Recognising When Your Customers Are in Trouble

The fewer customers you have, the more it will affect your business if one of them flounders and sinks. You won’t always be told about this until it’s all washed up and you are left with a bad debt and a big hole in your income.

Clues

Have your bookkeepers told you that their payments have been getting later? Have you tried to call your contact and found the person is always in a meeting and never rings you back? If you do get to talk to them, do they seem distracted and evasive?

Perhaps their cheques been unsigned or contained errors so they’ve had to be sent back and reissued, delaying the moment the cash is removed from their account. You or your staff might have picked up rumours going around about them.

Seeing How the Clues Add Up

If your instinct tells you that something is wrong, it’s time to research their financial status. Talking to them isn’t likely to be enough to allay your fears, so your first port of call could be the Companies House website, where you can see the accounts they have filed. But remember that these will not give the whole picture as they won’t be completely up to date.

The most current information will lie with the credit agencies. You have to pay for the services of the likes of Experian or Equifax, but their information is reliable and useful. If you don’t have time for tasks like this, why not ask you bookkeeping service to do it for you?

Reduce the Risks to Your Business

With this information, you can decide whether to reduce the credit you allow the customer, offer them different payment terms, or sever the connection altogether. There are many ways to reduce the risks of not receiving payment for the goods or services you supply.

Fewer Strands in the Tax Spaghetti Bowl

According to George Osborne, our recently appointed Chancellor of the Exchequer, Britain’s tax system is one of the most “complex and opaque in the world”. It is so difficult to sort out that he has likened it to a bowl of spaghetti. Most people would agree with him, and we can all breathe sighs of relief at his announcement that he will simplify it.

Our Complicated System

It’s currently bad enough for bookkeeping professionals to keep their heads around it, so there’s not much hope for the rest of us if we try to go it alone. You only have to glance at the home page of the HMRC website and see the lists of tax areas for individuals, employers and businesses.

Notice that the last item of every list is a link to more topics. We have to get every one of those areas right or be liable for hefty penalties.

The Job of the Tax Simplification Office

Sorting out the mix, while ensuring the treasury coffers can do their job, will not be an easy task for the Chancellor’s team in the Office of Tax Simplification that he is setting up. It will take a while, and won’t happen all at once.

We can probably expect rafts of ongoing changes over a long period of time. So how do you cope with that, and what do you do in the meantime?

Who is on Your Team?

The answer, of course, is to have your own team. But do you want to employ people full time to spend all their days keeping themselves up to date on the regulations as they change, and making sure you stay compliant?

You’ll find it much more cost effective to have outsourced bookkeepers and tax advisers on your team. They will keep up to date in their own time and only charge you for the hours they spend assisting you.

Business Survival in Hard Times

The business world is about to get even tougher. Everyone is talking about it. The coalition government has announced where their levels of support will drop. Public sector building and maintenance projects have been abandoned. Responsibility for managing public services with less devolves down.

Contracts will be terminated. Less work will be done. Fewer materials will be needed. Fewer goods will be purchased and distributed. Competition will get fiercer. Not many businesses will be unaffected.

Being Prepared

Now is the time for an in-depth review of your business plans and cashflow forecasts. Why not meet with your bookkeepers and office managers for a brainstorming session on potential problem areas and where costs might be reduced? You could find it well worth the cost of the time and effort involved.

Consider your customers and their survival chances. Your own could depend on theirs. Will they need to reduce their orders? Will they be able to pay your invoices? Do you need to amend your terms or their credit status in your company?

Will they test the market to see whether other suppliers are cheaper? Are your prices going to be driven down in order to compete?

Back Office Help to Cope

Keeping your financial records up to date is going to be even more crucial. If you outsource this aspect, make sure your outsourced bookkeepers understand how important it is for them to flag anything unusual and look at the implications of the figures they are processing. Then they can warn you if they see problems looming.

Let them know that you are open to their suggestions. Because they have multiple clients, they will have experienced many problems that could be similar to yours, and seen how they were overcome. That experience could be invaluable to you.