Insight Associates provide outsourced accounting and Finance Director services to ambitious and growing businesses. We work as your only resource or with existing staff to give you complete financial support including monthly management accounts, high level financial advice, robust controls and financial systems, funding and business planning, payroll & compliance, VAT returns and statutory compliance.

Successful business leaders have all the information they need to make good decisions…Do You?

Thursday, December 31, 2009

Proceed with caution?

I have been asked a number of times in recent days and weeks how I feel 2010 is going to be for UK businesses (particularly small ones).

My response has been that we are far from out of the woods yet and even though the media seem to be trying to talk us out of recession my feeling is we are far from there no matter what any official statistics may say. Historically the failure rate for businesses are higher in the period following the bottom of a recession than when going into it, and I really can't see this being any different. Indeed talking to Insolvency Practitioners recently they all expect to be busy in 2010.

The worlds economies are generally in a perilous state. The level of debt that the UK now has is unprecedented and it has to be paid for. The impending General Election is just putting off the tough decisions, and as a result things like the recent Pre Budget Report ("PBR") just glossed over the real issues. There can be little doubt that in the UK the tax take must rise significantly over the next few years and public spending must come down substantially. Add to this the threat of inflation increasing and the measures that may be necessary to control that and things don't look that good to me!

So focusing on when the official statistics say we are out of recession (when growth becomes positive) is really not the point.

Just yesterday on Twitter, Entrepreneur and TV's Dragon's Den panelist Duncan Bannatyne commented: "2010 is the year of danger for British Businesses and it is best to proceed with caution". Bang on Duncan.

If you are running a small business don't be fooled into thinking it is all going to be OK. It isn't!  You need to ensure you continue to run a VERY tight ship and manage your cash flow like your whole life depends on it. Many businesses are really bad at this, make sure you are not one of them.

If you don't already have it in place ensure you monitor your cash position daily and constantly forecast out a number of weeks to know exactly what your cash is likely to do. Make sure the assumptions you make are realistic (it's only you that you are kidding otherwise) and take a worse case approach. If you need a basic template to get you going take a look here

If you need help you know where to come!!

Monday, December 21, 2009

The end of a decade ...

Not strictly on topic, but as it's Christmas!!

When talking to our members at the Bishops Stortford Breakfast Club at our last meeting of the year on 9th December, I commented that it was 10 years since we were all celebrating the millennium. Incredible isn't it? Where did that go?

Back then we were all worried about the Millennium Bug and all the pre-printed stationery that had "19" ready for us to fill in the date!

Then I received this from our friends at Shadowfax Technology, and thought is was worth sharing.

10 things you could not do at the start of the decade:
  1. Download songs from the Internet
  2. Access the Internet from your mobile telephone
  3. Communicate with friends and colleagues via Social Networking sites
  4. Online grocery shopping, online banking, online dating ...the list goes on
  5. View television on demand
  6. Navigate by SatNav
  7. E Books
  8. Listen to digital radio stations
  9. Listen to music on an MP3 player
  10. Advertise on Google (key word advertising started in 2000)

And ... things that maybe won't be around at the end of the next decade?

  1. The Fax?
  2. Friends Reunited?
  3. Cheque Books?
  4. Video Recorders?
  5. Camera's with film?
  6. USB sticks?
  7. Mobile phone chargers?
  8. CD's?
  9. Personal telephone landlines?
  10. Big Brother??

Have a great Christmas and a very prosperous new year!

Friday, December 11, 2009

The PBR and all that ...

I took the time out on Wednesday to watch and listen to the Pre-Budget Report ("PBR") being delivered by Alastair Darling (the Internet makes all this so easy!). I am not interested by all the political manoeuvring, but there can be no doubt that the whole exercise was very lame and dsiappointing for good reason - the impending election.

Much comment before and since expected to see more being done to raise the tax take and attack some of the obvious areas such as Capital Gains Tax and VAT - but nothing. It has to come, but presumably now after we have had a general election. A poison chalice if ever there was one for any incoming Government.

One area that has received a lot of comment over the past year is the HMRC Business Payment Support Service ("BPSS") which we have commented on previously here and there is more information about on our website. This was introduced in last years PBR and has without a doubt been the most "successful" Government initiative to date to support businesses through these troubled times. There was some speculation that it might be closed at the end of December 2009, but the Chancellor confirmed on Wednesday that it will remain in operation as long as it is needed - which repeats his pledge of a year ago.

The BPSS has apparently now assisted over 160,000 businesses and deferred £4bn in tax payments. A good proportion of these business have used the service more than once.

Some commentators, including our good friend and colleague Keith Steven have suggested that all the BPSS is doing is putting of the inevitable. Many very fragile businesses that might (and should??) have otherwise failed have been propped up by this facility and when the prop is taken away they will then fail.

Our view is a bit different. We have used the facility very successfully over the past year with many client businesses and in some cases it has been the very difference between failure and being able to continue trading. Most of these same businesses are now finding cash flow a little easier, so it did have a positive impact. However, undoubtedly there are other cases where either the system has been abused or it is just putting off the inevitable.

At Insight Associates we do therefore very much welcome the decision to continue this facility for as long as it is needed as we feel sure it will help many businesses into 2010 - a time which may prove even more difficult for many. We are far from out of the difficult times yet.

Businesses using the BPSS must though be careful. It seems like easy money, but it is just buying time and careful planning and cash management is required. Ensure you can afford the commitment you are making as HMRC are getting increasingly tough on non-payers and are not shy of issuing Winding Up Petitions.

Friday, October 09, 2009

The law won't help you ...

Despite our spending a considerable amount of time telling businesses about managing the credit they give to their customers, even we get caught out occasionally!

We have very unfortunately recently had to sue a former client for unpaid fees. The situation should have been quite simple even though they did not seem to be able to communicate with us properly. We had a clear contract, clear payment terms and there was no dispute over the amounts owed (well not that they had ever told us!).

