Bribery Act Sentencing a Real Deterrent

Earlier this year, we brought you the news that the new Bribery Act came into force on July 1st. Now we are able to report on the sentencing of the first case brought to the courts under the new Act.

On 18 November 2011, Munir Patel, a clerk at a magistrates’ court, received a 3 year prison sentence after pleading guilty to receiving a bribe of £500 in exchange for removing motoring offences from official records. He also received a concurrent 6 year sentence for misconduct in public office, since he had previously committed a number of similar offences that netted him in the region of £2,000. This was before he was filmed in a newspaper investigation pocketing the cash received from a motorist on 1 August 2010, after which he was prosecuted.

Will There be a Trend Towards Harsher Sentencing?

The sentence was something of a shock to the legal community since there have been earlier trials relating to bribery by international business people and overseas government officials where the sums of money involved have been significantly higher and the sentences much less severe. Speculation ranges from whether this was a response to calls for harsher punishment under the reformed legislation, to whether it was about a need to protect the English criminal justice system. Most arguments favour the former, and lead us to believe this sentence is meant to act as a deterrent to anyone considering any form of bribery.

The Onus on Business Chiefs

A business owner or director now has a responsibility to prevent bribery offences being committed in the name of the business. It is not enough to be squeaky clean yourself. If a member of your staff takes or accepts a bribe in the course of their work, perhaps to be awarded a contract, or to select a specific supplier, you could be prosecuted.

So what steps can you take to prevent this happening? It is important to have a written anti-bribery policy and procedures which are communicated to everyone. The procedures should include logging reports of any incidents that might be construed as attempted bribery by outsiders, or internal disciplinary activities to prevent bribery.

Some members of staff may be ignorant or unclear about what constitutes bribery, so training sessions to get the message across and reinforce it could be a good idea, and should also be noted on your log. If the worst were to happen, and someone from your organisation was prosecuted, you would at least have documented proof of your own anti-bribery activities.

A Taxing Christmas?

At this time of year, along with many other longstanding traditions, business owners like to reward their loyal staff with gifts, bonuses and parties. But don't forget that the tax man is also rubbing his hands together in anticipation of extra income for the Revenue. There are some rules to be aware of if you don't want to have extra tax or NI liabilities for the company or your staff.

Taxing Gifts

Small seasonal gifts can be treated as trivial for tax purposes. If you hand out a few Christmas turkeys or boxes of chocolates to members of staff, they won't incur a benefit in kind tax charge. But if you made your gift an expensive Christmas hamper or bottle of vintage champagne, it won't be seen as trivial, and the employee could be taxed on it.

Taxing Bonuses

You can't avoid the tax due on a Christmas bonus. It is of course included in annual income and therefore taxable at whatever bracket is appropriate for the individual. And whether 80% or 60% or 50% of it becomes disposable income, it's sure to be welcome. Of course, it will also have an impact on levels of national insurance for both the individual and the company, so that must also be included in the bonus budget.

Taxing Christmas Parties

The tax rules about annual functions cover the Christmas party. If Christmas is the only time you have a staff get-together, as long as your costs do not exceed £150 per head, no additional taxes will be charged.

Everything you spend, including VAT, on venue, food, drink, entertainment, and transport or accommodation, must be taken into account as a benefit for the staff member. If the total divided by the number of staff attendees works out at more than £150, unless you have a PAYE Settlement Agreement with the Revenue, your payroll operatives have to include it as a benefit in kind for tax purposes. For any employee whose earnings come to £8,500 or more in the year, or for any directors, your company must pay additional National Insurance as well.

If you also treated your staff to a summer barbecue and/or any other annual functions, and the amount per head of all the functions added together exceeds £150, the rules become quite complicated. If this is the case, you may need some expert advice on what tax is due.

Ask your outsourced bookkeepers to help you make sure you comply with the rules. With the current special scrutiny by HMRC on small businesses, it's important to get your tax affairs right this Christmas.

Unfair VAT Relief to Change

How many small businesses can afford to send their low value goods to the Channel Islands for storing, packaging and resending out to customers in the UK? All to avoid having to add VAT to the purchase – a significant competitive advantage.

Large organisations have been doing it for years through the Low Value Consignment Relief (LVCR) arrangement whereby goods with a value of below £18, and more recently, £15, from outside the EU are VAT free. But from 1 April, 2012, this VAT relief from the Channel Islands will cease, as announced by the Chancellor in his 2011 Autumn Statement.

Bad News for Some

It's bad news for the major retailers who have been taking advantage of it. There will be no advantage for them of sending their goods out to the Channel Islands any more, and they will certainly be making other arrangements. So it's also bad news for island workers in the fulfilment industry, the ones who facilitate the logistics of this kind of order fulfilment. They will not be needed any longer. Others who are likely to suffer are island residents who will probably face higher postage costs and possibly air travel costs as the volumes of post and transport requirements reduce. And it's bad news for the consumers who have been buying these goods without having to pay VAT on top.

