I was asked to give my point of view on a local radio programme today, regarding the latest government statistics about the increase in the amount of time the average employee spends at work. The argument was that the average worker in the UK works harder than their EU counterparts.
To me, the statistic says we are working longer, not harder. To be working harder, the statistic would be about output, results, even job satisfaction; not about how long we sit at our desks.
As a freelancer, I am always conscious about how I am valued. I have learnt that my value is assessed first and foremost by whether I get the job done. How long I will take, or how much I will charge is a secondary issue. If I do the job well, but take longer to do it than is really necessary just makes me more expensive, not better. Who do you know that would pay for unnecessary hours, or for poor quality?
And yet, that is what many employers do. They pay workers to be at their desks, measuring their contribution in time and cost, not quality. This charade is also played by employees, who are willing to put in extra time at work for free, perhaps hoping that this show of commitment secures their place in the company.
Do you value each employee by their cost, by how much time they spend at work, or by what they do for you?
I was put in a difficult position by a client recently. I was helping them with their self assessment tax return, and was being pressured to include a couple of expenses that I did not consider to be legitimate business costs.
Within reason, and subject to some legal exceptions, a business is allowed to incur a wide range of expenses in the furtherance of its objectives. When you are self employed, or a sole trader, the onus of responsibility is the other way round – the basic assumption is that all expenditure is personal, unless you can demonstrate that it is business related.
In particular, I was being asked to include two items of significant value as business expenses, based on their presence on a credit card statement and the client’s insistence that they were business related. Bearing in mind that I had already had to consider whether towels and a set of weighing scales could be included, I felt the lack of any appropriate or independent evidence of the two items, such as a copy of the invoice and the fact the two large expenses were bought in the previous accounting period, I decided that, in my professional judgement, I would not allow them. This did not please my client.
Accounting is often considered an exact science. In my view, it is an art. Its purpose is to paint a true and fair picture of what has happened, in a way that makes sense to the person looking at the information.
It is the responsibility of whoever is putting the accounts together to ensure that there is appropriate evidence to support their view. Of course, what you might want to see may vary depending on whether you are the business or the tax man.
It’s not often that there is good news regarding funding for training and development, so this is worth shouting about!
If you have been in business for at least 12 months, have between 2 and 249 employees, and want your business to do better, then read on…
The Skills Funding Agency is offering grants to help leaders of eligible organisations to pay for training and development to help their businesses grow. The grant will pay for 50% of approved training (excluding VAT) up to £1,000. For example, if the training costs £1,000 plus VAT, you can claim back £500. If the solution costs £2,500 plus VAT, you can claim back £1,000.
Solutions need to be linked to one or more of the following:
Developing a highly effective personal leadership and management style,
Creating an effective business culture,
Planning and developing your business and its teams, or
Building high performance across your business.
These are quite broad headings, and I would be surprised if you can’t think of something you would like to improve that doesn’t fits into this criteria.
For more information, or a no-obligation chat, call me on 07913 895798 or email me on email@example.com today!
I was weighing up some options for a client over the weekend. They are worried about what might happen if a plan didn’t work.
It got me thinking. What was the worst thing that could happen? If the plan didn’t work, there was still a business, a reputation, and a lot of goodwill. Life might not be easy, but life would carry on.
When starting a business, it is essential to know what your bottom line is. If the idea doesn’t work, when is the right time to walk away, or change the plan?
To some, running a small business is almost a hobby – the impact of financial failure is minimal due to other streams of income (for example a partner’s salary). But if the consequences of failure are more material (no money to pay the rent, buy petrol, or eat), then knowing when enough is enough starts to seem sensible.
Motivation to succeed is often fuelled by an appreciation of the consequences of failure.
In the same way that success can be measured in terms other than pounds in the bank, so can failure. Working out what you want, or what you don’t want to lose, is harder than you think when you start to think beyond the bank balance.
I am not suggesting that businesses should always worry about the worst case scenario, but I would suggest that having the option to quit while still ahead is better than the alternative.
So, having identified the worst case scenario, now it’s time to focus on the positives, aim high, and succeed!
I was talking to a client recently about their business. They were explaining to me what information they wanted to see on a regular basis that they believed would help them monitor their business. The indicators he felt were key were Turnover (sales income), Profit, and Cash in the bank.
Without wanting to start an argument there and then, I realised that I have a lot of work to do to get the business owner to understand what he really needs to know, why he needs to know these things, and what he needs to do about things when they are not good.
I have often talked about the Balance Sheet being more important than the Profit and loss, and I still stand by this statement. The Balance Sheet tells you what you own, who owes you money, and who you owe money to. These three facts give you a far better snapshot of your businesses health than any other measurement.
Take cash in the bank as an example. It doesn’t include cheque payments to suppliers that have not cleared. It doesn’t tell you how much you are owed by customers, or how much you owe to your suppliers.
Profit is a nice measurement if you are the taxman, but it doesn’t tell you how profitable you are. Making more profit than last year might sound good, but what will you do if you are only making 10% net profit, when last year you made 15%?
Running a business requires focus on the future. A review of the past is helpful, but only if you do things differently as a result of the lessons you have learnt. If you are measuring your performance by the wrong indicators, do you even know what those lessons are?
