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The future of business funding?
March 28, 2013
Invoice finance benefits small businesses by: allowing business growth; protecting cashflow, because late payments and increased credit terms are no longer an issue; providing an alternative to overdrafts and loans that can be difficult to secure at appropriate levels.
This can be seen with two of the fastest-growing industries using invoice finance today. The construction industry has enjoyed an increase of 138% for construction businesses taking up invoice finance from 2007 to 2012, particularly affecting small builders' firms who find it most difficult to secure an overdraft at the levels they need. The manufacturing industry has seen a similar increase in adopters of invoice finance, with an increase of 120% from 2007 to 2012. So why are these industries choosing to take invoice finance as their funding solution?
Invoice finance is flexible; it requires little collateral and takes into account that customers do not always pay invoices on the date of the invoice’s creation. These are especially pertinent reasons for the construction industry, because these businesses are often paid 60 to 90 days after the job is complete.
Invoice finance provides them with a cash advance of any invoices created. By allowing the business to fund projects with the money they would have previously only secured once the job is complete, they can now pay costs such as wages and purchase raw materials, which are required throughout a project’s lifetime.
Banks are unwilling to lend to what is often seen as a risky industry for late and non-payments. This is probably due to construction projects being easily halted by problems such as bad weather, or simply because the job has not been finished to the customer’s satisfaction. These problems can be seriously harmful to cashflow, because the banks are looking predominantly at historical financial data to assess whether a business (particularly a small business or startup) is worth lending to.
Construction businesses that are turning a corner and are in fact profitable, have responded to this by seeking out alternative forms of finance – invoice finance, where funding is judged on the future income of a business rather than its historical records.
Two other extremely popular adopters of invoice finance, according to data from Touch Financial, are recruitment businesses and those in wholesale and distribution. Wholesale and distribution often suffer from late payments, and the nature of the wholesale business means they need a quick stock turnaround in order to maximise income and profits. In no other industry does time mean money more than in wholesale, and invoice finance allows protection against late payment, while strengthening cashflow to allow the purchase of further stock as quickly as possible. This gives the safety and flexibility smaller businesses benefit from the most.
Recruitment is a sector where invoice finance also appears to be thriving. Contractors often require payment before the customers settle their bills and invoice finance provides the working capital to achieve this. Recruitment companies often have few high-value assets, which makes securing a bank loan or overdraft difficult, particularly earlier on in the business’s life. Invoice finance provides cash you are to receive in the future through the invoices you generate today and usually requires little other assets to secure - something an overdraft cannot provide.
Late payments, poor credit history and a lack of assets are all common reasons for small businesses being unable to grow to their full potential. 2013 is likely to see a further increase in the amount of construction and manufacturing sector businesses moving towards invoice finance, while wholesale/distribution and recruitment SMEs should continue to benefit from the flexible funding that invoice finance has provided them throughout the years.
Written by GrahamTripp on behalf of invoice finance provider Touch Financial
2013 Budget Winners and Losers Infographic
March 28, 2013
Deloitte presents winners and losers at a glance The Budget 2013
RTI: possible late-payment penalties
March 26, 2013
There seems to be some confusion about the new Real Time Information rules (RTI) and when penalties apply. There are three situations where a fine can be imposed.
Penalties for late returns
There will be no penalties if your RTI returns are submitted late for 2012 – 2013 (if you are in the pilot) or 2013 – 2014.
Penalties for inaccurate returns
According to HMRC: “Penalties for inaccuracies may apply from the 2013-14 tax year. HMRC will continue to use a risk-based approach to identify employers who may be submitting incorrect returns.”
Late payment of PAYE due
The rules here do not change with the implementation of RTI.
“HMRC will continue to use a risk-based approach to identify employers who are not complying with their payment obligations and who therefore might be liable to late payment penalties.” Full guidance from HMRC can be found here.
The Reality
My advice? If you don’t think your data is accurate, don’t submit a return until it is. You won’t be fined for a late return, but will be fined if you submit inaccurate data.
Of course you will need to make sure your data is accurate and submit on time for your April 2014 payroll runs, although it’s worth noting that the last day for your RTI return for 2013-2014 is 19 May 2014.
If in any doubt about RTI contact your payroll provider or your accountant.
Using 20 years’ experience spent working at some of the UK’s leading businesses, award-winning chartered accountant Elaine Clark is the founder and managing director ofwww.cheapaccounting.co.uk.
** After this article was published, HMRC announced a "relaxation of reporting arrangements for small businesses". According to HMRC: "Until 5 October 2013, employers with fewer than 50 employees, who find it difficult to report every payment to employees at the time of payment, may send information to HMRC by the date of their regular payroll run but no later than the end of the tax month (5th)." We’ve put together an RTI resource page that contains a handy checklist, various articles, blogs and news.