Good News for Others

Perhaps it's good news for you. It's certainly good news for smaller operators for whom the cost of making such arrangements would outweigh any benefits from the LVCR. They have been making reduced profit margins because of having to compete with the lower prices of goods with no VAT added. They see this new legislation as levelling the playing field and making the competition fairer.

It is also good news for the Treasury which stands to gain in the region of £100 million or more in additional tax revenues.

Is it Legal?

Since VAT is an EU law requirement in member countries, it has been argued that this proposed change is a breach of fiscal neutrality. A prominent tax accountant believes that the change should not be implemented without gaining permission from the European Commission for a deviation from the EU law. It could therefore be challenged. If you sell low value goods to consumers, ask your outsourced bookkeepers to keep an eye on the situation, and set a price review date for the next financial year.

Understanding Profit

Are you sure you understand the difference between gross and net profit, and how to calculate your profit margins? It's surprising how many business owners are vague about this. In a small business you may trust your accounts staff to give you the figures and reports you need, whether or not they are deserving of your trust. In a micro business, you may not have the staff to deal with these aspects.

Your profit margins are a key indicator of the health of your business. You need to know what they are, if they are changing and why. If your profit margin is going up, you can't afford just to sit back and congratulate yourself. The rise could be temporary and the fall that follows could be a serious crash. You need to recognise the reasons for the rise to predict what will happen next, and to learn the lessons that might help you to keep it high or repeat the momentum. If the margin is going down, you must understand the reason so that you can do something about it.

Gross Profit or Net Profit

Gross profit is the amount of income you receive from a product or service, less the amount it costs you to provide it. Knowing or predicting your gross profit helps you to decide what products and services to supply.

To arrive at your net profit, you have to add all your overheads into the equation. For interested parties, such as lenders, your net profit is what counts. It should also be the most important to you because, even if you are getting a good gross profit margin, if other expenses are too high, the net margin can still be very low.

The Profit Margins

It's easy to arrive at your gross profit margin. You divide your gross profit per item by its sale price and multiply that by 100. That gives you your margin as a percentage figure.

To arrive at your net profit margin is a lot more complicated, because you have to get your overhead figures right. They might include wages and salaries; the expenses relating to your premises; equipment; travel and communication costs, and so on. You'll have to average them out to monthly, weekly, daily, or whatever period you choose to check your net profit margin. A similar calculation takes that into account as well as your total sales for the period and the direct costs of producing them.

Whether you do it yourself, or get these figures from staff or outsourced bookkeepers, to have real confidence in the health of your business, it's best to have a good understanding of where the figures are coming from.

How Healthy Is Your Credit Rating?

The credit rating of small businesses doesn't just affect how much cash you can borrow. It can also affect the amount and timing of the credit your suppliers will allow you, and whether you can source materials from new suppliers as quickly as you need them. It can even affect your order book if potential customers believe your finances are not sound enough to be sure you will be able to complete a contract. Some businesses will not trade with you at all if they believe your credit rating is poor. You really do need a good credit rating.

Different Credit Agencies May Give Different Ratings

That's okay, you say, you already have one. That's good, but unfortunately when other people check it, they may not get the same picture. It could depend whether they check it with the same agency as you do. If you compare recommended amounts of credit from several different agencies, you may get a very wide variation in the amounts.

Accountancy firm Shelley Stock Hutter decided to check 100 companies with three different agencies over a period of two years. They not only found these massive variations – one company's credit limit recommendations varied between £7,000 and £290,000 – they also gave very different limits when checked again a few months later.

At present the agencies do not have to divulge how they make their decisions. They all use different kinds of information to measure credit risk, but it is hard to see how they can justify such broad fluctuations. Nevertheless we have to live with them.

What Can Be Done About it?

When you are deciding whether to do business with other companies, you'd be wise not to rely solely on a single credit rating. Where appropriate, ask to see business plans and management accounts. Your outsourced bookkeepers would most likely be able to give these a once over for you, and let you know how they feel about them. Unless you can cover the risks, don't take any chances. Perform a mini due diligence exercise.

Where you are seeking credit for yourself, you need to offer your own up-to-date business plan and accounts for scrutiny. Again your outsourced bookkeepers could help with the preparation of these. It would be a really good idea to get at least a template of these prepared so that they can be made available at short notice whenever they are needed.

Go the Extra Mile for Your Customers

One of the current conundrums for small businesses is how to cut costs without letting customer service standards slip. In a recent survey of 2000 consumers by the accountancy software company Sage UK, they found that customer service performance was becoming even more important. Nearly a third of their sample reported that they wouldn't give a second chance to suppliers who let them down in some way.

Consumers are Getting More Demanding

Providing outstanding customer service has always been an important factor in business success. Keeping your customers happy brings you repeat business and saves on the time and money needed for marketing and pitching for new contracts. Now it seems that consumers are seeking more for their money in terms of the type of service they receive, both when they buy and following a purchase.