So would you not think that getting paid in these circumstances should be quite straightforward?

If only!

The exercise that at long last that has got us to an agreement with our former client (ratified by the court) has in the end cost nearly £3,000 in legal fees and taken the best part of a year to complete. And now we have had to agree to a payment plan, so we still have to wait for our money!!

The moral of the story here is don't rely on the legal system to collect your debts for you. Yes occasionally as we have found it is necessary, but as a system it simply does not work! It is slow and expensive and at the end of the day very much works in the debtors favour! The debtor (the one that owes you your money!) has so many opportunities in the system to find reasons not to pay and raise reasons for disputes it is simply crazy!

When will the legal system be sorted out so that businesses can collect the money they are rightfully owed, easily, cheaply and quickly?

Thursday, October 08, 2009

Thinking and New Ideas ...

The great thinker and author of 82 books, Dr Edward De Bono, recently made these interesting observations on the recession and how we should counter it ...

In an economic downturn everything tends to shut down including our thinking. Any new idea suggests some risk and that is not acceptable. We believe that if we sit tight and batten down the hatches the storm will pass.

Yet new ideas are badly needed to simplify things, cut costs, do things in a different way, create new values etc. It is also true that the new conditions can open up new opportunities if we can see how to use them. For example new ideas for very cheap holidays should do very well.

Thinking is not just for surviving and problem solving. Any area of thinking can benefit from creativity. There may be a focus on smaller ideas rather than grand ideas, but the ideas still need to be generated.

Can you really afford to sit still and say: "There is a recession and I do not need to do anything?"

If you are not saying that - then what are you doing?

Wednesday, October 07, 2009

Free loans to your customers ...!

If you are like most businesses you allow your customers time to pay your invoices to them.

For some reason in the UK the norm seems to be 30 days or current month 30 days, and that is after you have raised the invoice. Often these days it seems to be even longer, 60 days, 90 days ...

Every time you make a sale and then raise an invoice (hopefully immediately!) you have to wait for your money.

You are therefore in effect lending your money to your customer the often vague hope that you will be paid. And in lending this money what have you actually done about making sure you do get paid?

Most businesses in our experience do very little to ensure they can collect their money and on time, which when you think about it is pretty staggering! Remember, you are making:
  • An interest free loan
  • With no security
  • No guarantee of payment
  • To someone you probably know very little about
  • With often no signed contract or terms of payment
  • And no real penalty if they pay late!

How many banks do you know that you can get terms like that from? Yet your customer has you lending them your money on those terms!!

So, just give it a little thought. Check out your customers and ensure they are credit worthy. You may have little choice but to give credit if you want to trade in your market, but you do have a choice on being paid on time!

We have a useful fact sheet on credit management. E-mail me if you would like a copy!

Saturday, August 29, 2009

Is the recession over? (Part 2)

My last post asked the question - is the recession over?

Yesterday, my good friend and long time business associate Keith Steven of KSA Company Rescue (Keith is a leading authority on company rescue mechanisms, especially the Company Voluntary Arrangement "CVA") posted the following in his blog which I could not agree more with:

Double dip recession is certainty, not just for UK

"The shocking business investment numbers released yesterday give the lie to the green shoots myth for business.

Investment by businesses contracted on a quarter-on-quarter basis by its largest amount since 1985 and its looks like the annual decline this year is likely to be about 18 per cent — the biggest fall, outside wartime, for more than a century.

With that backdrop I cannot see a big recovery or even a small recovery in the economy. We have been saying for some time that companies, to survive the recession, have been cutting costs, reducing employment and now its clear they have also cut investment.

With 180,000 companies not paying PAYE and VAT on time (to survive cash flow crises) it is clear that SME businesses are having to "hunker down" for worse times ahead, by cutting investment, costs and employment.

Alongside consumer tax rises, next year we will see the new Government cut costs, public sector employment and investment too. Smart boards are already planning for that and cutting their cloth to fit. Coupled with falling investment as employment falls, less money will be spent by the consumer, so service sector and retailers in particular will see growth grind to a halt again after a recent rise.

So will this lead to the double dip recession or W shaped recession. Nothing is ever certain but that is what I am thinking as each month goes by.

So what of other countries? The rise in GDP in Japan is interesting. Much of this is probably restocking by companies, remember Japanese manufacturing collapsed last year. So good news for Japan ahead? NO.

This week the worlds largest car manufacturer, Toyota, decided to close a US plant and mothball two production lines (one in Britain), this is the first time in its history it has taken such actions. Does the board of Toyota see growth ahead?

Fujitsu announced 1,200 job losses in the UK . This after shorter working hours did not work in the UK. Falling revenues were to blame. No growth there then.

France and Germany also announced growth in Q2 of 2009. I also think this was driven by restocking and the bringing forward of car sales for example. Ambrose Evans-Pritchard of the Telegraph's recent article also points out that European credit contracted recently (ie did not grow).

We should not succumb to optimism that everything has been overcome. The whole world is in recession together and nobody alone can export their way out of the downturn. The recovery cannot last unless there is rise in global demand, and jobs are created, and there is no sign of that.

The rebound in Germany and France is not sustainable. The state has stepped in to compensate for the Private sector. As long as economic growth relies on the state, you cannot talk about durable recovery.

So lets wait and see, but it looks like a fall in GDP is ahead and it will be late 2010 before meaningful recovery in the major economies and then I think growth will be very sluggish."

I was listening to a commentator on the television this week who pointed out that there were no signs anywhere (in the world) that any "recovery" was sustainable. He also highlighted the lack of consumer demand and the restocking issue.

The reality is that any green shoots are probably just weeds, since small businesses are still suffering and judging by Keith's comments not investing either (how can they when credit is so tight!) and are therefore far from out of their problems.

There needs to be some substantial movement in the smaller business sector before we will see any positive and real change.

