Be bold be brave but get the basics right


TV-Bay Magazine
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by Peter Savage
Issue 88 - April 2014

The world, and especially George Osborne, is telling us that we have never had it so good. GDP has finally climbed past the 2008 mark, and we are now set for many years of rose-tinted growth from our strong economy. Well George may have a point, and it may be worth considering some of the aspects of business management when planning in an upward economy. But I would also like to add that a degree of flexibility could be needed to make sure that if things dont happen as planned, you can still quickly and easily re-tranche back to todays position.

As ever in upward or downward economies, I am a great believer in having a decent plan. Knowing your business blueprint is essential, and it is these skills that can make all the difference in becoming a successful entrepreneur.

Planning also means you understand how your cash works in your business and how to manage the peaks and troughs. In an upward economy, its common for businesses to suffer from over-trading. This is where your costs need paying quicker than you can get your money physically in. For example staff cant wait 60 days from invoice to have their salary. So you could be flat out and making good profits, but actually incapable of paying your employees. Making sure that you have good lines of credit are essential, which in todays economy can be difficult to get.

Many times I have been quoted saying that if banks managed the markets correctly then there would be no part for challenger or boutique finance companies in the market. However even in this years budget George Osborne had to stipulate to the high street, of which we the tax payer are major shareholders in two of the five main players that decline credit, it would have to refer customers to secondary lending markets. These markets are not at Wonga rates, but sensible banks that charge sensible margins that take sensible risks - something you cant really find in the high street today.

So now I have come off my bank bashing soap box, just remember to make sure you have adequate credit lines open for both sunny and rainy day scenarios.

Flexibility of staffing is another key factor in being able to scale up or down your workforce. Many companies have very poor understanding of the rules behind current employment law. For instance probation periods can run up to six months and termination in these periods can be as little as one week. And employees who have been working for you for under two years have far reduced rights. One good piece of advice we have been given is that the Federation of Small Businesses (FSB) runs a free and insured HR service which is exactly the same type of service as these quite expensive products that banks and accountants sell to their clients. This service is included in the FSB membership, which if I remember correctly is only about £300 a year. This compares favourably with just one monthly fee the bank charges, so massive savings can be made.

So key points are: plan, cash flow and flexible staffing and finally one last thing to consider is managing your assets. This is both in the way that you finance or buy them, and also making sure that you use the assets to your best ability. A couple of quick scenarios should demonstrate my point. We deal with a hire company that until now had not managed their assets well; they kept equipment that maybe only went out once a year, earning £500 annually. Eventually they put it in a skip. It was then pointed out to them that if they had sold the equipment two years previously, then they would have received £2,500 for the kit. Almost five years income in one go and the daily hire cost was £200 a day. Now its not rocket science to work out that they were better off selling the kit previously.

Lastly it makes economical sense that if you hire more times a month than the lease costs, then naturally buy it on finance.

www.azule.co.uk


Tags: iss088 | Azule | Finance | [author]
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