The basics of good customer service are just being polite, helpful and responsive to the customer's concerns. Whatever pressures you and you staff are under, they must be put out of mind at times of interaction with customers, so that you can all appear upbeat and friendly, and listen to what the customer is saying. In the Sage survey, only 22% believed that businesses they dealt with were giving outstanding service while riding out the economic downturn.

The Extra Mile Campaign

Sage's extra mile campaign has been launched to provide some recognition for companies providing good customer service. You and your customers can use the #extramile hashtag on Twitter to get public appreciation where you think it's deserved.

If you'd like to be nominated, get your staff to brush up their customer service practices. Set a good example by treating your personnel the way you'd like them to treat your customers. Welcome them each day with a friendly smile; get to know them by name and remember their birthdays and other things that matter to them; listen to their niggles and deal with them; ask for their feedback and give them credit for useful ideas.

Make yourself available to customers too, and always be ready to deal with complaints in a way that doesn't leave them feeling let down. Remember that statistic about not getting a second chance. Here's another one that comes from a different survey: of customers who are satisfied that their complaints are dealt with quickly and reasonably, 72% will continue to use the company they complained to.

Are you going the extra mile for your customers? Who would you nominate for the Sage UK extra mile campaign? Perhaps it will be your outsourced bookkeepers.

Don't Fall Foul of the Phishers

What would you do if you received an email saying you were due a large tax rebate and should go to a link to claim it? If you are sensible you won't click on that link. You could have received one of a batch of phishing emails which will take you to a clone of the HMRC site. Once you are there, you'll have a request to give credit or debit card details. If you comply with that, your bank account will be emptied and your credit card maxed out.

HMRC doesn't use email to advise about rebates due, only snail mail. It will never ask for credit card details either. No matter how legitimate the email and the website look, they aren't the real thing.

Why Do the Phishers Do it?

How can it be worth the effort of copying a website and sending out these emails? Apparently the phishers have acquired thousands of email addresses. They just have to set them up as a group, type in the message once and press send. And when we all turn on our computers and get connected, they pop up in our inboxes, or perhaps in the spam folder if we are lucky.

Unfortunately there are always some gullible people who click on the link and comply with what they think are HMRC instructions. Then the dastardly phishers move fast to gather their funds and disappear.

What to do if you Get One

HMRC believes that the trend for trying to get easy money this way is growing, so we are all going to get more and more of these phishing emails and must be on our guard against them. The HMRC website requests that, if you receive such an email, you forward it to phishing@hmrc.gsi.gov.uk to assist in investigations to try to find the criminals behind them, recover fraudulently acquired cash and put a stop to their activities.

The site gives a list of email addresses that have been used for phishing, none of which are ever used by the revenue. It also mentions other methods used to con people out of their hard earned cash.

Some fraudsters make telephone calls claiming to be tax officers. They ask for bank details so that a tax refund can be made. Others send text messages asking you to call them. This is more difficult to recognise because HMRC officers do sometimes leave messages asking people to call them at their local office. Always check if the telephone number is correct before making the call.

Take precautions. Don't get caught out by the phishers.

The Benefits of Non-executive Directors

Do you have a non-executive director, or have you ever considered it? There are many benefits to be gained if you have the right one. A good non-executive director will take on many different roles as your business develops.

In your start-up phase an external director could bring experience of your marketplace and contacts from within it. He or she should offer guidance and open doors for you. The non-exec might even help with opportunities for business, taking part in meetings and presentations. Acting as a mentor to you and other senior members of your team, your non-executive will attend meetings, give opinions and advice, and support whatever decisions you make.

How to Find the Right Non-executive

Advertisements for non-execs usually find plenty of applicants with a mix of motives. Putting such positions on a CV is always helpful to the career of an ambitious go-getter. You could even find an aspiring non-exec who will not require a fee initially, but you would still need to be sure they could bring what you need to your board meetings. It might be more advantageous, and more profitable in the long run, to pick someone with experience of the role who would expect some remuneration, but be able to bring you more benefits.

Before you start to weed them out, decide exactly what you are looking for in terms of the relationship. Look at its duration, how often you will meet during that time and what you expect to get from it. When you interview them, make all this clear, and don't think of appointing anyone unless you are confident about what and who they know that can help you reach your business objectives. Be sure to discuss the financial aspects with your outsourced bookkeepers beforehand and be clear about what you can afford. Then you can have a maximum fee in mind and negotiate to no more than that.

Get the Most from the Relationship

Have an option of one-to-one meetings where you can review how things are going and speak frankly to one another. Regular debriefs can make sure you are both on the same wave length and neither of you are expecting too much of the other. The role of the non-exec should change along with your business development, and you both need to recognise the shifts and phases you need to go through. It's a good idea to have these discussions before each board meeting so that you can plan strategies and iron out any problems. Speaking with the same voice at your board meetings can save valuable time and be reassuring to other board members.

Remember the advantages of a non-executive director when you are considering how to grow your business.

Farewell Default Retirement Age

Do you have anyone over 65 on your payroll? October is the month when the Default Retirement Age (DRA) begins to be phased out. Unless you informed them of the date you intend them to retire before the 6^th of April this year, you can no longer force them out because they have reached the DRA. While they retain their right to retirement at 65 if they wish, you can no longer oblige them to do so.