In the meanwhile if businesses are to at the very least survive, if not thrive, through this they need to wake up to the realities of the world we are now living in and adjust accordingly. Just battening down the hatches is not the answer. Businesses need to reassess their plans, look at the financial positions, and revise them to take account of the new reality and make something positive from it. Many great businesses were founded in recessionary times - make yours one of the ones to gain from the current climate!

Wednesday, August 26, 2009

Is the recession over?

Increasingly in recent days there has been more and more items in the media about the recession being over, or nearly so? It's almost as though talking the economy down is boring now and they need to talk it up.

But is there any substance to it?

The most recent one I have seen is an item on the BBC news website this week based on an index of business confidence run by the Institute of Chartered Accountants in England and Wales (ICAEW) saying the recession is at an end and we will see 0.5% growth in the third quarter in the UK!

Then you have news that countries like France and Germany are out of recession and various other indicators showing increases in demand - even in the motor industry!

This also leads to thoughts about the shape of the recession perhaps? There was much talk about "U" shape, "L" shape and even a dead cat bounce which always makes me smile! Will we get a double fall? Will the economy ever recover to where it was? And how long will it take? It certainly needs to grow substantially if we are ever going to get the national debt down!

I can't say I'm convinced by all this talk of being out of the woods. Personally I feel we are a long way from being out of trouble. I do not want to be the merchant of doom, far from it, but we must be realistic! However, that said, if we can get some feel good factor back into peoples thinking then it can only be positive and will in itself bring good news!

From what we see at Insight Associates many smaller businesses (which are after all the bulk of the UK employers!) are still suffering, and in some cases suffering badly. Unemployment is still rising (a strong lag indicator) and will probably still do so for some considerable time yet - with all it's knock on effects, and credit is still in very short supply.

Someone mentioned to me the other day that in the last true recession of the early nineties, unemployment did not peak until 1995!! I have not checked that out - but that is some lag!

To my mind we will not see any sustainable improvement in the fortunes of smaller businesses in the UK until banks and other lending institutions get sensible with their lending criteria again (because they are far from it at the moment) and credit insurance also sorts itself out. In the meanwhile businesses need to get much better at managing their scare cash resources and focus on this critical area which so many are still failing to do!

Saturday, August 15, 2009

Are the banks causing businesses to fail?

Comments from the Forum of Private Business (FPB) this week are suggesting that the banks general reluctance to lend is causing significant business failures.

The second quarter of 2009 saw a 39.1% rise in compulsory and voluntary liquidations of companies in England and Wales, and at the same time the Bank of England reported that lending to small businesses had dropped by a staggering £14.7bn in the same period! Research by the FPB suggests that businesses demand for finance is not being met by supply and in fact the banks are continuing to refuse to support even apparently good businesses as they perceive too high a risk.

Even when funding is available it is becoming increasingly expensive with margins of six percentage points and above over the base rate now becoming almost the norm.

Some would suggest that the banks are just taking a sensible line after perhaps some years of being a little reckless, and the businesses failing to get support are perhaps simply not viable in the first place! However whilst there may be instances of this, it is more likely to be the case that the businesses concerned just need help to get them through a difficult period. Many current leaders of smaller enterprises have never managed them through periods like this before, and need help support and guidance not a ruthless approach. That has certainly been more often than not our experience in recent months.

Let's see a return to sensible relationship banking and local managers being empowered to make decisions on the ground rather than the box ticking mentality that seems to prevail now.

It is also interesting to note the increasing statistics that seem to appearing recently about how badly all of the various Government support schemes appear to be working! With the notable exception of the Business Payment Support Service which I talked about again recently, all of them seemed to be failing to deliver. Indeed Mark Prisk MP, Shadow Spokesman for Business & Enterprise who spoke at our Bishops Stortford Breakfast Club last week said that the £2.3bn Automotive Assistance Programme had so far not given a single pound to the sector!

Whatever your view, the reality is businesses need help through these difficult times. Both in terms of real cash, management guidance and financial management support! The consequences of not getting this right could be disastrous.

Saturday, August 01, 2009

Resolving turnaround issues ....

Another case study, this time with a client, Cahro Limited, that inintially turned to us for turnaround advice. Not only did we deliever that, but also took over full responsibility for the accounting and financial management functions with our Outsourced Finance Department.


Braintree-based consultancy firm cahro was established in 1999, the brainchild of Tim and Wilhelmina Edwards. With their extensive experience in training and human resource management, the couple identified a need for good quality training and consultancy services to, amongst others, the healthcare profession.

The company quickly grew as demand for their services increased. cahro, which stands for Consultancy and Human Resource Outsourcing, developed strong links with bodies such as the Learning and Skills Council, Institute of Leadership and Management and Edexcel. Initially the company was home-based but due to success and growth, it acquired its first office premises in Braintree. Continued success over the following years resulted in cahro being voted Training Provider of the Year 2008 by the Learning and Skills Council as part of the EWBTC consortium.

Financial Difficulties

After 10 years of successful trading, financial difficulties hit the company in 2006. Due to changes and re-structuring within the Learning and Skills Council, severe delays occurred with cash-flow, causing major problems. Managing Director, Tim turned to business acquaintance Garry Mumford, owner of Stansted-based turnaround and financial management specialist, Insight Associates.
Together, Tim and Garry identified the main problem areas within the business. They recognised that the distribution of staff was uneven with many staff in the wrong geographical areas and too few in the required areas. Poor middle management and inadequate control added to the problems and the company was suffering from under capitalisation.

As Tim Edwards recalls:

“Following the analysis of the business, I disposed of virtually the whole of the management team, including one director due to poor performance. Garry and his team at Insight Associates ‘cleansed’ the company from a financial perspective and gave me tangible, relevant and quantitative information to make sound business judgements. This has continued to be a successful strategy.”

The Insight approach in a turnaround situation is to Analyse, Plan and Execute. From Insight’s analysis of the business and its thorough review process, Garry was able to advise that the best solution was to propose to creditors the little used Company Voluntary Arrangement (CVA) mechanism, which allowed the company to trade as normal, eased cash-flow pressures and cut costs.

