Small Business Matters

Want to get paid? Think like a banker and other lessons for and from SMEs

This post is by Manos Schizas, senior policy adviser, ACCA

By November 2011, the UK’s SMEs were owed £33.6 billion in overdue payments and the average wait to get paid was about two months. 

Few even try to use the legal tools at their disposal against late payers for fear of jeopardising important relationships. Is there nothing SMEs can do? Well, they can start with improving their credit management.

To help, ACCA (the Association of Chartered Certified Accountants), Experian, the Forum of Private Business, and ICM (the Institute of Credit Management) have teamed up to provide a guide on late payment: ‘Get Paid!’.

The tips in the guide are taken from an upcoming report from ACCA, ‘Getting Paid: Lessons for and from SMEs’, due to be published in March. The report includes the experiences of trade credit of large and small businesses throughout the supply chain.

See the big picture

If you sell on credit, you are, to an extent, a banker, so try to think like one! Credit is part of your cash conversion cycle - you need to balance the amount and timing of cash coming in and out of the business. Giving credit is as much a part of your business as getting orders - a profit on paper could become a loss when you add in chasing late or non-payments.

One credit controller of a large, market-dominant distribution company said most of their time was spent chasing unpaid bills and collecting little:

“Many depots just agree to deliver without going through the credit department, so there is no check, no credit agreement...it’s all done on...well, goodwill...verbally, which is useless.”

Be organised

Invoicing and collecting debts are not dirty words. Set up a routine and have a professional process.

Understanding Profit - It’s not as obvious as you might think

This post is by John Sollars, serial entrepreneur and MD of online printer ink supplier, Stinkyink.com.

I started my first business back in the 80s when you had to prepare your books and VAT reports manually using day books and cash books. Because of the complexities of double entry bookkeeping I felt that my accountant was talking to me in double dutch. A modern accounts system is simple and you should be able to understand your profit and loss with ease. 

Mind you, when I watch entrepreneurs presenting on Dragons' Den and they don’t understand the difference between net and gross profit, I really wonder if they are capable of running a business. These are the most basic of financial performance figures which you need to understand, yet even experienced business people are often unclear on their differences. Read on for a quick-and-easy breakdown of what they mean and why they’re important.

NB: I always quote profits before tax.

Gross Profit

What is gross profit?

Gross profit is simply your business revenue minus the cost of creating your goods/service. If you sold a desk for £80, and the materials for the desk cost £60, you have made £20 gross profit.

Calculation: Revenue − Cost of goods

Remember: Gross profit comes BEFORE deducting things such as wages and rents. It is purely the direct cost of your sale.

So what is gross profit margin?

In our previous example, our desk sells for £80 and made £20 profit, giving you a gross profit margin of 25%.

Calculation: ( Revenue − Cost of goods ) / Revenue

Remember: Gross profit margin is simply your gross profit reported as a percentage of revenue. If Product A and Product B both made £10 profit, but cost vastly different amounts to produce, you’d want to know the difference! 

What does gross profit show?

Gross profit itself shows very little except how much money, before overheads, you make on each product/service you sell. Gross profit margin is the important figure, as it shows how efficiently your company uses its supplies. 

Q&As with the Prime Minister - Part three: Finance for startups, health and safety and more

As you may know, Prime Minister David Cameron recently visited the Intuit UK offices for a PM Direct event.  It was a great day and very informative.

For those of you that couldn’t attend, we’re publishing all the Q&As in a short video series.  Here’s the third and final part. 

Advice for entrepreneurs

Health and safety

Finance for tech startups

Local Government confidence in new ideas

National Insurance holiday for small businesses

A questions from our very own Diana Flier, compliance analyst for Intuit UK

What do you think of David Cameron's comments? Is there anything you would have liked to ask him?

Q&As with the Prime Minister - Part two: Tips for businesses, trademarks and more

As you may know, Prime Minister David Cameron recently visited the Intuit UK offices for a PM Direct event.  It was a great day and very informative.

For those of you that couldn’t attend, we’re publishing all the Q&As in a short video series.  Here’s the second part. 

Uncertainty in the solar panel industry

Coaching for small businesses

A great question from Intuit’s very own Alison Ball, our UK head of accountant programmes.

A peep into freelancing [Infographic]

Are you considering freelancing? You're probably wondering what it's really like and what's involved. PolicyBee has done some useful research which should give you a bit more of an insight into freelance life. 

The research was carried out at the end of last year amongst 2,000 freelancers. 

Infographic by PolicyBee Insurance

Are you thinking of becoming a freelancer? What kind of things would you like to know more about?

Small business news round-up (28/1/12)

We search out key small business news stories and articles each week so you don’t have to, leaving you more time to spend on running your business.