Will the DRA be Good for Your Company?

Of course, many employers have been keeping workers on after that age for quite some time. Some have been happy to recruit more mature people because they perceive them to be more reliable and loyal than the younger generations. They have more work and life experience, so more knowledge of the world and how the markets operate. They are often more willing to keep going when things go wrong, and to persevere until they get it right. And statistics prove that overall they take fewer sick days, despite being of an age when you would expect them to have more health problems.

Having a balance of different age groups among a workforce is no bad thing, provided it has a healthy culture of respect flowing both ways between younger and older employees. Everyone should be valued for what they can bring to the party. While greater energy and enthusiasm for state of the art technology and other developments might come from a younger group, many of their older colleagues might have more staying power and more wisdom to see both advantages and disadvantages of proposals.

Will the Younger Generation Suffer?

Some people believe that the knock on effect will be significantly fewer jobs for young first time applicants, especially in the unskilled sectors. To some extent, this appears to be inevitable. However, young people without skills are hardly likely to be recruited into vacancies left by retirees who have acquired many skills over the years. There will still be areas where this type of young worker is needed.

A number of companies have introduced more flexible working hours to accommodate older workers who would like to continue in work but slow down a little. Part time positions are ideal for this and allow businesses to retain the skills and experience of their more mature staff, and still have vacancies for all ages of applicants.

What About the Financial Consequences?

Anyone over 65 that you have to let go must receive the statutory redundancy package. There may also be an effect on your ongoing payroll budget, so discuss it with your outsourced bookkeepers before you decide on your future HR strategy.

Freelancers Sometimes Make More Sense than Employees

When you are supplying a service or a product, that's what you need to concentrate on if you are to make any money. But running a business involves all sorts of other jobs that have to be covered and can keep you away from your core activity. That's why you need to employ other people to deal with all these intricacies, allowing you to get out there and make a profit.

When Cash is Hard to Come By

But what if you have a very young business where funding is stretched, or the recession has hit you so hard you've had to let people go? You simply can't afford to take on permanent employees.

That's where freelancers come in. You accept or negotiate their charges up front and employ them for as little or as long as you can afford. They know that you will review their performance before you call them back, so they will do their best for you.

Use of Freelancers is Soaring

Recent research has shown a phenomenal rise in the use of freelancers by small businesses. The rise in the year to July 2011, compared to the previous 12 months, was reported to be 68%. And around one in 20 workers in the UK works as a freelance. Many of them have specialist skills and experience that can be a real benefit to your business, and would command an extremely high salary if you were to take them onto your payroll.

Benefits of Using Freelancers

When you use freelancers, you pay for the time they work for you, not for their holidays or when they are off sick. And remember, you are under no obligation to offer more work than you can pay for. Just make sure this is all agreed in writing before they start work.

Whether you want admin help or assistance with a marketing campaign, you'll find experienced freelancers who won't need training except for a quick induction. They will be accustomed to finding out what they need to know about each business they work for, and they won't take up too much of your time. And they can often bring a fresh perspective to the tasks involved, so you can benefit from ideas you may not have thought of yourself.

This is particularly helpful when you've outsourced your bookkeeping if you are concerned about credit control or meeting regulatory deadlines. It's always worth considering a freelancer who doesn't have to go on the payroll.

Sole Trader or Limited Company?

Many micro businesses start life as a sole trader. In the first year at least, if the profit is likely to be less than the owner's personal tax allowance, this is the sensible thing to do. If you anticipate significantly higher earnings, or if your start-up really takes off, you should consider setting up a limited company to maximise your personal profit and reduce your personal risk.

What are the Risk Factors?

As a sole trader all the debts of your business are your own. If things go wrong, you risk losing any or all of your personal assets. If you own a limited company, the debts belong to the business, not yourself personally, unless you have signed any personal guarantees. You are not in danger of losing your home in the worst case scenario.

What are the Tax Factors?

As a sole trader all the profits of your business are your personal income and you are taxed on them accordingly. You will also need to pay Class 2 National Insurance (NI), currently set at £2.50 a week, and Class 4 NI on profits over the current threshold of £7,225.00.

If you set up a limited company, you could add members of your family or others as directors if you wish, or you could be a sole director. You do have to register as an employer and submit the relevant employee returns.

On profits of up to £300,000, the company pays corporation tax of 20%. It pays salaries to directors and dividends to shareholders. You will pay no tax or NI on a salary of £589.00 a month, which is an allowable expense against profit. If this is your only income and your personal tax allowance is the normal £7,475.00, as long as there is enough profit in the business, you could also pay yourself a dividend of up to £38,934.00 without incurring any income tax.

Get Professional Advice

On the face of it, as soon as a business becomes reasonably profitable, it would be wise to set up a limited company. Under some circumstances, it might even be wise to sell your sole trader business to the new company.