Garry Mumford explains:

“Once we have identified the problems within a company, we can quickly work out the best solution and devise a plan of action. Tough decisions often need to be made and it can be a painful experience for a business owner. However, as in cahro’s case, once a plan is in place, the company can begin to get back on track, through organised financial planning and tight cash management. This gives the directors a renewed sense of real control over the business and optimism for future trading.”

Clearly, Insight’s extensive experience in financial management issues has revitalised the business and given cahro a brighter outlook for the future. However, the road to recovery isn’t necessarily an easy one, as Tim Edwards reflects:

“As a business owner, I found the first three months of the process very concerning and stressful. By six months I had a viable plan in place, by nine months I had my finger on the button, and by 12 months the company was back on track on a sound trading platform. The recovery process has to be a partnership between the company and Insight Associates. Decisions are tough but have to be taken. I can now see a bright future of trading out of a difficult economic environment. Also, I can now sleep at night!”

There are many reasons why a company may end up in financial distress and in the current economic downturn, trading conditions are proving difficult for businesses across all sectors. For business that may be experiencing the first signs of financial trouble it’s important to remember that the sooner expert help is sought, the more likely it is that a solution can be found to get the business back on track. Insight’s experience and expertise within this field has rescued many businesses, like cahro, from financial ruin. Furthermore, through establishing solid financial foundations and tight cash management, Insight’s expert help can rejuvenate a business and provide firm foundations for future prosperity.

How outsourcing can really add value ...

A recently completed case study on our client Shadowfax Technology Limited.

His passion for delivering quality IT support to clients drove Adam Pedder, together with a business partner, to set up his own business in 1990. Shadowfax provides IT support services for small and medium sized businesses. Adam is a Microsoft Certified Systems Engineer and the company has achieved MS Gold Certified Partner status; recognition of its expertise in providing successful IT solutions to small businesses. The pair was joined by Vanessa Pedder, now a director, in 2006.

Accounting Difficulties
After several years of successful trading, Adam’s business partner, who had previously undertaken most of the accounting and financial management duties, left the company, and this created a problem. From only being involved part-time in processing invoices, Vanessa was now faced with having to do all the accounting, cash management, payroll, tax, and the like, tasks that – by her own admission – she found daunting. Furthermore, it was clear that Shadowfax needed guidance on their general financial management and accounting due to their growth, as well as longer term strategic direction. As Adam and Vanessa were already acquainted with and impressed by Insight Associates, it seemed an obvious choice to turn to them for help

The Outsourced Solution
Insight’s considerable experience in helping businesses through its own turnkey outsourcing division, The Outsourced Finance Department, meant that it was able to grasp the issues and problems facing Shadowfax immediately. As well as taking care of all the day-to-day accounting, The Outsourced Finance Department can help with strategic input by acting in a virtual Finance Director capacity. The Outsourced Finance Department set to work on taking over the finance function and getting to grips with the bigger picture, as Vanessa explains:

“Insight were fantastic and helped us immensely in the transitional period from doing all the accounting ourselves, to them taking over. In addition to looking after all the routine accounting, they have held our hand all the way through the process of moving across to their platform and even helped to improve the way we do several things.”

The improvements were felt at Shadowfax within a couple of weeks and with a regular contact at the end of the phone to provide help and support, Vanessa was delighted with the progress.

“We are now much better at managing our cashflow, sending out invoices promptly and organising our accounts. Payroll is now managed much better, with holidays recorded and overtime paid correctly. We now feel more confident and able to work towards growing the business for the future. As an additional bonus, Insight Director Garry Mumford introduced a new bank manager who has improved our banking facilities and again made us much more stable as a business.”

As Shadowfax familiarised itself with the new ways of working, the relationship quickly settled down, and Adam and Vanessa can now concentrate on the future of the business. The ongoing relationship remains strong and Vanessa has a Finance Manager at Insight who understands their business and is always available to respond to queries promptly.

“We have monthly meetings with Insight Associates which are never rushed and allow us to clear up queries and mistakes before they hang around too long. In addition they highlight areas where we need to focus and add great value to the business. All in all we consider Insight to be an essential part of our team.”

Deferring tax payments

News this week from HM Revenue and Customs showed that they have now deferred £3.17bn through the Business Payments Support Service!

There have been 177,000 separate arrangements and to date around £2bn has been paid back. Most deals are for three months or less, and as time passes the number of repeat deferrals has increased.

As I have said before, as Government initiatives go this one really works. It is in effect giving short-term (often interest free) overdrafts to businesses and is without a doubt relieving much pain that business may be feeling at present.

We have used it extensively for and with clients over recent months and it is indeed very effective.
There can be no doubt though that the Service is becoming increasingly concerned about repeat deferrals and also abuse of the facility. Are all the businesses that are using it doing it for genuine reasons? - probably not? Compared to most overdraft facilities it is cheap and easy money -why would businesses not use it when there are very few hurdles put in the way.

I personally took quite a grilling earlier this week on behalf of a client when we were looking to defer payment of a quarterly VAT return. It was the third time they had used the service, and each time the quarterly VAT had been repaid before the next quarter became due (sensible if you can afford it!). A lot of questions were asked about what else the Directors had done to try and resolve their cash flow issues. Is this a sign of what is to come?

The Governments challenge will be how (and when) they withdraw the scheme. One thing is for sure they will have to be very careful indeed not to create a bigger problem than the one they have already gone some way to solving. I also hope that they do not rush into it, as there can be little doubt that there are still many businesses hurting out there!
In conversation on Thursday with my good friend and colleague Keith Steven of KSA Group, one of the countries most innovative and leading insolvency experts, he said that he believes that to some degree the facility from HMRC is just putting off the inevitable. It is giving time to businesses but not really solving the fundamental issues which more dramatic action would help with. Knowing Keith I suspect he is right!!

