The Pros and Cons of Exporting

Nearly two thirds of all UK small and medium-sized businesses are not interested in exporting, according to the latest quarterly Close Brothers Business Barometer. Of those considering exports just over half believe the European Union (EU) has the opportunities they need. The rest are mainly looking to the Middle East and Asia.

Government Support

Meanwhile the government is working to encourage more businesses to export, and has set a target of £1 trillion of total exports per year by 2020, with 100,000 more businesses involved. If your bookkeepers agree that your business has exporting potential, help is available from the UK Trade and Investment (UKTI) organisation, which has a network of International Trade Teams across the country, and representatives around the world, to provide advice and support to potential, novice and experienced exporters alike. They also assist companies to participate in international trade fairs through their Trade Show Access Programme. One small UK company recently reported £100K worth of sales in one day at a trade fair in Germany, plus a number of orders for the future.

Pros and Cons of the EU

They recognise that, for many small firms the freedom of movement of goods and services across the EU offers many advantages. The Federation of Small Business (FSB), in its response to the government’s consultation on the free movement of goods, said that it believes these advantages far outweigh the disadvantages, such as the imposition of standards. It did, however, recommend that standards should be “created with the small business perspective in mind”, and should be “simple and cheap to implement” in order to encourage more trade.

A big challenge in cross-border transactions is the complexity of VAT rules, which your outsourced bookkeepers will be aware of, and which the FSB recommended should be addressed. Some small companies have also complained that, although legislation is mostly harmonised, they find the paperwork around certificates of origin and EU preferential rates agreements with certain countries particularly onerous.

Exporting to the Middle East and Asia

The Middle East is one of the wealthier areas of the world. It has its own political and economic alliance, although this is not a tight knit community such as the EU. The Gulf Cooperation Council (GCC) includes Saudi Arabia, Kuwait, the United Arab Emirates, Oman, Qatar and Bahrain. Between them they own nearly 50% of the world’s oil reserves. Opportunities for exporting are rich, but cultural differences need to be overcome. The UK’s Middle East Association was set up to promote trade with the Middle East, North Africa, Turkey and Iran.

Asia has not been as badly affected by the recent global recession as Western countries and their economies continue to develop. Again it will be important to recognise the cultural differences. UKTI is involved in a one-day Road Show in Bristol on 11th April, where you could gain advice and meet people who could help you move into the South East Asian market.

Your outsourced bookkeepers are aware that there is plenty of support available if you think you could expand your businesses overseas. You’d have nothing to lose by discussing it with them, and potentially much to gain if you decide to take the plunge.

Be Prepared for the Next Tax Year

Just as January 1^st is a time when we might take stock of our personal lives and make our resolutions to do some things differently, so April 6^th – start of a new financial year - can be a time when we’ve taken a fresh look at our business practices and decided what needs to change. What could you do differently in future to get better results?

Is all your paperwork in order, and all your bookkeeping up to scratch? If you use outsourced bookkeepers, the answer is probably yes. But they may still be able to give you suggestions for improvements that could boost your results. Some of the most important areas that have an impact on the bottom line are covered below.

Invoices

Do invoices always go out without any delays? Do they always relate to a purchase order number? Do they clearly state the amount that is due, with a breakdown showing VAT? Are they always checked against the rules for VAT accuracy by someone in the know? Do they clearly state your terms, the date the payment is due and whether you retain the option to levy a legally allowed penalty for late payments.

Credit Control

It’s so important to have adequate procedures in place for this. Making credit checks on new business to business customers is easily done before you extend new credit, and it can save much heartache. Until this is completed, you could ask for payment up front, or a large deposit, or you could simply delay your service. Most reputable organisations will respect you for this and collaborate.

Keeping tabs on payments that are overdue could be in the remit of your bookkeepers. They could follow up for you or just inform you when that is needed. A telephoned reminder often gets the desired result, or you could find out if there is a problem and discuss how it could be dealt with. Staged payments are always better than no payment, or perhaps you need to relax your terms and give more time. If a client is going to be difficult, it’s important to be strict about charging late payment interest and even taking legal action to claim the compensation you are entitled to.

Cost Control

Where could you cut costs? Is it time for some market testing or renegotiating with suppliers? Can you save money by joining or starting a local purchasing consortium? Can you cut staff costs and gain more expertise by outsourcing any non-core business activities?

The Business Plan

This will be a good time to review and update your plans. Did your financial forecasts for last year work out? If not, why not, and what changes should you be making? Does the plan include any development projects? If not, is it time to add some? Will you need more funding? Where will it come from? What do you need to be doing in order to get it?

Preparing for a new financial year by addressing these areas could give your business a lift. Involving staff and outsourced bookkeepers can lift morale and motivation and propel you into the next tax year with momentum.

New Rules for Crowdfunding

In information released by the Crowd Funding Centre of The Social Foundation, during the first couple of months of 2014, £2.4 million has been raised through crowd funding in the UK. The number of equity and rewards projects that have been launched has topped 2,600, and more than £1,700 an hour is being raised.

But the Financial Conduct Authority (FCA) is concerned that many investors may not understand the risks involved in investing in a start-up business. While many new businesses have only been able to get going with funds from crowd funding, statistics prove that between 50% and 70% of start-ups fail in their early years.

Addressing the Risk

Bookkeepers and small business owners should note that the FCA has therefore set up new regulations to come into force in April that try to address this. Chris Woolard, its Director of Policy, Risk and Research, said in a BBC radio programme, “We're trying to strike a balance between on one hand making sure consumers are properly informed and have real clarity about the investments they are getting into, but on the other hand, making sure this ... source of funding is open to businesses and individuals."

One of the most controversial new rules is that investors must certify that a crowd funding investment will only be 10% of their investment portfolio. This has provoked the comment that “it takes the crowd out of crowd funding” from Barry James, founder of The Crowdfunding Centre. It will be interesting to see how this will affect the fund raising efforts of businesses like Sian’s Plan, which recently started a crowd funding campaign that invites investments as small as £10 from people who don’t normally have investment portfolios.

Another Point of View

However, Ayan Mitra, CEO of Crowdbnk, interprets this rule as for experienced investors only and said, “We are pleased to see that the FCA has kept the ‘crowd’ in crowdfunding, by allowing anyone to invest up to 10 per cent of their available assets. This ensures crowdfunding remains available to all types of investor and, on the whole, we think the approach strikes the right balance between consumer protection and access to investment opportunities…”

So perhaps it is still worth going the crowdfunding route to raise start-up or business development funds at a time when many of the traditional routes are still virtually closed to SMEs. It could be a good idea to discuss it with your outsourced bookkeepers who may have experienced the results of this kind of fund raising with other clients.