I met a prospective client a couple of days ago. He is starting a business based on his many years experience and contacts in his specialist field. We met on the basis that he needed an accountant, and could I help?
The word Accountant has become a much overused description of someone who provides financial assistance to a business. Calling yourself an Accountant implies expertise in a wide range of disciplines:
Business Tax (Corporation, CGT, VAT)
Personal Tax (NI, PAYE)
I believe that every business needs all of the above, just not necessarily all at once, or all the time. When choosing someone to be your “Accountant”, are you paying for all the above services “just in case”, or being quite precise about what kind of support you need?
If you manage your business well, you will be able to select when and who provides you with “Bookkeeping” (needed on a regular basis) separately from your “Auditor” (only needed once a year); be able to pay for “Tax” or “Investment” advice only when you need it. You should ask for general support and guidance from a “Finance Director” only as and when you need to.
The various functions of Accountancy can (and often are) outsourced. Accountancy is a big pool with all sorts of fish in it. As a business owner you should dip into the pool only for what you need, when you need it.
Does my prospective client need an Accountant? No. His needs are far more subtle and demanding than a generalist. Are yours?
Ok, so fuel goes down by a penny at 6pm. It’s still expensive. On the plus side, as an employee I will be able to claim 45p per mile from my employer fro the first 10,000 miles I drive. If I own the business, I might not feel so great about parting with up to £500 per employee…
Then again, as a business, I have some good news, the VAT threshold is now at £73k, and corporation tax is reducing (unless you are already an SME, and already only paying 20%, in which case there is no change).
Tax avoidance measures are being ramped up – the government is looking to pull in an extra £1billion more per year in “lost” revenue. If you are avoiding paying tax, make sure its legitimate!
My personal tax allowance is going up by £630 per year, but not until April 2012.
The bigger picture is a mixed bag. Growth is still growth, but only just. To help kick start regions that are really struggling, Enterprise Zones have been established. At first glance they may have some attractive strengths: potentially 100% rate relief if you move into the region, and the promise of super-fast broadband.
As expected, the squeeze on public spending continues, with council taxes frozen, or reduced.
To my mind, and as a small business myself, all the above suggests one thing, opportunity. As a chair of governors of a local school, I have already received the first of what I expect to be many approaches from a private company, this time selling expertise that was previously provided free of charge by the Local Authority.
The world hasn’t stopped, its changing direction. Which way are you pointing?
Ahead of the budget, here is a prediction: in the next 6 months, either inflation will go up, or interest rates will go up, or they both will go up.
The challenge therefore is not to second guess what is going to happen, but what you are going to do about the inevitable increases.
At the start of the recession, interest rates tumbled to their lowest level in living memory. To remind yourself what it was like, work out what the additional cost of an increase of 1% on your borrowings would be. Now multiply that by 4 or 5. That is how much better off you are at the moment, and how much you will need to find again when interest rates go up.
In the mean time, inflation is creeping up. No change there. However, pay awards are being held flat or low. Certainly lower than inflation.
My real prediction is that life could be a lot worse.
I had a conversation today with someone about pensions. Now I am not a personal financial advisor, and I gave no advice, but it did make me think about what I do do.
I have been taught that a good Finance Director knows everything, and that a really good one will get everyone else to do it for him (or her). I am not so sure any more. I think a good Finance Director knows how to find out everything he doesn’t know, and that a really good one will help others to do the best they can. After all, a really good Finance Director knows the financial situation, has a good idea of the aims of the business, and a pretty good idea of what every department is trying to achieve. I agree that generally it is up to others to make things happen.
More than any other department, Finance is judged by a very simple metric, is the business performing as well as it can. It’s existance is not about sales, or marketing, or brand awareness; and yet a good Finance Director is assessed on how well the business as a whole is doing.
So what has this to do with pensions? Well, it reminded me that I don’t know everything about pensions, but I do know the questions to ask to ensure the business is compliant. I also know what to ask to see what plans the business has in place to make the most of its staff and goals to see if it is as successful as it can be.
A good Finance Director is good with numbers; a really good one knows what questions to ask. How good your business is depends on how well you can answer the questions.
There are two levels of leadership in most organisations, executive and non-executive. Executive leaders are usually responsible for the day today management, and non-executive leaders act in an advisory or “occasional” capacity. Non-executive leaders often meet as a Board, whether of a business, a charity, or even a school.
Usually, non-executive leaders are responsible for the strategy, and executive leaders for the operations of the organisation. Board meetings are often the time and place where strategy is determined and translated into operational aims and objectives. For example, the non-executive leadership may take the strategic decision to start working in a new territory. It is up to the executive team to agree operational aims and objectives, such as sales targets, market share, or brand awareness.
Ideally, non-executive leaders are chosen because of their experience, wisdom, and ability to consider long term implications. Good executive leaders are able to act swiftly on short and medium term issues.
To me, the most interesting aspect of being a non-executive leader is the monitoring of operational activities. The biggest mistake a non-executive leader can make is to get too involved in operational details; equally, it can be disastrous if the executive leaders start to change the strategy.
The best saying I heard about being a non-executive leader was “Noses in, Fingers out”. It has been excellent advice.