In the meanwhile, if you need the facility, use it! Further details are available from our website, or give me a call on 0800 180 4265 if you would like a confidential no obligation chat!

Thursday, July 09, 2009

To disclose or not to disclose ...

There has been a lot of comment in the financial and accounting press recently about the amount and frequency of financial disclosure by companies.

It all seems to come down to the "perception" about credit ratings, and as a consequence the impact of the insurability of a business by the credit insurers. I have commented previously here about the credit insurance issues, and no doubt will again. However the interesting issue now that is being raised is: are smaller businesses credit ratings being adversely impacted by the amount of financial disclosure there is in the public domain and is this creating big problems for them?

It's an interesting call. I have to freely admit we at Insight Associates can be rather hypocritical on the matter in dealings with our clients. Our general feeling with our clients is that (if they can) we would normally encourage them to file abbreviated accounts (and give the minimum amount of information that they are legally able to), but is this really helping them? Then when we are looking for financial information on their trading partners (customers and suppliers) we get frustrated that there is little information available!! Are we by our own actions making matters worse?

Recent research from Graydon UK suggests that two thirds of UK small firms are carrying a credit rating which may negatively impact their ability to obtain credit. That seems a bit extreme to me, and it is not just about accounts disclosure but also the accuracy of other information which can often be inaccurate. However it does highlight it is an issue.

Just to add to the debate it appears that it is Government policy - in the interests of reducing red tape - to reduce still further the obligation on companies to publically file information! And then there is the whole issue on providing management accounts to external parties - but that is for another item later on!

Overall it would appear that perhaps it is in businesses best interests to be prepared to disclose more information, but then you have to make sure it is accurate!

Friday, June 19, 2009

The power of doing it right!

We have a very long established client, which although a big turnaround many years ago, has traded very strongly for the last few years and is in the fortunate position of having generated substantial cash reserves as a result.

With interest rates as poor as they are it has been quite a challenge to find a secure home for the cash that provides anything like a sensible return. There are deals to be done, but the price you pay is that you normally have to tie the money up for an extended period. As a result most of the clients "free" cash is now in longer term deposits.

The other interesting angle that has come about is the ability to pay key suppliers early and take not insignificant settlement discounts which are often available. This has been possible with a couple of significant raw material suppliers and has given an excellent return on the cash, by only in effect paying debts sooner. Nice!

Despite careful cash planning we recently hit a short-term problem. The timing of the cash flow unexpectedly worked against us. A couple of weeks before a significant deposit was due to come back from a long term bond, sales activity increased meaning increased purchases (which are now paid for on a 7 day cycle as a result of taking the really excellent settlement discount on offer) and also a big customer missed their payment date, resulting in a delay of a big receipt.

In a matter of just a few days the cash position changed. All free cash was tied up in long term deposits and we had some big payments to make and unbelievably not enough free cash!!

The relationship with the clients main bankers is excellent, and a good deal of time and effort goes into keeping it that way. Even though there are no loan or funding facilities with the bank (the client clearly being debt free) and the surplus cash is deposited elsewhere (as they cannot match the rates) we spend time ensuring the bank understand the business, get good quality management information within 5 working days each month and manage the bank account impeccably. You never know when you might need a favour.

This proved to be one of those times. A call to the Senior Commercial Manager with a request for an overdraft for two weeks of £175,000 unsecured was met with a positive response within 24 hours! Problem solved at a stroke.

The bank manager made a very strong point of telling me that we probably had the only unsecured facility of anything like this size within his region if not the UK, and the reason we got it was because of how the account and the relationship was managed. He said approving the facility was only possible because of the strong management information and our impeccable control of the account and facilities.

We often say, make your bank manager your best friend, and this just goes to prove why! Bankers are not your enemy, they can really help you solve problems if you manage the relationship properly!

Wednesday, June 17, 2009

7 deadly business sins to avoid in a recession

I recently saw this excellent article posted on web site based in Australia, and thought it was worth repeating here (having got their permission of course!!).

This is all so true and I like the use of the sins ...

If big businesses are hurting financially, smaller suppliers that are more reliant on cash-flow will be hurting even more. Rather than envying their cashed-up clientele, suppliers may need to sit down with customers and restructure project schedules and payment terms to facilitate regular progress payments and deal with cash flow issues. Most customers will appreciate the need to keep key suppliers afloat, especially where they have developed good business relationships.
Lesson: On the conduct of each depends the fate of all (Alexander the Great)

Market forces shift, industries evolve, customer expectations change – especially during recessions. How resilient is your organisation to change? If your business is based on widget making, can the market be widened to increase your customer base? Alternatively, if customer demand for your services is waning, have you considered ways to re-brand, re-fresh or re-conceptualise your service offering?
Lesson: If you don’t change, you will become extinct.

The credit crunch has forced many businesses to delay forecast spending and put non-essential projects on hold. As a result, SMEs that were dragging out commercial negotiations or pushing for higher fees back in 2008 may now be left high, dry and without service fees.
Lesson: A bird in the hand…

If you would like to read about, Sloth, Gluttony, Lust and Wrath (!!) take a look at the Dynamic Business website here. Then take note!!

Thursday, June 11, 2009

Government loan guarantee scheme

There is constant press coverage about the difficulties smaller business are facing at present with obtaining credit especially from the banks. I have commented on it here before.

One of the Government's key initiatives introduced earlier this year to help this is the Enterprise Finance Guarantee ("EFG") scheme, which replaced the good old Small Firms Loans Guarantee Scheme ("SFLG") earlier this year.

The headlines suggested that this would inject £1.3bn into smaller businesses by the Government guaranteeing to the banks 75% of the loan, with the balance supported by whatever means the lending bank felt was appropriate. However a spokeswoman from the Department for Business Enterprise and Regulatory Reform ("BERR" - the old DTI) said recently that only £230m had been lent through the scheme so far. We hear many stories about the difficulties of getting these loans and the often unrealistic demands placed on lenders by the banks. There also appears to be a huge inconsistency in approach and understanding by the banks.