But things are rarely as simple as this. Most people have other income to factor into the equation, even if it's just bank interest on their savings. You should always seek advice before setting up a private company. Discuss it with your outsourced bookkeepers, and if it still seems feasible, talk to your accountant.

Small Businesses: Get help with Problem Solving

When you have a business problem to solve, what do you do? Do you mull it over for as long as you can and then make a decision because there's no time left, even though you're not really sure about it? Do you ever discover when it's too late, and you are briefing your staff that someone actually had a better solution, but they hadn't known it was needed?

Problems come in many forms. It could be how to deal with a customer's complaint. Perhaps it represents a significant opportunity, if only you knew the best way to respond to an invitation to tender or invest. Or is it that a competitor has the edge on a product, and you must find ways to develop something even better?

Getting a Handle on the Problem

You may have to make the decisions for your own business, but that doesn't mean you have to make them in isolation. The first thing you have to do when a problem arises is make sure you have a clear definition of it and what caused it. You need to clarify it in your own mind before you can communicate it to anyone else you might decide to involve. Sometimes a problem might be raised by someone else on your team, and if you haven't already recognised it yourself, this aspect is really crucial. No problem can be effectively solved unless it is fully understood.

Who Can Help?

For something really serious, if you can afford it, you might want to call in a consultant who specialises in your sector and market, as well as in problem solving. Or you might prefer to look closer to home. Arranging a group brainstorming session can be less time consuming for you than talking to people individually. You'll only have to explain the problem once and make sure people understand its parameters.

When you come to evaluate the ideas you'll be really surprised at some of the things that come up. Make it plain that you value everything that has been suggested, even though they can't all be used at that time. If you get everyone to award points to the ideas after they've been discussed, you might come away with a clear winner.

All kinds of people could be involved, from senior managers to the office gopher. You could even invite your outsourced bookkeepers to take part and offer some independent wisdom. Don't struggle on alone. Even just talking through a problem for ten minutes can help you see the light.

Reprieve for Cheques

So after all the head scratching about how to replace payments by cheque, we're not going to lose them after all. They had been due to be phased out completely by 2018, but no-one has been able to come up with a viable alternative, so the decision has been reversed.

Reasons for Phasing Out Cheques

The original proposals to stop them had been made because the number of payments by cheque has been dropping significantly since the early 1990s, culminating in a reduction by nearly half over the last five years. The widespread use of other methods of payment such as direct debits, BACS or CHAPs, or plastic cards in person or on the phone or internet has also saved the expense and hassle of preparing, signing and sending cheques by post.

Reasons for Not Phasing Them out

However, last month the Payments Council announced that the planned closing of cheque clearing has been cancelled. This was agreed, their announcement said, after they had consulted with over 600 stakeholder groups. Also, its members had been unable to come up with the paper based solution to using cheques, which would be essential to some sectors of the community including some small businesses. And we probably all know how much opposition there has been from members of the public and the MPs representing them, as well as charities which often receive donations by cheque.

Cheques are More Risky Now

While 2018 is still a way off, and many small businesses have not yet started to put other payment options in place, some retailers have already stopped accepting cheques. Will they have to do a U-turn? The problem is that cheques no longer have a guarantee, letting the banks off the hook if they are fraudulent.

Anyone who exchanges goods or services for a cheque from someone they don't know and trust is asking for trouble. So people who want to continue using them are still likely to find it difficult to get them accepted now that the cheque guarantee card can no longer be used.

There may not be much risk in continuing to accept cheques from long-term and trusted customers, or those you have for which you have completed credit checks. It's a different matter though, if you are dealing with individuals on a one-off basis, and have no way of knowing if their cheques are genuine.

Your outsourced bookkeepers are well aware of the problems and know how their other clients are dealing with them. Why not ask them for advice if you are unsure of anything?

Can You Pay Your Bills on Time?

A major problem for small businesses is late payments. While individuals usually pay on time, the business to business sector really suffers here. Those who supply goods or services to major companies frequently experience long delays in getting paid. Some have to resort to factoring, which incurs more expense for them. It seems that many larger organisations follow their own terms for payment, completely ignoring the terms on invoices they receive.

Results of Late Payment Receipts

It's a vicious circle, because if you don't get paid by your customers, you have problems paying your own suppliers. You can charge interest for late payments but most small businesses are reluctant to do so in case the customer decides to go elsewhere and they lose future business.

Late payments can cause serious problems for small businesses. Some may not even be able to pay their staff if their cash flow projections are nullified by not receiving expected income.

Sometimes accepting what appears to be lucrative business can make a small business vulnerable. For example, a provider of cross border deliveries from the UK to Europe has significant expenses in performing the service. The cost of fuel, ferry crossings and overnight stays can be crippling if the company has to wait 90 days or more for payment.

Your Legal Rights

Legislation to encourage prompt payment now includes an entitlement to reasonable compensation for debt recovery costs. The calculation of interest entitlement was simplified in 2002. It is now based on a reference rate, which is currently the Bank of England base rate as at 30^th June, plus 8%. This means that the maximum that can be charged from the present to December 31^st 2011 is 8.5% of the debt per year, so you just have to multiply that figure by the number of days the payment is late and then divide by 365. The bank's base rate at December 31st will become the new reference rate for the next six months.

