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Archive for the 'Finance' Category

Business banking

Published by Business Link on 21 July, 2010 in Finance • 0 Comments

Knowing the finer details of your business banking could help to cut costs and improve your benefits.

Standard account services, such as administering credits, debits, cheques and transfers, may be free for startups, small businesses or new customers. But in time, or should turnover exceed thresholds, fees for standard services may be payable. It’s important to remember this from the outset and consider specific banking costs within the context of your business.

For instance, consider a business that receives lots of automated payments. A quick look at three banks finds per-transaction fees for automated credits ranging between 10 and 20p. The most expensive account would therefore cost £100 extra for every one thousand transactions.

Getting to know such costs – even during a free banking period – can help you to understand which account suits your business. Compare costs across different banks as well as other account options from your own bank. Other costs to compare: interest rates on borrowing, and non-everyday costs such as stopping cheques or fees for exceeding overdraft limits. If the differences are notable you may be able to negotiate lower fees with your existing bank, or you might choose to switch banks.

Of course, it’s not all about cost. You might save money by switching to an account with lower transaction fees, but what if your existing service offers more secure payment systems and better fraud protection? Such features could be valued by customers, turning higher banking costs into business benefits.

It’s a question of reviewing both costs and benefits. Questions should be asked within the context of your business, because a bank account that suits one business may be the wrong choice for another. One business may value a close relationship with its bank, while another is happy at arms length; one might appreciate a bank’s global reach, while another values a nearby branch. Just as it’s useful to compare costs, it’s worth comparing benefits too. If your service falls short: renegotiate, or consider switching.

One do now tip for reviewing your banking: examine your bank statements. Note common transaction types and costs. Do you mostly send and receive BACs payments or Direct Debits, or are most of your transactions handled in branches? Do any banking fees stand out as being notably high or frequent? Looking at your past banking behaviour – are there specific costs to keep an eye on in future?

The next step might be to talk to your bank manager or ‘relationship manager’. If you have identified costs you are unhappy with, they may negotiate non-standard terms to keep your business. Or they may point you towards different account types or suggest options which could lower costs or improve your benefits.

Attention grabbing free banking periods, key benefits and ‘typical’ interest rates may seem attractive, but it’s hard to know if you are getting a good deal until you dive into the detail. In a competitive market, where it has never been easier to switch, it could therefore be valuable to review banking costs and benefits, and use this analysis to negotiate a better deal with your bank. Or – if that fails – maybe it’s time to switch?