It certainly seems not to be the great salvation that the Government would have us believe.

At the end of the day, if you want cash from a bank it all comes down to the quality of your proposition. No scheme it seems is going to make that any easier. A good business plan, supported by realistic assumptions and financial forecasts is a good start point. If you need any help get in touch

Tuesday, May 26, 2009

More companies refused credit from the banks ...

Over just the couple of weeks I have seen a number of stories from different Asset Based Lenders ("ABL's"), suggesting they are benefiting from the banks apparent continuing reluctance to lend any money to businesses.

Asset Based Lenders are those that traditionally base their lending on sales receivables (debtors / sales ledger) finance products - factoring / invoice discounting etc., however it is often the case that their offerings go much further than just that, but the receivables is normally a prerequisite.

There is certainly an increasing amount in the press, and other evidence, to suggest that despite all the Government incentives and the real need for lenders to be sensible, they are simply not giving what might be quite good propositions any consideration at all. A survey from our friends at Venture Finance recently suggested there had been an almost three fold increase in the number of businesses being refused credit by banks and other traditional lenders, now reaching 58% of all propositions.

Our own experience is similar, with the need for bricks and mortar security seeming to be a prerequisite before a discussion can even begin!

It seems that the press from the "independent" ABL's is that they are gaining from this market, and picking up new business which may have otherwise gone to the banks. By independent I mean those ABL's that are not bank branded, as even some who are not these days are ultimately owned by the banks. Our experience certainly has been that bank owned and branded ABL's have similar criteria to the banks themselves, the independents are often much more creative. However, that said we have seen even their lending criteria tighten and a much stronger desire to see protection of some description or other (security, credit insurance, etc.).

What does this all mean? If you need funding for your business you may have to think a bit outside the box, but also accept that you not only need a first rate case, with a strongly supported business plan etc., but that you may have to put your house on the line to make it happen. There are though alternatives to the high street banks if they refuse to play ball.

Interesting times ...

Sunday, May 17, 2009

Better Business Magazine

My article in the latest issue of Better Business Magazine is worth a read for some tips on managing cash flow.

At Insight Associates we have been spending a lot of time of late trying to get clients and businesses in general to really understand how critical good cash flow management is. This is probably a skill that has been lost in recent years when times have been good and credit was readily available.

We are currently managing tight and difficult cash positions with some clients brought about mainly by factors well outside their immediate control. However, a very firm understanding of the day to day cash position and constant re-forecasting has undoubtedly made a great difference to their long term fortunes.

The article is available for download from our website

Thursday, May 14, 2009

Positive News Agency

I subscribe to a blog written by Edward De Bono ... and received this entry today ...what a simply brilliant idea!

The media, and especially the press, are usually full of negative news: murders, attacks, economic failures etc. It may be that experience has indeed shown that negative matters are of more interest to readers.

Even if this is so, I believe that at least one page of positive news would be welcomed by readers. Readers would turn to this page - even if they found the negative stuff more interesting.
Editors might agree with me. Then they would ask where positive stuff is to come from. Negative stuff comes easily from the police or the law courts. But where is the source of positive stuff.

So my suggestion is that someone sets up a ‘Positive News Agency’. This would be a news agency like Reuters. It would collect positive news and make it available on demand.

With all the doom and gloom from the press this would make such a welcome change!

Tuesday, May 12, 2009

More thoughts on late payments

Reading a number of press items over recent weeks it seems that the problem of late payments is rearing it's ugly head again.

I posted an entry a short while ago about the new Prompt Payment Code ...and what a nonsense it is. That aside it seems smaller businesses are beginning to suffer in the hands of larger customers.

Recently UK retailer Argos was reported to have unilaterally doubled the time it takes to pay it's suppliers from 30 days to 60 days and in addition to deduct a 4% settlement discount. For a retailer this must be nothing short of obscene as they will not be giving any credit will they! So why are they making their small suppliers suffer other than to improve their own cash flow. It really is appalling.

Having a long standing client who supplies the major food retailers we have seen who is funding their growth in recent years by the increasing terms they are unilaterally taking. Fortunately our client has the ability to withstand it, but many won't.

Research from HSBC suggested that smaller businesses are being forced to wait up to six weeks after the agreed payment date to receive their cash! Payments owed had risen 40% in a year, and 64% of business are saying that managing cash flow is their biggest challenge. Tenon Recovery said that 3 out of 5 of UK business were struggling with cash flow issues because of late receipts from their customers.

If you are dealing with the big boys then there is often little you can do about having terms imposed upon you. It is a case of take it or leave it. However, in our experience you do need to make sure you have an extremely efficient credit control process. The trick appears to be when dealing with the bigger companies is to have a really intimate knowledge of their systems and then follow what they want to the letter. If that means that certain codes or numbers need to be quoted on your invoices then make sure it happens without fail, if it means certain supporting paperwork needs to go with the invoice (like a delivery slip or the like) then ensure it always happens. In most cases it is a waste of time sending the invoice if you are not getting it right.

Then make sure that you have someone who is clearly responsible for building relationships with the accounts payable people at the customer, and that they are in constant touch and ensuring invoices will be paid on time before the payment date comes around. This proactive approach will undoubtedly pay dividends.

I do sometimes wonder how many of the statistics about the delays by the large companies mentioned above is due to the system not being played right. However, there is no doubt at all that they are abusing their position and strength.

Tuesday, April 28, 2009

Trade Credit Insurance

In my last entry I mentioned the lack of apparent detail with the latest Government initiative - Trade Credit Insurance.

Another search has revealed a page on the Business Link website which definitely helps, including a document to download.

A study of this, and looking at the situations that we are facing with our clients, it would appear that some of the recent sceptical commentary on this scheme is correct - I really cannot see it having much effect.

