advise a SME in distress on restructuring its business that I find that there is a conflict among directors.

Perhaps it is no surprise that in today’s trading environment there should be disagreements at board level about how to proceed, particularly during financial difficulties when people are under stress.

However, a successful turnaround plan depends not only on my thorough investigation of the state of a business, in terms of the numbers and the business model, it also needs the support of the board, suppliers as creditors and other stakeholders, not least the employees.

While a conflict among directors has the potential to undermine, damage and disrupt a business at any time, this is more so in a tight corner when leadership and a united team is needed to execute a turnaround plan.

Tools that can help to resolve a boardroom conflict

While every business, and every conflict, is likely to be unique there are some tools that can help...

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The pros and cons of team building activities for SMEs

There is considerable disagreement about the effectiveness of company team building activities, especially those that involve away-days for things like paintballing, go-karting, white water rafting and the like.

The question is whether team building activities away from the office will make a noticeable difference to your productivity, rather than simply to the bottom line of the businesses that offer such facilities.

According to Forbes Magazine, Kate Mercer, author of A Buzz in the Building: How to Build and Lead a Brilliant Organisation and a co-founder of the Leaders Lab consultancy, warns that such activities can actually damage your workplace because it takes a great deal of skill to bring out the learning points and to transfer them back to the workplace.

Not only that, she says, they can make some employees feel embarrassed and others feel patronised and too often they confuse socialising with actual team building activities.

Such exercises can also be expensive,...

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How should SMEs approach their marketing post-GDPR?

Uncategorized Jun 24, 2018

Many SMEs issued emails to the contacts on their lists asking them whether they still wished to receive their marketing post-GDPR.

It has been suggested that many of these businesses were already GDPR compliant and such action may not have been necessary. The estimated the opt-in rate in response to requests has been approximately 10%, drastically cutting business contact lists if those who haven’t opted-in are removed.

However, rather than see this outcome as a disaster or as signalling the death of e-mail and digital marketing, it could be argued that it is a timely reminder that your marketing activity needs to be reviewed. I would argue that it should be regularly monitored, scrutinised and refreshed.

After all, as one small business recently told me, having a lengthy list of customers going back ten years or more is not in itself valuable if a proportion of them have neither communicated nor bought anything for years!

The beefing up of privacy regulations, therefore, can...

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The pros and cons of setting up business in the countryside

business growth economy Jun 24, 2018

There are undoubtedly challenges to setting up business in the countryside but in this blog, I will argue that there are also benefits.

Obviously, for some businesses, such as those related to agriculture, leisure and tourism, a rural location is essential for access to customers, but it is taking a somewhat narrow view in an ever-more connected world to discount the possibility of moving out or setting up away from an urban location.

There are plenty of examples of all types of business, from digital media companies to engineering, already to be found in rural areas.

The drawbacks to setting up business in the countryside

High on the list of drawbacks are the adequacy or otherwise of the IT and transport infrastructures and the availability of employees.

For a business that relies heavily on IT and a decent broadband speed with uninterrupted access can be a problem. In theory, however, this is a problem that is already being addressed by the Government’s Broadband Delivery UK...

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How crucial is SME growth to the UK economy post-Brexit?

SMEs are often described as the backbone of the UK’s economy and it has been said that their future success will be crucial post-Brexit.

There are an estimated 5.7 million SMEs in the UK accounting for around 99% of all private sector businesses and providing 60% of UK employment. The CBI (Confederation of British Industry) believes that the UK’s economic growth depends on them.

Analysis by the Centre for Economic and Business Research has suggested that helping some 22,000 high-growth small businesses to flourish could close Britain’s productivity gap with its rivals.

On these figures one can conclude that SMEs are vitally important to the UK economy, both now and in the future, and especially their ability to compete in foreign markets to bring in the needed income to replace Europe once tariffs are in place.

Yet, it is also alleged that SMEs’ are not being given sufficient attention by the Government during the ongoing negotiations about leaving the EU.

...

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Do the Q1 insolvency figures suggest Brexit chickens coming home to roost?

brexit insolvency May 02, 2018

Yet again, as in the last quarter of 2017, construction and retail were the top two sectors in the insolvency statistics for January to March 2018.

The first three months of 2018 were at their highest quarterly level since the same quarter in 2014, with a total of 4,462 companies entering insolvency, 3209 of them via Creditors’ Voluntary Liquidations (CVLs) accounting for 72% of all the quarter’s insolvencies.

Total insolvencies also represented a 26.2% increase on the same quarter in 2017 and an increase of 13% on the pre-Christmas October to December quarter.

Regardless of the excuses of the usual post-Christmas slump, and this year, the effects of the three-week weather event known as “Beast from the East”, it seems clear now that insolvency numbers are heading inexorably upwards as they were throughout 2017.

Equally clear, given the vast numbers of CVLs as a proportion of the total, it seems that company directors are no more optimistic about the future...

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