Guide – Choose and run a business account

Guide – Transferring business accounts between banks

More info – Business banking

Top Tips: Finance

Published by Business Link on 7 June, 2010 in Finance and Strategy & Operations • 0 Comments
Top Tips: Finance
Quick-fire tips with links to more information on 18 business finance related subjects.
Cashflow
Cashflow monitoring can be crucial for survival, while effective cashflow management boosts profitability.
Manage cashflow, Improve cashflow
Cost Cutting
If you cut costs in areas that deliver customer value you may damage sales and customer satisfaction, so focus on identifying and cutting ‘wasteful’ costs which offer little or no customer or business value.
Cost cutting tips, Cost cutting ideas, Waste not
Balance Sheet
Make balance sheet comparisons over time to help both monitor and assess financial performance.
Balance sheets: the basics
Borrowing
Be strategic about debt. If you need it to survive, develop a strategy for reducing your reliance on borrowing over time; if it aids growth, have a plan for reducing borrowing using profits from growth.
Get debt help and advice
Invoicing
Ensure invoices include the information required by law and clearly set out pertinent details such as payment terms and credit limits.
Invoicing
Insurance
Make sure your business, its assets and people are adequately insured, and that it’s insured against business liabilities. Use our interactive tool to work out which forms of insurance you need.
Insurance
Debt Recovery
Be ready for bad debts: read up on managing late payments, calculating interest on unpaid debt, and recovering debt via formal requests for payment or through the courts.
Debt recovery
Pricing
Take ten to evaluate pricing by reviewing your cost price but also your value. What value do customers find in your products or services, and what’s your worth compared to competitors?
Ten minute price review
Financial Contingency
Cash reserves, or a plan for accessing finance quickly should you need it, could help to survive threats such as economic downturns or opportunities such as grabbing market share from a failing competitor.
Banking
Review your banking and consider transferring if you are not getting a good deal; explore the pros and cons of business debit or credit cards; find out about accepting card payments from customers.
Business banking
Payment Cards
If you accept card payments you should be aware of twelve requirements that apply to all companies holding personal and payment data; PCI DSS rules come into force in September.
Accepting online payments, About the PCI Data Security Standard
Bootstrapping
New projects often need financial resources, but they also need control to minimise risk. And balanced financial discipline could help to pursue projects previously thought to be too expensive.
Bootstrapping
Online Filing
File returns and company information online to save time and money, and know your key filing deadlines.
Online tax and filing services, Get email alerts for key tax deadlines
Suppliers
Review supplier performance in relation to cost. If the balance of cost and value weighs against you, use this intelligence to re-negotiate, or use as the basis for evaluating alternative suppliers.
Six tips for reviewing suppliers
Factoring & Discounting
Release cash from invoices in advance of them being paid.
Debt factoring & invoice discounting
Business Plan
If you need to raise finance, a business plan is a powerful tool; get to know what to include.
Preparing a business plan to raise money, Use your business plan to get funding
Finance Options
Explore the various sources of finance available and their advantages and disadvantages.
Interactive tool – Identify finance options, Finance options, Sources of finance
Insolvency
If you are having problems paying debts – consider the options for avoiding or dealing with insolvency.
Avoid insolvency, Insolvency: the basics

Quick-fire tips with links to more information on 18 business finance related subjects.

Cashflow
Cashflow monitoring can be crucial for survival, while effective cashflow management boosts profitability.
Manage cashflow, Improve cashflow

Cost Cutting
If you cut costs in areas that deliver customer value you may damage sales and customer satisfaction, so focus on identifying and cutting ‘wasteful’ costs which offer little or no customer or business value.
Cost cutting tips, Cost cutting ideas, Waste not

Balance Sheet
Make balance sheet comparisons over time to help both monitor and assess financial performance.
Balance sheets: the basics

Borrowing
Be strategic about debt. If you need it to survive, develop a strategy for reducing your reliance on borrowing over time; if it aids growth, have a plan for reducing borrowing using profits from growth.
Get debt help and advice

Invoicing
Ensure invoices include the information required by law and clearly set out pertinent details such as payment terms and credit limits.
Invoicing

Insurance
Make sure your business, its assets and people are adequately insured, and that it’s insured against business liabilities. Use our interactive tool to work out which forms of insurance you need.
Insurance

Debt Recovery
Be ready for bad debts: read up on managing late payments, calculating interest on unpaid debt, and recovering debt via formal requests for payment or through the courts.
Debt recovery

Pricing
Take ten to evaluate pricing by reviewing your cost price but also your value. What value do customers find in your products or services, and what’s your worth compared to competitors?
Ten minute price review

Financial Contingency
Cash reserves, or a plan for accessing finance quickly should you need it, could help to survive threats such as economic downturns or opportunities such as grabbing market share from a failing competitor.Business banking

Banking
Review your banking and consider transferring if you are not getting a good deal; explore the pros and cons of business debit or credit cards; find out about accepting card payments from customers.

Payment Cards
If you accept card payments you should be aware of twelve requirements that apply to all companies holding personal and payment data; PCI DSS rules come into force in September.
Accepting online payments, About the PCI Data Security Standard

Bootstrapping
New projects often need financial resources, but they also need control to minimise risk. And balanced financial discipline could help to pursue projects previously thought to be too expensive.
Bootstrapping

Online Filing
File returns and company information online to save time and money, and know your key filing deadlines.
Online tax and filing services, Get email alerts for key tax deadlines

Suppliers
Review supplier performance in relation to cost. If the balance of cost and value weighs against you, use this intelligence to re-negotiate, or use as the basis for evaluating alternative suppliers.
Six tips for reviewing suppliers