The impact of the wholesale withdrawal or reduction of credit limits by the main credit insurers in recent months cannot be overstated. It is dramatic. Yet it has not really reached the headlines in the same way as many other facets of our current economic predicament have. At the very time that businesses need the support and comfort of the knowledge that should one of their customers fail then they will not be hurt, the insurers are reducing cover due to the increased risk! It simply makes no sense.

Two of our clients are facing difficulties because of the actions of credit insurers. Neither of which in our view is fair nor reasonable. The issue is exacerbated by the fact that the insurance is a precondition of funding, so the impact is not just increased risk but reduced cash! The intervention by the Government with its "top-up" scheme is it now seems very restricted and will only give any help at all in the narrowest of circumstances, and not for the very businesses I suspect they think they are helping!

Monday, April 27, 2009


Uninspired? Yes, that is probably how I feel about Alastair Darlings Budget last week. There was very little of note there for businesses (that we did not already know about) and certainly as I see it not that much that was going to make a real difference.

Without wishing to make any political comment (no time for that stuff!) it does seem that this Government really does not understand what businesses need (especially smaller ones) to help them through this period. The one thing of note that is of interest though is the new top up Trade Credit Insurance scheme - but unless I am missing something, yet again there seems to be very little details available as to how this will work. Having clients that have been very negatively impacted by the virtual closure of the credit insurance market, this could be of some help - if only we could understand how!!

One very interesting part of the complete budget report published by HM Treasury though, was information about how the Business Payment Support Service has been operating. This is the one thing that the Government has done so far that has really had a great impact. In effect this is giving short-term overdrafts to businesses without the need for bags of bureaucracy. A brilliant move. According to the HM Treasury Budget Report up to 19 April 2009 100,000 businesses had used this service and £2 billion of tax had been deferred through payment plans. With interest rates at only 2.5% now this is certainly worth looking at.

I wish we could say the same for all the other schemes that have been dreamt up - most of which seem to be having very little impact so far.

Monday, March 23, 2009

Prompt Payment Code!

Am I becoming an old cynic in my advancing years (feeling a bit old at the moment!!) but is this newly launched Prompt Payment Code just a complete waste of time?

The payment practices of many larger UK businesses and most Government bodies leave a lot to be desired, forcing unreasonable terms on their suppliers and then often through their own ineptness failing to pay them even then. The issue is serious, and we have seen many clients suffer the consequences in all sectors.

However, apparently according to Peter Mandelson (Secretary of State for Business) and many others (who should know better!) the Prompt Payment Code is “a critical step in tackling the issue of late payment”. Do they really believe that by getting a few high profile players to sign up to a code that says we will pay our suppliers on time, give them guidance on how they will be paid, and encourage good practice, it will make any difference? I think not!

The main issue surely is the lack of any effective mechanism in English Law to enable you to collect your overdue debts? If a debtor does not pay, what can you really do about it to make any real difference? Take them through a pretty impotent court process and then try and enforce a judgement (which all the while is costing you more money), or charge them statutory interest? Whoopee!

It strikes me that the whole issue of giving credit to customers is a pretty risky business, and no code is really going to change that. Something much stronger is needed.

As part of the Pre Budget Report last November the Chancellor Alastair Darling said that Government Departments would be instructed to pay suppliers on 14 days. That was 4 months ago, and apparently it still is not happening! Perhaps they should sign up to their own code!!

Friday, March 13, 2009

We are running a breakfast workshop ...


Insight Associates, in association with NatWest and Herts & Essex Observer is presenting the first in a series of finance workshops for small and medium sized, local, established businesses.

The downturn in the local economy is affecting businesses right across the UK, including those in our area. This seminar will answer key questions being posed by business owners in these difficult trading conditions, such as:

  • How do we improve cashflow and speed up payments from customers?
  • How can we avoid bad debts?
  • Can we change our supplier payment terms?
  • How likely is it that we’ll lose our overdraft facility?
  • Is anyone lending to businesses any more?
  • What government support is available?
  • What are our legal obligations regarding insolvency?

This is a unique opportunity to gain valuable information and tips on how to steer your business through these difficult times and beyond, from local business experts who understand your financial concerns.

The workshop will be held at Pearse House, Parsonage Lane, Bishop’s Stortford, Hertfordshire, CM23 5BQ on Thursday 2nd April, 7.30am for an 8am start. It will finish by 10.30am. Over a working breakfast delegates will be able to listen to, and participate in, talks by Insight Associates’ Managing Director Garry Mumford and Bill Butler, Director, Commercial Banking at NatWest.

Insight Associates will also provide delegates with two weeks’ free telephone support and a practical workbook full of useful tips and ideas that delegates will be able to put to use in their business straightaway.

Call Insight Associates on 01279 647447


There is a nominal cost of £35 (inc. vat) which includes breakfast. Payment can be made by credit card or cheque.

Numbers are limited so you are encouraged to book soon.

Tuesday, February 24, 2009

Managing risk ...

I was interested to see that a recent Ernst & Young study showed that 31% of the companies questioned had cancelled contracts with high risk customers, with nearly a quarter saying they had already seen a key customer collapse.

On the other side the reaction to perceived risk was mixed, with 42% saying they had broadened their supplier base to reduce the impact of the failure of a supplier, whereas 46% interestingly had taken the opposite approach and narrowed their supplier base in order to be able to negotiate better terms.

Whichever approach is taken, the message has to be all businesses must be looking around them and considering the risks that may impact their activities. Whilst you cannot always influence or manage certain risks which are outside your direct control, a vital step is awareness. It is critical that all businesses in the current climate manage all risks very closely to minimise the impact that these may have on them. Ask, what are the consequences of X or Y happening - however unlikely that may be. Then either take action, or put in place a system or process that monitors that risk and alerts you to changing circumstances.

All businesses have fragilities, the issue is recognising that and acting on it.