What to do About it

If you are concerned about this affecting your business, you need to review your credit control practices. Outsourced bookkeepers can help with this if you don't have the time or the staff to cover it. If you don't want to charge the statutory interest you're entitled to, you could offer a discount for prompt payment, which might be a cheaper option than factoring or waiting for those late payers. Your outsourced bookkeepers might come up with other ideas too. Don't forget to make full use of their experience and expertise.

After the August Riot Mayhem

Most businesses in the areas of the recent rioting have been affected in some way. Even those serving the public on the fringes lost revenue either because people stayed away thinking it too risky to come there, or because management decided to close much earlier than usual and get their staff out of the area before nightfall.

Of those small businesses that were damaged by rioters, sadly many will not survive. But there is some help out there for those determined to struggle on.

Claiming for Damage and Loss

The Riot Damages Act of 1886 is still in force, which means that businesses can claim for damage to goods and premises or loss of stock by looting. Unfortunately, the form to be used to make claims is an antique, but you do have six weeks to submit it. As long as the police agree that a riot was taking place in your area at the time, your claim should be honoured, though it could take some time for the cash to arrive. You might also benefit from a suspension of council tax and business rates for a while.

Claiming on Insurance Policies

Support is available from the Forum of Private Business if you aren't sure whether your insurance will cover you. Whether or not you are a member, its underwriters will assess your cover and give you free advice if you call them on 0845 130 1722.

HMRC Helpline

HM Revenue and Customs has set up a telephone helpline for people and businesses affected by the riots. If you are going to have trouble meeting your tax commitments or you have lost your tax records in the mayhem, call it on 0845 3661207 any day between 8 am and 8 pm. The department has pledged to be sympathetic with difficulties, not to impose surcharges and to review whether penalties should be imposed.

Entrepreneurs Help Each Other

Various other types of support have been offered by businesses keen to help. Social media sites are full of such offers, for example:

· @riotcleanup is a new twitter account where people can offer assistance and publicise cleaning up events

· Workspace Group, a London commercial property company, is offering temporary storage and work stations for those in need

· Stockline Ltd can help with high quality refurbishment where needed for damaged property

· Lockaid has country wide branches that can help with general security, including boarding up or repairing windows.

It's good to see the business community pulling together like this. If you are among the lucky ones that haven't been adversely affected, perhaps there is something you could offer.

What's Most Important – Profit or Cash?

It's always good to know you are making a healthy profit. Regular positive profit and loss reports can give you confidence that your business is developing well. But profitable companies have been known to have cash flow problems and even to go under because of them.

If you are a regular reader of these pages, you'll have seen plenty of articles here about cash flow before. As experienced bookkeepers, we know just how important it is to keep on top of your cash, and we can't stress this often enough.

A Hypothetical Cash Flow Problem

Suppose you received a new large order for multiples of a product and had to take on extra staff and buy in extra materials to fulfil it. All your efforts go into getting it right and producing what is wanted on time. If you are a service company, rather than sourcing more materials, you might have to pull in people from other jobs to form the perfect team for the new client.

You lose focus on your regular customers, the rest of your order book, and on what's happening to your cash. Suddenly you hear from your bank that you've reached the limit of your overdraft. How long will it be before you can expect to be paid for the new work on which you have been spending most of your resources? How are you going to pay your staff and your suppliers?

The hypothetical example above shows how easily, and quickly, it could be to fall by the wayside if you don't look after your cash. It doesn't matter how much profit you've made on paper if you don't have the cash to go forward.

Keep Your Eye on the Bigger Picture

Make time for regular meetings with your bookkeeping staff or outsourced service providers. The latter can help you to look at the implications of the reports they produce for you. Do you need to be chasing up debtors or cutting costs in other areas?

They could also demonstrate trends such as dwindling repeat orders from long term customers. Then you can look at your customer service, see if there have been any problems and try to put them right. Or you can look for shifts in the market where you need to adjust your strategy. Perhaps there are new products out there that are outshining yours, either because of genuine improvements or clever marketing tactics. Your business will need to respond and remain dynamic to continue to make a profit and develop.

Do you Have a Good Accountant?

Do you have an accountant, and is your accountant good for your business? If you haven't appointed one yet, how will you know when you've found the right one?

Just as in all walks of life, accountants can be excellent, or not worth having. If they are qualified members of one of the professional organisations, they will at least be competent in the basics. If they are not qualified, it doesn't necessarily mean they are no good. Many excellent accountants have plenty of experience but no qualifications.

What Makes the Difference?

What you really want, in addition to the basic competencies, is someone with knowledge and experience of your type of business, and the markets in which you compete. But you don't want them to have any conflicts of interest. It's not a good idea to have the same accountant as your biggest rival, for example.

