October 2000 - Small Business News

Business Information and Cash Flow on the Internet

Ask the majority of failed small business owners what caused their demise and the likely answer would be "lack of cash flow". What this actually means is that the business failed to react to low levels of product/service sales, over committed itself with suppliers and usually lacked the technical ability to manage the finances: any similarities to boo.com are likely.

There are not many small businesses that can afford the luxury of a financial director with most, at best, employing a bookkeeper. The expectation of the small business owner is that the bookkeeper will bring financial control with the mandatory financial administration. To some degree financial control is tightened due to the bookkeeper's frequent comments, such as, "we are 4,000 pounds short this month" or "we will have to pay this invoice next month?"

The information bonanza borne by the Internet has transformed the red-tape hating small business owner into an empowered and informed corporate leader (ok, jack of all trades then). Once smitten by the quality and depth of the information available (and of course the very low cost of it all), they (we) cannot resist seeking more and more articles to crunch through. However, I see that for many, finding small business cash flow information and resources has been difficult due to the vague understanding most of us have as to the cause of poor cash flow. It is better to break down the contributory factors that cause the problem into two groups:

a) Financial Management - expenses, finance costs, wages, creditors, debtors, taxes,

b) Business Management - sales, personnel, production, distribution, you get the idea...

With the above list it is a lot easier to look for inefficiencies and then seek effective solutions. I have always been a committed user of government web sites, since the government is usually the biggest creditor. A creditor that gives you unparalleled information on how to use its service efficiently. The Customs & Excise and Inland Revenue web sites fail to get the praise they deserve for being at the forefront of the information portal. The Small Business Service (SBS) web site, being as new as the service itself, has some way to go before being an authority in its intended field: small business. Independent services such as Digita (tax specialists) and StaffPay (an online payroll service) offer good information besides promoting their own services. We should also add that stalwart of UK business help: Business Link.  

The new breed of entrepreneur, and in particular the 'Net-preneur', looks at cash flow from an unhealthy insular position. The constant talk of 'burn-rate' (the time it will take to use up physical cash) is as frightening to creditors as it is to the bank manager. The creditor has somehow become a contributor in the vein of venture capitalist and business angel, and not as a current liability. The already strained 'popular' culture of late payment is in danger of being endemic. The proposed changes to bankruptcy - to reduce the disqualification of the 'unlucky' entrepreneur from the current two years (first timer) to as little as three months disqualification will surely undermine the government's Late Payment of Commercial Debt Act 1998 and Better Payment Practice Group initiatives.

With the small business audit limit moving to 1m pounds annual turnover from 350k pounds last June, the almost certain slackening of financial control in small companies will impact on all SME's. Spare a further thought for accountancy firms who are set to lose around 400m pounds in audit fees (can't say I was too bothered either). Another area of concern is e-commerce administration and in particular VAT. 

With all the current discussion (from "I heard there was no VAT applicable in cyberspace" to "I registered my web site through the Caiman Islands") it's best to browse through the user friendly page at Customs & Excise. Finding information to improve cash flow is still in its infancy, but that is expected to change in the second half of this year with a number of business portals appearing on-line: well, pre boo.com they were due to appear anyway! Look hard and there are a few resources that will help and educate: 

Biz/ed, a business and economics service for students, teachers and lecturers with a layout that nurtures you along the financial management assault course, the Institute of Business Advisers is a "non-profit making professional Institute of individual Business Advisers, Counsellors, Mentors and Trainers who specialise in helping small firms". If you are looking for a stimulating read Freepint has much to offer the business professional.

Gadgets are always handy, for instance at the Amex web site there are a number of useful business ratio calculators to help you monitor business performance and benchmarking. I wait for the day that the business portal brings us the goodies that are available to those using personal finance sites like MoneyWorld, being a good example of an interactive experience. 

For the small business owner using the Internet as a resource to educate themselves in the art of trading successfully a number of web sites are now charging a premium, albeit a relatively low charge. Two sites at present being, bnet.co.uk at 50 pounds per annum and Usecolor.com/ at 15 pounds per month offer access to relevant and affordable information. A number of other sites forgo subscription fees but require registration: for the financial manager AccountingWeb and its sister site Businesszone for general business information are worth bookmarking - BusinessZone also has one of the better daily news streams. The smaller small business owner should have a look at Tapaz, which offers networking  potential with business articles: again registration is required, not obligatory but "to gain the most benefit from the site". The benefit of providing your inside leg measurement escapes me. This intelligence gathering is unprecedented and never has so much been gathered for so little in return, and it is all getting a little worrying: others will know more about you than you know about yourself.