Monday, February 09, 2009

Insolvencies rise ...

It is perhaps not surprising that insolvencies are on the increase in the present climate, but the rate of increase is high.

Last week The Insolvency Service published the statistics for the fourth quarter of 2008, and they do not make pretty reading. Compared to the same quarter in 2007 there was a 220% increase in the use of mechanisms such as Administrations, Receivership's and Company Voluntary Arrangements (CVA). There was also an increase of 52% in company liquidations in the same period.

It is actually early days yet the impact of the economic environment filters through, particularly to the large base of smaller businesses in the UK. Therefore annual statistics for 2008 are not really that descriptive, but this chart (from the Insolvency Service press release) already shows that we are at levels not seen for many years.

The level of failures in 2008 equate to 1 in 150 of all active companies in the UK!
The level of personal insolvencies is at almost the same level in 2008 as 2007, although many commentators are suggesting at 50% increase in 2009! What is perhaps of interest is that the proportion of bankruptcies is increasing. It has been suggested this is because unless there is an adequate source of income it is now increasingly difficult to fund a Voluntary Arrangement.
As ever ... the message has to be act early. If your business is facing difficulties moving quickly to look at options will often mean that the solutions are more palatable. It is easy to get into a position of denial, but that is very dangerous. Most business owners have no real experience of the present trading conditions or the prospect of insolvency. Most do not understand the implications. So seek help early and fully understand where you are and the ways forward.

Friday, February 06, 2009

The price of limited liability ...

The price of limited liability ... has just gone up!

As of 1st February 2009 Companies House has increased the level of fines for the late filing of company accounts. This is the first increase since the fines were originally introduced in 1992. In addition there has been a change in the penalty bands which are now shorter, and a double penalty for persistent late filings.

Companies House state that the fines system has been very effective in increasing the proportion of accounts that are filed on time from less than 60% to over 86%. However, in recent years as the fines have been impacted by general inflation their effectiveness has decreased. Indeed Companies House state that may companies have been waiting until the very end of the three month overdue period and pay the small £100 fine, almost treating it as a charge for taking three months longer to file!

Within the UK creating the protection of limited liability for any business is very simple indeed. The process of registering a company is quick and easy and the protection afforded if the officers act properly is huge. One of the small prices that you pay is some element of transparency in that you must then file your accounts on a public record (Companies House).

At present a private limited company has 10 months (soon to reduce to 9 months) after the end of its financial year end (Accounting Reference Date) to get it's accounts completed and filed. This should be very easy for any business that has any decent system of financial management and control in place, but it seems many still struggle. A properly managed business should of course have continuous information about its financial picture, and so a "year end" is really just another day. This only leaves the process of producing accounts in the statutory form for filing. A simple enough process if the accounting records are kept to any sort of standard!

The changes to the fines are quite significant. The present £100 fine for being 3 months late changes to £150 for 1 month late, and £375 for up to 3 months late. The 3 to 6 months fine increases from £250 to £750, and the over 6 months becomes £1,500 from £500. The over 12 months band has been dropped.

In addition companies that file late for a second year will have the penalties doubled.

At the end of the day, as discussed above, this really should never be an issue for a well run business. However, it is clear from the number of late filings that it is, and this can only send a very clear signal to the wider world that the business has significant internal issues.

Friday, January 23, 2009

Going going going … concern …

In the ever unfolding financial crisis, the next issue that may well come to the fore, and has already in some areas reached the headlines, is that of “going concern”.

This really is the concept on which the whole basis of accounting rests. The accounts and financial statements of an organisation are presented on the basis that the business will be able to continue to trade for the foreseeable future (normally at least one year from the date of approving the accounts). The assumptions that are made in how the numbers are presented are key to the going concern basis of preparation (for instance, an asset value will certainly be different if sold at auction on a “break up basis” compared to how it might be recorded in the Balance Sheet of a healthy going concern).

For those businesses that need to be externally audited, their auditors will look at the going concern basis of preparation very carefully and then ask themselves whether its application is appropriate in the circumstances. A big question now of course is can you, as company directors responsible for preparing the accounts, continue to apply the going concern basis? Many businesses are facing an uncertain future and even those that are perhaps stronger than some others still have this issue looming over their heads – will they be they be around in a years time? What level of certainty is there, given the present climate, that they can successfully weather the storm?

From the auditor’s perspective it is an unenviable task. If they decide that an “emphasis of matter” paragraph is required in their audit report to highlight a material uncertainty, or worse are forced to qualify their audit report because they disagree with the directors’ going concern basis of preparation, it becomes almost a self fulfilling prophecy – for when a modified audit report is seen in the public domain, people will lose confidence in that business and failure is much more likely. It is interesting for instance that this is already being discussed in the context of the major clearing banks – yet another problem for their ever deepening crisis.

Whilst many smaller businesses do not have the issues relating to an external audit the issue of going concern is still a real one. The directors have to sign off the accounts that show they believe the accounts are representative of the business and show a true and fair view of the company’s financial picture. One of the assumptions made is that the business is a going concern.

The directors must therefore prepare budgets and forecasts, review the company’s ongoing financing requirements and consider all factors that might affect the company’s ability to trade for the foreseeable future. If there are material uncertainties affecting the going concern basis, or if the period considered by the directors is less than 12 months from the date of signing the accounts, they must disclose these facts in the accounts. So the absence of an audit does not necessarily take this problem away.

The vast majority of businesses will find an overbearing requirement to ensure their business is presented as a going concern – understandably. It is therefore a critical issue which should be getting the urgent attention of directors. This will mean that they consider it in advance of their financial year end and address the issues as best they can. Then when they will be asked to sign a piece of paper that says their accounts are “right” they can understand what they are signing!

Insight Associates, Insight House, Riverside Business Park, Stoney Common Road, Stansted Mountfitchet, Essex, CM24 8PL, UK
Tel: +44 (0)1279 647447 Fax: +44 (0)1279 814512
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