Factoring & Discounting
Release cash from invoices in advance of them being paid.
Debt factoring & invoice discounting

Business Plan
If you need to raise finance, a business plan is a powerful tool; get to know what to include.
Preparing a business plan to raise money, Use your business plan to get funding

Finance Options
Explore the various sources of finance available and their advantages and disadvantages.
Interactive tool – Identify finance options, Finance options, Sources of finance

Insolvency
If you are having problems paying debts – consider the options for avoiding or dealing with insolvency.
Avoid insolvency, Insolvency: the basics

Economic Downturn Surveys: Analysis and Review

Published by Business Link on 20 August, 2009 in Finance and Strategy & Operations • 0 Comments

Motivation, focus and positive action are helping many local businesses to feel cautiously optimistic about the future.

During the past year we have conducted two economic downturn surveys, in Autumn ’08 and Spring ’09. Our aims: to understand how the recession has affected local firms, explore what actions businesses are taking in response to these challenging times, and gauge their outlook for the future. Each survey received around 1,000 responses from across the region, predominantly from owners and decision makers at firms with less than five employees.

Cautious optimism

Findings show a modest increase in the number of businesses reporting that the recession has affected them. 17 per cent have been ‘extremely’ affected, a 3 per cent rise since Autumn ’08. But 39 per cent have found trading only marginally more difficult, while 12 per cent claim to have felt no ill-effects.
 
Some businesses have benefited from the recession. 14 per cent of respondents say the downturn has had a positive effect on their business. One third of these businesses have taken the opportunity to change and improve, becoming more motivated and focussed in the face of the recession.

Greater motivation and focus could explain increasing levels of optimism for the future. 60 per cent of firms are ‘optimistic’ or ‘extremely optimistic’ about the coming year, an increase of 7 per cent since Autumn ‘08. Interestingly, this sentiment was also echoed during our recent South West Roadshow event, albeit with an extra word of caution, 55 per cent of attendees felt ‘optimistic’ about the future, while 33 per cent felt ‘cautious’.

Put these words together and you get a ‘cautious optimism’ about the future. In our view, this phrase symbolises the outlook of most businesses today. Most business leaders are rising to the challenges of the recession, becoming more motivated and focussed than before, and crucially, are taking positive action to ensure their futures.

Your actions. Our reactions.

So, what specific actions are businesses taking, and what is Business Link doing to help?  Almost 50 per cent of businesses are reviewing prices; 47 per cent are exploring new marketing and advertising approaches; 41 per cent are evaluating and reviewing their products and services; 38 per cent are reviewing suppliers; Just over one third are working longer hours, and the same number are undertaking long-term planning; A quarter have introduced pay freezes, and 19 per cent have reduced employees’ working hours, both steps seen as more effective than redundancies; Finally, over a quarter of businesses are using steps such as waste reduction and energy saving as ways to go green and save money.

In response to our Autumn ’08 findings we produced a business survival guide which focussed on many of the issues identified in our surveys. The guide provides panic-free tips for surviving tough times, and forward thinking advice on how to build better businesses.   To obtain your own copy of this guide, call Business Link on  0845 600 9966.

Since then we have let our survey results guide the content of our monthly business i newsletter. Our ongoing business innovation and leadership features have been widely popular, we have recently published two special features on pricing, and more generally have produced articles on hot topics ranging from cost cutting and new marketing approaches to supplier reviews,  business strategy and planning.

Thank you to those who took part in our surveys. Our role is to help you through these difficult times, and your participation has helped us to do this better. We hope our information and advice has been useful, relevant and timely.  And if you need any further assistance, please do get in touch.

What actions are businesses taking to face the downturn?
Download full report

Ten Minute… Price Review

Published by Business Link on 20 July, 2009 in Finance and Top Tips • 1 Comment

Two steps to getting your price right:  1. Calculate your costs.  2. Get to know your value.