Seven steps to recovering commercial debt
March 26, 2013
Infographic provided by Green Door Debt Recovery
Do we really need another bank?
March 25, 2013
Last year, Business Secretary Vince Cable floated the idea of a new business bank, a financial institution whose raison d'être would be to support the UK’s freelancers, contractors and small businesses.
Time after time, official figures prove it’s SMEs that are driving the UK’s recovery, so it only makes sense to support them in every way possible, while the wider economy lumbers back to its feet.
The main function of the business bank will be to help small enterprises raise funds and give them access to credit - something the high street banks are still monumentally failing to do.
There is a fundamental problem with Cable’s proposition, however. Back in September he promised £1bn in funding, plus a matching contribution from the private sector. Hang on a minute, you’re probably thinking, won’t those private sector contributors be the same institutions currently denying credit to small businesses up and down the high street? Quite possibly, yes.
If this new bank is to have private sector involvement, there is a danger the same risk-averse attitude the big banks have adopted will find its way into this organisation, rendering the whole exercise pointless.
As well as being easily accessible, any loans offered by the business bank must be available fast. I have seen many businesses disappear while waiting for loans to make their way through the maze of bureaucracy that blights most financial institutions.
Set up a scheme that allows access to funds within 30 days, guaranteed. Not only would this allow businesses to start up faster, it would allow owners to plan their spending accordingly, with a guarantee that funds will reach them by a certain date.
The government desperately needs to avoid another costly and under-subscribed business stimulus initiative. Past failures such as National Insurance holidays, and more recently the Funding for Lending scheme, will hopefully have given the Department for Business, Innovation & Skills a feel for what works and what doesn’t.
Details are still fairly sparse as to what form the business bank will eventually take, but with a bit of luck Vince Cable will listen to business owners and put together a sensible and useful establishment - and not one that exists solely to turn a profit for its commercial backers.
Written by Darren Fell, managing director of Crunch Accounting.
Is social media the equaliser for small businesses?
March 22, 2013
Is social media the equaliser for small businesses?
Social media provides opportunities for small businesses to compete with global brands. Any business can choose to register a Facebook or Twitter account and promote their products and services. Social media enables customers to define a brand’s reputation by choosing to follow, publicise or interact with an organisation and ‘share’ their services.
No matter how large or small your business, the overall goal remains the same: to sell products and to publicise and expand the brand. To achieve this, engagement with your target audiences is essential. In today’s digital era, engagement relies upon a brand’s online presence. Depending on a business’s use of social media, a small business can easily get more exposure then a multi-billion dollar organisation.
Live marketing events (ie exhibitions and conferences) provide a great platform for engagement and digital media has transformed the event industry by allowing exhibitions to reach a larger target audience. According to Exhibitor Magazine, the number of companies integrating social media to their exhibits had risen by more than 80 per cent in 2012.
A web interface on your exhibition stand allows customers to experience and engage with your brand first hand, creating debates across the social media sphere and enhancing the brand’s online presence. Let’s examine the key social media tools an exhibitor can use.
LinkedIn is a business community that brings professionals together. It also provides the opportunity to follow other companies and participate in group discussions. Building genuine relationships and sharing knowledge is a great way to make new connections and nurture your relationships.
Companies attending exhibitions often use the group discussions feature to share their products and services, generating an interest in the product before, during and after the show. During the exhibition business cards are traded, and later connected on LinkedIn.
A large portion of any customer base are likely to be Twitter users, who could choose to follow your brand. Businesses can use the hashtag (#) to keep their products trending and create a buzz around their brands. Updates on your products or services will connect with your customers. Many exhibitors give out free samples in exchange for a follow or re-tweet. Outreaching new customers has to be a primary business objective, ensuring you leave the exhibition with more connections that could well lead to face-to-face meetings.
A Facebook fan page provides an opportunity for customers to interact with your business and comment on your news. At exhibitions, companies offer incentives for users to ‘Like’ the fan page, which stands out on their newsfeed. Creating a live brand experience at an exhibition can generate many hits very quickly, so businesses will often try to entice the public to their stand with a USP. This is a cost-effective method for large brand exposure.
Pinterest is growing in use in the social media field and there were some 27m active users on the site in 2012. Exhibitors have used the tool to pin stands and products. Inspiring technology is present at most commercial exhibitions and when shared, it entices online communities. This provides invaluable social exposure for brands products.
Blogging is the heart of a digital marketing strategy. Social media draws traffic to the page where a company is able to describe its services in more detail. Simultaneously blogging during live events provides excellent exposure for your brand and unique insights to your company. Search engines such as Google recognise high quality content as a key ranking factor and it is important to write on your company blog to increase your sites visible presence rankings and engage your existing readership.
Article contributed by James Barnett on behalf of Nimlok. James is a former consultant for the live events industry.
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