How to Find the Right Accountant

Many people feel more confident if they choose someone who has been recommended. But you still need to know the person has the right kind of experience for your circumstances. Ask probing questions, then listen carefully and respond to the answers.

If you want to be sure of having a qualified accountant, you can check the membership lists of the Institute of Chartered Accountants of England and Wales, and the Association of Chartered Certified Accountants (ACCA). Choosing a suitable member gives you the comfort of knowing they will undertake ongoing training to keep up to date, and will probably have professional indemnity insurance. It also means you have a complaints procedure to follow, if you are not happy with them.

Shortlist two or three and arrange to meet them. If the accountant has lots of questions for you, it probably means he or she is careful to find suitable clients and will do a good job for you. Be truthful in your answers. If there are problems in the business finances or in your background, they need to be aired up front.

Don't forget to discuss your choices with your outsourced bookkeepers. They will have experience of working with accountants, and may have valuable input that will help with your decision making.

Nurture the Working Relationship

When you have found an accountant with the right experience and expertise, who will care about your business and be keen to help it succeed, you should be sure to forge and maintain a good working relationship. While you don't want to get too familiar with your accountant, you do want to maintain mutual respect and strike the right balance between professionalism and friendliness.

Compliance With the Bribery Act 2010

On July 1^st, the Bribery Act came into force. Do you know what this means for you and your company? If not, you need to get familiar with it, because the penalties for non-compliance can be crippling fines and even imprisonment if the offence is serious enough.

Policies and Procedures

If you are a small business with employees, you need an anti-bribery policy and procedures in place for the prevention of anything that could be construed as bribery. Your staff should be briefed and warned that offences will not be tolerated. You need to keep records of any occurrences or potential risks.

Having a written log is your proof that you are taking the bribery laws seriously and trying to comply with the Act. Another good idea is to hold training sessions, and have a training manual and materials that can be available for inspection.

Put incident reports and reviews of your anti-bribery policies and procedures on the agendas of board or senior management meetings, so that discussions can be minuted. These minutes will be further proof of your commitment to the new legislation.

Failing to Prevent an Offence

One of the offences listed is the failure of a commercial organisation to prevent bribery. So even if you are personally innocent, as a business owner you are deemed responsible if a member of your staff offers or accepts a bribe in exchange for a favour of some kind related to the business.

You could appoint a member of staff to take on a policing role and to assess the risks of bribery in your sector and the markets in which you operate. Particular care is needed when new external relationships are set up, as you can be implicated by association with any wrong-doing. Make sure all your joint venture partners, associates, agents and representatives are squeaky clean to avoid prosecution by default.

Entertaining Customers and Targets

Corporate entertainment must be appropriate, and this is a grey area where you must make your own decisions about what can be included. While all this is much more likely to affect larger businesses, you could be at risk even as a sole trader, if you invite potential clients to over-extravagant events or meals in the hope of doing business with them. It will only take one complaint to be followed up by the authorities, to put both your reputation and finances in jeopardy.

The implications of the new Bribery Act are far reaching. All entrepreneurs need to understand them and take appropriate compliance action.

Do you Have Public Liability Insurance?

Assuming you do have public liability insurance, do you know what it covers? Some small businesses are aware they should have it, but they are not really sure why so here is a quick guide to what is covered and why it is so important.

Claims from the Public

Whatever your business offers, it must offer it to other people, either in other businesses or end user consumers. That is your obvious connection to other members of the public. But in the course of this, there may well be other occasional interactions with people, and risks of them making a claim against you. We never know what is around the corner. It could be your maintenance man up a ladder cleaning out guttering, when something heavy falls and injures a passer by. Or perhaps someone working on your premises leaves an obstruction on the public footpath and someone running by falls over it. Or maybe a visitor falls and injures themselves.

The legal costs of these claims can be high; so can the compensation claims involved. But your public liability insurance should cover it. And this could make the difference that allows the business to survive.

Bidding for Work

Having public liability insurance is sometimes a condition of a contract, especially for work in the public sector, and it is often required for joint ventures or contracts with larger firms. Without documented proof of your public liability cover, you may not be qualified to bid.

Loss of Earnings Cover

When you run a small business, public relations do not always go smoothly. If you are unlucky, unexpected happenings can get out of control and affect your reputation, and your profits. It is wise to have public liability insurance to cover such rare, but unfortunate, events if they should happen.

Why not have your outsourced bookkeepers review your public liability cover to check its relevance to your business? Or they could help you select from different quotes if you have to start from scratch.

Helping the Environment by Helping Yourself

Would you like to green your business premises and save money at the same time? Most people realise that using solar energy brings a return for the energy generated as well as keeping the building warm and light and running all the appliances and computer equipment.

A Green Deal to Fund Your Investment

But where do you get the finance to have the solar panels installed? You might already be able to get an interest-free loan for the purpose from the Carbon Trust. And next year, the government proposes to introduce a Green Deal Scheme, through which you can borrow up to £10,000, with your repayment instalments no more than the savings you make on electricity bills. If you decided to go this route, a few years down the line you would be free of the debt with far lower overheads. So more profit for your business!

As currently proposed, the Green Deal applies to both homes and small business premises, so one way or another, you are bound to qualify. It is expected to cover most energy saving projects, insulation as well as power generated from solar or wind sources.

Business Opportunities for Some

If you are in a sector that makes, advises on or installs the products that help people use less energy, this will also mean more work opportunities for future years. In this case you need to set in motion your preparations for holding the Green Deal Quality Mark.

Raising Awareness

And we all need to spread the word and talk to our customers, friends and acquaintances about the benefits the Green Deal will bring to our pockets, profit margins, homes and other premises; the related business opportunities; and of course to our environment. The UK has pledged to cut carbon emissions by eighty per cent by 2027. There is a long way to go, and the business community can help while reducing its own costs and boosting its bottom line.

Cheque Guarantees Go out of the Window

If your customers are consumers, you probably get many payments by cheque. There are still a number of years to go before cheques are likely to be phased out completely in 1918. But did you know that the cheque guarantee scheme will no longer operate after 30 June this year? If a cheque bounces you will have no protection and will lose out unless the customer has made an honest mistake and puts it right.

The Federation of Small Businesses has discovered that 75% or more of small companies do not know about the stopping of the scheme. They believe that the banks will continue to honour between £50 and £250 on all cheques issued by their domestic customers.

What will it Mean for Your Business?

You are advised to consider what this means to you. Do you offer credit and debit card facilities yet? In sectors such as window cleaners or plumbers and other trades, when the work is completed, payment is often made by cheque. Carrying around bulky card payment machines will take some getting used to, supposing they make the initial investment on one. If you have a number of operatives who collect payments, the cost could be prohibitive all in one go.

Other Payment Options

Small businesses need to be considering other options as well. The alternative of your people being responsible for cash collected in large numbers is not likely to be popular. Advances in technology are making it easier to pay using a mobile phone, but customers need to have a smart phone. It's worth keeping an eye on developments to see what might suit your business, and what you can afford. It remains to be seen whether the banks will offer convenient loans for these purposes. But it would be in their own interests to make sure that their clients can collect payments from their customers.

Don't forget to ask your outsourced bookkeepers for advice. They will be keeping on top of developments, and may well have ideas you haven't thought of.

Are You Eligible for Rate Relief?

Did you know that, if your business occupies a single location with a rateable value below £12,000, you could make claim under the Government's Small Business Rate Relief Scheme?

Designed as a tax incentive for the small business, the scheme has been extended for a year from its original cessation date in September this year. For the year starting on 1 October 2010, new, higher levels of relief start at 100% for premises with a rateable value of up to £6,000, tapering to 0% at £12,000, as announced in the Chancellor’s budget in March.

When you have More Than One Location

Businesses who have additional premises in other locations may also qualify if the rateable value of each of the other properties is less than £2,600, and if you add it all together, the rateable value of all your locations does not exceed £18.000 – or £25,000 if you operate from the Greater London area.

Don't Miss Out

But many small business owners have been quite unaware that they are eligible for this tax break and have not been making claims. They have been missing out on the previous levels of rate relief.

If you believe you qualify and have not claimed before, you should contact your local authority without delay to confirm your eligibility and ask how to make your claim. Meanwhile, make sure you don't default on your payments and pay your rates as normal. Talk to your outsourced bookkeepers if you are not sure whether you will be eligible.

If you already receive the relief, the new rules should be automatically applied and you can include the tax relief in your cash flow projections. It's good to have some positive news about your finances for a change.

Bank Loan Appeals

If you are looking for business funding from your bank, you need to gather all sorts of information to back up your application. Of course, your outsourced bookkeepers are the ones to advise you on putting the best possible case, and hopefully, you'll get what you want. But what happens if you don't?

Making an Appeal

The big 5 banks – Barclays, HSBC, RBS, Lloyds and Santander – recently agreed to set up an appeals process for businesses that have been turned down for a loan. If you have made a formal request that was declined, and you think the decision was unfair, you have the right to make an appeal and should ask how to proceed. On receipt of your appeal, the bank must have their decision reviewed by another member of their staff who was not a party to the decision-making process. You should receive the result of the review within 30 days.

This will only apply if you've gone through the formal application process, not if you've just had informal discussions and been informed that you haven't a chance with them. But in that case they should be giving you advice about other possible sources of funding, or how to go forward without it.

Responsibilities of the Bank

While there are no guarantees that the bank will agree to reverse the decision on appeal, you should get some similar benefits from the process. If you don't get the loan, the bank should offer you advice on where else to try for funding, or provide support in a different form. They might, for example, put you in touch with a business mentor who could help in some way.

This has come about because of the Better Business Finance Campaign spearheaded by the Business Finance Taskforce of the BBA, which calls itself ‘the leading trade association for the UK banking and financial services sector'. It remains to be seen how helpful the right to appeal will be for SMEs, but it has to be another step in the right direction following the banks' commitment to setting up a new £1.5 billion Business Growth Fund over the next few years.