1. Calculate a cost price

List the following: fixed costs, which are incurred regardless of sales volumes, such as rent or salaries; variable costs, which are incurred directly when a product or service is produced and sold, such as raw materials or delivery costs; and any indirect or miscellaneous costs, such as marketing or after sales costs.

Now crunch numbers to estimate a ‘cost price’ for your product or service. To do this you need to apportion a reasonable percentage of fixed and indirect/miscellaneous costs to your per-unit price. For example, if you sell 1,000 products a year and the product’s marketing budget is £1k, your per-unit marketing cost is £1. These calculations can be tricky; over-estimate at first, and seek further assistance to refine your calculations.  

The resulting total represents your cost price, upon which you can add a desired profit margin. But, before you decide on a final price, it is crucial to get to know your value.  

2. Get to know your value

The above ‘cost-plus-profit’ method overlooks some important value factors. For one, your price might be too high or low in comparison to competing products. And importantly, your product or service could be ‘greater than the sum of its parts’, in that it is higher quality than competing products (or you have a superior brand).  

To appreciate value it helps to know your competitors and customers. Compare your product or service’s benefits and features with those of competitors, considering intangible factors such as the perceived status of your company or brand, and the perceived quality of your product. Think about the specific benefits and features your customers value; how much would they pay to receive the unique values and benefits of your product or service? Upon what factors do they make buying decisions?  

Now try to establish an objective ‘valuation’ of your product or service. If you have a premium, high-quality offering, you might be able to set a price above your cost price and competitor prices. If your product or service does not satisfy the key value factors, you may have less scope to inflate prices. Remember to be objective; over-valuations could limit sales, and under-valuations could unnecessarily hurt profit margins.  

The right price

You need a point enough above cost price to be sufficiently profitable. But you also need to ensure your price reflects your value. You will forfeit sales if your price is too high, or forgo profits by failing to charge your worth. Raising low prices later on can also present its own challenges, so it pays to get it right first time. So remember: calculate your cost price; make sure you know your worth; and find a price which sits well in the marketplace and fulfils your long-term profit objectives.

Download the ten minute price review

More info – Price your product or service

Invoicing

Published by Business Link on 14 May, 2009 in Finance • 0 Comments

Take a look at our three guides to help you review your invoice terms and prevent or recover late payments.

Review invoice terms

Make sure invoices include the right information as required by law. Also review your terms and conditions to ensure you clearly set out pertinent details such as payment terms, credit limits, or your right to charge interest on late payments. Obtain explicit customer agreement of your terms and conditions.

Are your payment terms too flexible? Commonly used terms range from payment upon delivery to seven to thirty days, or longer. Tightening terms can improve cashflow, but remember, credit can be a valued customer benefit; in such cases it is important to strike a balance between your needs and your customers’.

More info – Invoicing and payment terms

Preventing late payment

Getting your terms and conditions in order and obtaining customer agreement are key steps for preventing late payment. If your customers agree to specific terms, they might feel less inclined to break them.

To lower the risk of late payment you may wish to run credit checks on all customers, or on specific customers where you are wary of their ability to pay. If credit checks are unsatisfactory, tighten your invoice terms.

Quickly issue invoices. Prompt invoicing reduces the total time you are awaiting payment, and signifies that you are professional in your approach to invoicing and thus you expect a similar courtesy from your customers. Issuing friendly and timely invoice reminders could also help to prevent accidental late payment.

More info – Preventing late payment

Recovering late payments

Strong communication is often the most effective start to late payment recovery. Be professional, fair and firm. Find out why payment is late and when your customer expects to pay. Sometimes you might choose to offer flexibility, but do this on your own terms and ensure a payment deadline is agreed. If necessary, remind customers of your terms and conditions, and that you may decide to charge interest on late payments.

You have a statutory right to charge interest on late payment of invoices. Such a course of action could deter further delays, or represent a means of compensating you for the inconvenience and costs of late payments.

You may ultimately need to pursue legal action. Make sure you have a plan of action in place should the need arise, so that you can act decisively, quickly and effectively.

More info – Recovering late payments / Tool – Calculate the interest due on an unpaid debt