To finish on cash flow: we saw the 'boom-bang' eighties and the downsized nineties, what of this new decade. UK personal, corporate and institutional borrowing now stands at a record 1 trillion pounds, with any upward trend in interest rates likely to cause a breach in the accounts of many a business. The chancellors proposed injection of 43 billion pounds into the economy would put further pressure on the Bank of England to curtail borrowing by increasing interest rates beyond those we have enjoyed. The economy is in a similar position to that of the eighties just before the bang. And with the emergence of the Internet encouraging a frenzy of borrowing and funding of new technology and research, lots of cash is pouring into the economy and ... Did you hear that bang?

TOPIC 2 ; QUESTION AND ANSWER

Another of our popular 'Question & Answer' replies. We always give an answer, with the most beneficial replies being added to the web site for others to see and use: no personal details are ever revealed.

Can a Lender Pursue You for 11 Years?

Q.

If a lender has six years to pursue a (non house purchase related) debt, does the six years start from the date of the last payment to the account, the date of a default notice (a formal Notice of Default is listed on your credit record), or thedate of a CCJ? Can a lender, say, issue a default notice 5 years after a loan and still pursue that debt for another 6 years (ie 11 in total) after that.

A.

The six year rule applies from the date the payment was due i.e. 30 days after the invoice date where 30 days credit is allowed, or the invoice date where immediate payment is due.

A creditor can send you a letter at any time during the initial 6 years, from which time the creditor can pursue you. They do not need to commence a legal action. It is also OK for the creditor to send out a demand for payment to the last known address they have, and this will count as being served on you: and yes another 6 years of grief when they catch up with you.

I understand that on the 12th anniversary of the debt being due the debt ceases to exist, whatever is happening.

TOPIC 2 b

Uncompromising Creditors

Q.

I have fallen behind on payments to (removed) for a truck I purchased and I cannot get caught up late charges are really bad and they wont compromise at all what can I do?

A.

Quite often the first response from almost all creditors is 'all or nothing'. Your immediate task is to get the creditor to believe that you are truly in no position to pay arrears/extra charges/increased payments, or whatever the scenario is. 

You need to complete an honest income and expenditure form that treats all of your creditors fairly and allows you to live within reason and to work. 

Explain that any heavy handed action may well topple the whole stack. That said, ensure you get them to understand that you will definitely survive with their backing. The point here is not to let them think that you are down and out: as they will surely repossess and/or take immediate legal action.

Use letters to communicate, as refusing your reasonable offer verbally can be denied in court etc. If you have a letter saying 'please help me for a short period and I will get everything sorted out in the next six months (or whatever)' the creditor is proved to have ignored your reasonable offer if they take action.

TOPIC 3

The Law and your Business Name

A ‘business name’ is a non-limited company and/or a ‘trading style’. A ‘company name’ is a reference to a limited company and/or a plc. Up to 1982 most business names had to be registered.

We were recently asked to advise on what regulation applied for a business name (non limited company name). The question was whether it was OK to name a company ‘XYZ’ where ‘XYZ Limited’ also existed but was not connected in any way to the enquirer: or, can ‘XYZ’ and ‘XYZ Limited’ be possible with two different owners.

The answer is ‘yes’ it would be OK to have a business called ‘XYZ’, in this case I add. As ‘XYZ’ is not on the controlled list (see A, B, and C below), and the name is not a recognised brand (i.e. ‘Microsoft’) the name is ‘probably’ OK. I say ‘probably’ as with the emergence of the Internet we have a true world economy, as such a name that is unfamiliar in the UK may be a top company in the USA. If your name was ‘Ford’ and you had a car showroom, you could have the business name ‘Ford’ and all would be OK: if you called it ‘Ford Motor Company’ and put up a logo similar to the Ford car manufacturer you will get sued very quickly.

All of the following words need to be authorised before use. Some words, say ‘British’, need government approval through Companies House, and others, say ‘Royal’, by HRH and ‘Architect’ by Architects Registration as per Architects Registration Act 1997.

A) Words which imply national or international pre-eminence:

British, International, Scottish, England, Ireland, United Kingdom English, Irish, Wales, European, National, Welsh, Great Britain, Scotland 

B) Words which imply business pre-eminence or representative status:

Association, Council, Institution, Authority, Federation, Society, Board, Institute 

C) Words which imply specific objects or functions:

Assurance, Co-operative, Re-assurance, Assurer, Foundation,  Reassurer, Benevolent Friendly Society, Register, Chamber of Commerce, Fund, Registered, Chamber of Commerce, Group Re-insurance, Training and Enterprise, Holding, Re-insurer, Chamber of Industry, Industrial & Sheffield, Chamber of Trade, Provident Society, Stock Exchange, Provident, Trade Union, Chartered, Insurer, Trust Charity, Patent 

Business Names