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?

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 ...as 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.

Insight Associates, Insight House, Riverside Business Park, Stoney Common Road, Stansted Mountfitchet, Essex, CM24 8PL, UK
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Insight Associates is a trading name of Financial Catalysts Limited. Registered in England and Wales Number: 5670047. Registered Office as above. Disclaimer | Cookies