Want to keep up with regular small business news, features and tips? Why not subscribe to our blog by RSS or email?

HMRC Self Assessment returns – two more days to file and pay

HMRC has agreed that customers who can’t get through to HMRC's call centres on 31 January because of strike action will have a couple more days to submit their returns. Late penalties will not be imposed for people who file their Self Assessment returns on 1 and 2 February, the HMRC has said.

The SA deadline remains midnight on 31 January. However, HMRC will treat all returns that come in by midnight on 2 February as though they were submitted by 31 January. No one will have to pay interest on payments due on 31 January that are paid on 1 or 2 February.

Find out more

Set up your business in a Government department, says Cameron

Entrepreneurs will be allowed to set up their companies in empty Government offices, David Cameron has said this week.

StartUp Britain Enterprise Calendar launch

A few key members of the Intuit team had a great day yesterday, attending the StartUp Britain Enterprise Calendar launch.

The StartUp Britain Enterprise Calendar is a new, interactive calendar of enterprise events, showcasing Britain’s vibrant and dynamic enterprise community. The calendar should be a great tool for entrepreneurs, signposting them to key events and growth opportunities. You can also submit your own events to the enterprise calendar.

Following the launch of the new calendar, Mark Prisk, minister for business and enterprise, said: “We want 2012 to be the year of enterprise, where entrepreneurs can unlock their business potential. Enterprise events don’t just take place on one day, or during one week, but they appear throughout the year and across the country. We need to make sure people know that there is support and advice available, that it is easy to get, and it is often on their doorstep.”

He added: “The Enterprise Calendar is a great addition to our support for business in 2012 and beyond.”

(pssstt…don’t forget you can download our calendar too, which will also help you keep up to date with events as well as key financial dates.)

Expert advice

“I shifted to QuickBooks and I understood how the business ran. In some ways that was one of the most delightful periods of my life with King of Shaves because I understood everything financially.” Will King, founder of King of Shaves

There was also a panel discussion on the day, with some expert advice from Intuit UK's very own managing director, Pernille Bruun-Jensen, as well as Will King, founder of King of Shaves, Doug Richards, original Dragon, investor and serial entrepreneur and Bob Forsyth, head of UK SMEs at Ernst & Young.

Watch a snippet here:

You can see more short interviews with Pernille over at Business Zone.

Pernille discusses shows how the Enterprise Calendar can help kickstart your business 

Is there a business in you? Intuit’s Pernille explains how everyone can be involved in startups 

New small business resources

StartUp Britain, which Intuit is a sponsor of, has also launched a range of new resources for small businesses. These were highlighted at the event and include:

Small business news round-up (20/1/12)

We search out key small business news stories and articles each week so you don’t have to, leaving you more time to spend on running your business.

Want to keep up with regular small business news, features and tips, why not subscribe to our blog by RSS or email?

UK may have slipped back into recession

An economic forecast from The Item Club has suggested that the UK has slipped back into recession. The think tank said GDP shrank in the final quarter of last year and would contract again in the current three-month period.It said that even if the eurozone problems are resolved, the UK economy would grow by just 0.2% in 2012.

The Item Club's chief economic adviser, Peter Spencer, told the BBC: "We are probably in technical recession.” However, the economic forecasting group said it did not envisage a full double dip recession.

Small business formations on the rise

The number of small business formations in the UK is increasing, new figures have shown.

According to Companies House data, 435,856 new businesses were registered in 2011, compared to 384,981 in 2010. In addition, registration volumes in the first two weeks of January 2012 are up by 12% compared to the same two weeks last year. 

The majority of these startups are tech firms taking advantage of growing demand for software, apps and online tools.

Find out why self-employment is booming, even in uncertain times.

Test drive a new product and get a £100 Amazon gift card

Want to try a new Intuit product before it's released to the public? We have an exciting new product that we're working on and we'd like potential customers to share their feedback.

We want the product to be the best it can be so we're looking for self-employed people or small business owners to come to Maidenhead to participate in the product feedback session. 

To thank people for their time, we'll be giving everyone that attends the feedback day a £100 Amazon gift card.

How to get involved

To qualify for the research day, follow this link http://ethn.io/99933 and fill in your details. If you're selected, we'll contact you with further instructions on how to join the session.

What would you spend the vouchers on?

 

How to stay on track during your first year in business - tips from a real business owner

This post was written by Sharon Lowe, owner of The Pure Emporia, a natural skincare website. She shares what she has learned during her first year in business.

Starting or recently started a business? Are you feeling daunted? Questioning whether it was the best idea? Lost in the massive amount of work that it takes to run your own business?

You need to stay positive and be as proactive as possible in order to push your business forward, particularly in the current economic climate.

These are my tips for staying on track: