Q & A: What should I do when my bank cancels my overdraft without warning?

Nov 11, ’07 11:55 AM

Author Stefan Töpfer (Editor) Categories Accountants/CPAs, Entrepreneur, Finance, Home Business, How to ..., Outsourcing, Question & Answer, SOHO/SMB/SME/Micro, Self-employed, Small Business / SOHO, avoid growing pain, be successful, bootstrap, do cost cutting, do credit control, find funding, grow your business, handle problems, lower overheads, outsource effectively, plan cash-flow, plan your business

This question is hard to answer, because there are no simple answers here and the outcome of this situation could easily be fatal to the business and if you are personally guaranteeing this money – and you probably are – this could potentially be very serious for your personal life too.

The things that you need to do, in my opinion are:

Find out why? If the reason given are not satisfactory, you will need to get legal advice.
Try and extent the deadline? If that is possible reduce the overdraft as soon as you can, or negotiate a stepped reduction of the O/D limit, ie. by month or week.
Try and change bank, ASAP.

People often believe it is somehow always their fault, if the bank changes their attitude towards them, that is not always the case. Banks will always try and make you believe it is, but in reality they my have new internal guidelines for handing out money – banks can get into “cash-flow” problems too. So – don’t automatically assume it is always your fault.

Banks may have the right to recall a loan or overdraft, but I’m not sure if they have the right to damage your business by doing so – especially if the reason for the recall is not your doing. So if it comes to the crunch, get legal advice. This is one of the reasons why I hate these, IMO, often legal but still unreasonable arrangements between banks and clients.

Many years ago someone made the the loan, O/D – umbrella analogy and it goes like this:

When the sun is shining your bank gives you an umbrella;
when it is raining, they need the umbrella themselves.

It is best if you do everything possible to not need banks in the first place, by bootstrapping, outsourcing, planning your business and keeping your fixed costs as low as possible.

Remember sometimes, attack is the best defense even with banks, they may need their money, but they do not need bad publicity either. ST.

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Q & A: What are successful cost-cutting solutions in small business?

Oct 18, ’07 11:49 AM

Author Stefan Töpfer (Editor) Categories Finance, Health Check, Home Business, Outsourcing, Sales, Virtual Assistants, Work/Life Balance, be successful, bootstrap, do a SWOT plan, do a reality check, do bookkeeping., do cost cutting, do credit control, find funding, grow your business, lower overheads, outsource effectively, plan cash-flow, plan your business

How long is a string? Let me give you some pointers here, but please remember you can always do more on the cost-cutting front in any small business and start-up business, like SOHO-, SME, SMB-, Micro-, Lifestyle-, Home-, DIY-, Hobby-, Boomer- or Personal business, like professional, contractors, freelancer, self-employed, sole-trader and virtual assistants.

Keep your staffing level low. As much as it may hurt, work longer hours yourself, until extra staff is economically viable.
Outsource all non-core business activities. This will reduce your fix-cost structure, make your small business more flexible and you can react faster to an economic down-turn.
Buy second hand. Do you really need the brand new van? Or computer, or……
Work from home, this will not only cut your cost, but may improve your work-life balance at the same time.
Let your staff work from home. No office cost, hire a room if you need to on an hourly basis.
Use online technology, so you don’t waste time and get distracted.
Focus on your core business and sales. Every distraction costs time and money, sales generates money.
Bootstrapping. Think before you spend a penny, could I borrow, hire or do it online, get creative.
Analyze your fixed cost every month. You will find things you don’t need – trust me you will.
Compare and get new quotes. Even if you need the service or product from your supplier, check others all the time, insurance, telephone, utilities, etc.
Get better payment terms. Ask to pay in 60 or 90 days, or get an early payment discount.
Check your bank charges – you’ll be surprised. Or have it done on a results basis, doesn’t cost you time and gets you money back.
Do credit control – get your money in lower your bank overdraft cost and charges.

This is only a short list of what you can do, but it’s a start. Remember even $100/£50 per month is $1200/£600 a year more in your pocket. ST.

Disclaimer: As with any of my readers questions, I do not have all the answers and here on my blog I can only give you some ideas, since I know very little about your small business. If any of you can add anything here do so for the benefit of my reader, who asked the question and everybody else, leave a comment below – I’d be most grateful.

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Small Business Failure – Reason: Funding

Aug 30, ’07 8:17 AM

Author Stefan Töpfer (Editor) Categories Entrepreneur, Failure, Finance, Health Check, Marketing/PR, Outsourcing, Sales, Start-Up, be successful, bootstrap, do a SWOT plan, do a reality check, do cost cutting, find funding, grow your business, handle problems, lower overheads, market and sell, outsource effectively, plan cash-flow, start-up in business

Funding issues are really only a problem if you do not use “bootstrapping techniques” – so I’m not that comfortable talking about this issue, since I believe everyone should start their small business and start-up business, like SOHO-, SME, SMB-, Micro-, Lifestyle-, Home-, DIY-, Hobby-, Boomer-, Professional-, Personal business on a shoestring.

Anyway here are the small business health check questions you need to ask yourself:

What do I need the money for? Can’t you find a customer how will buy the product or service, before you even have it? It can be done you know!
Do I have enough securities for a bank loan or overdraft? I always like the analogy of a bank will give you an umbrella (money) and when it rains (problems) they need the umbrella themselves – what than is the umbrella good for!
Should I be looking for an external investor? You could find external investors who will tell you how to run your business, but know even less about your small business than you do?
Do I have the detailed business plan needed to find investors? You will need a detailed business plan – which frankly may not be worth the paper it’s written on – which will be used against you when things don’t work out.
Do I have the time to wait until a decision is made? You could be looking a 12 – 18 month before you have funding, do you have that time? Why not deal with customers today and get started on a shoestring.
What if they say NO? This is my favorite one – are you happy to give up on your business idea if everyone things is bad or worse (?)…. if you are don’t start a business, because you are not ready and whatever you do do not borrow any money from anyone.

If you read this and think this is all b*** s*** – and you may be right, of course – let me know why you think you need to borrow money? Maybe we could come up with an idea that would allow you to start your small business, without having to borrow money and loosing some of the control in your small business.

You can see other reasons for small business and personal business, like contractors, freelancer, self-employed, sole-trader and virtual assistants failures in my Health Check Category, if you can add to this list please do so, I would welcome your comments.

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Small Business Infrastructure For Business Start-Up.

Aug 28, ’07 12:42 PM

Author Stefan Töpfer (Editor) Categories Accountants/CPAs, Accounting, Business Ideas, Contractor, DIY Business, Data Security, Development, E-Commerce, Employment, Entrepreneur, Exporting, Finance, Franchise, Freelancer, Generation-Y, Globalization 3.0, Green/Eco-Friendly, Health Check, Home Business, How to ..., Infrastructure, Infrastructure, Lifestyle, Marketing/PR, Mobile Technology, MumEntrepreneur, Office - IT, Outsourcing, Personal Business, Red-Tape, Relationships, SOHO/SMB/SME/Micro, Sales, Self-employed, Small Business / SOHO, Social Entrepreneur, Software as a Service, Sole-Trader, Start-Up, Suppliers, Virtual Assistants, Web Technology, WinWeb, WinWeb Live™, Work/Life Balance, avoid growing pain, be eco-friendly, be successful, bootstrap, choose your office, deal with taxes, do a SWOT plan, do a reality check, do bookkeeping., do cost cutting, do credit control, export, find funding, grow your business, handle problems, keep data safe, lower overheads, market and sell, motivate your staff, outsource effectively, plan cash-flow, plan your business, start-up in business, use online IT

I get regular questions about what we really mean by WinWeb’s Small Business Infrastructure?

On-demand Small Business Infrastructure™ centers around the idea that business start-ups and growing small businesses need help with numerous administrative tasks that are not core to the business success – such as bookkeeping, it services, internet services, call handling and other such services.

These services – if performed by the business owner – cause a great deal of time wasting – while the fixed cost of a business is still accumulating. This is in our minds a fatally floored business model and can easily be remedied with our infrastructure approach.

We should not expect business start-ups and small business in general to be accountants, bookkeepers, lawyers, marketing & PR gurus and so on. We should provide small business with an infrastructure in which it can concentrate on core business tasks, while at the same time enabling the business owner to stay informed of all relevant business facts like cash flow, sales, HR issues, tax position and more. This will enable him / her to make informed decisions, maybe with the help of an external advisor.

Based on these facts, we have devised a six point on-demand Small Business Infrastructure™ concept, which consist of:

1. WinWeb On-Demand Software Solutions – Anywhere At Anytime.

AccountsOffice and OnlineOffice are our two software offerings, which are based on the SaaS – Software as a Services model, to allow for the following key business benefits:

• tight inclusion of business advisors from the start,
• cultivating outsourcing techniques at the outset, i.e. virtual assistants,
• no IT knowledge needed and hassle free operation,
• real-time multi-user access from anywhere, increasing mobility.

2. WinWeb 24/7 Live Support – We Are Here For You Always.

Providing customer care and support only during business hours is not acceptable to our clients. Experience has shown us that most admin work gets done by small business before nine in the morning or after five in the evening. This practice is essential if the business is to survive it’s early years.

This is why we have provided our much acclaimed customer support for 24 hours a day, seven days a week from the outset. Saving our clients wasted time and money – while setting new standards in customer support. No manuals need to be read – all problems can be solved in real-time online.

3. WinWeb Live – Networking Community for Small Business Only.

To foster collaboration and outsourcing we have expanded our WinWeb Live™ offering to allow for small business community networking – thus enabling the business owner to make decisions about his / her current needs, with the following benefits:

• timeshare virtual assistants for professional results,
• offer contracts of work to contractors on a case-by-case basis,
• promote the business to a large audience or even locally,
• find new work and contracts online

4. Business Advice

Our On-Demand Small Business Infrastructure™ enables business advisors, accountants, bookkeepers and other advisors to have a “Up Close and Personal” relationship with the small business owner, providing key elements for the success of a small business:

• timely and up-to-date advice from anywhere at anytime,
• more efficient advisor function due to SaaS technology, less travel,
• easily expandable advisor network.

5. Solution Partners

Third parties provide external services to complement our services, such as parcel service, office supply services, printing services. These and other services are provided on a bulk buy arrangements by leading businesses in their respective sectors – to provide the most reliable and up-to date service possible – with the effect of enhancing the professional appearance of our clients.

6. ClimateByte™ Technology – For A Cleaner Future.

Our clients are among the biggest demographics concerned with climate change and carbon footprint neutrality. It is a fact that employing remote working and collaboration techniques drastically reduces the damaging business side affects on our environment. We enable our clients to be more eco-friendly and aware, by providing them with our green technology – an ongoing development commitment of WinWeb.

WinWeb welcomes any suggestion that will further enhance our On-Demand Small Business Infrastructure™ concept – especially the development of even more eco-friendly business processes – to serve our small business and business start-up client-base.

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Cost Cutting for Small Business – Payment Terms

Aug 24, ’07 3:37 PM

Author Stefan Töpfer (Editor) Categories Boomer Business, Business Ideas, Contractor, E-Commerce, Entrepreneur, Finance, Freelancer, Generation-Y, Home Business, Lifestyle, Outsourcing, Personal Business, Relationships, SOHO/SMB/SME/Micro, Self-employed, Small Business / SOHO, Social Entrepreneur, Sole-Trader, Start-Up, Suppliers, Virtual Assistants, avoid growing pain, bootstrap, do a reality check, do cost cutting, do credit control, find funding, grow your business, handle problems, lower overheads, outsource effectively, plan cash-flow, plan your business, recruit the right people, start-up in business, use online IT

There are two ways to get better payment terms from your suppliers – make sure you know what the pricing is and negotiate the payment terms last, without warning. Most businesses do not expect small business and start-up business, like SOHO-, SME, SMB-, Micro-, Lifestyle-, Home-, DIY-, Hobby-, Boomer-, Professional-, Personal businesses to negotiate payment terms, so you have the element of surprise on your side – and it makes you look more professional.

Firstly there is the extended payment term, of 60, 90 and 180 days – see if your supplier will allow any of those terms. Even if they only give you 60 days, you can always go back after 3-4 month using this payment terms in which you have shown to be trustworthy. If it is declined and only 30 days are offered – because you have no history – then this is the perfect scenario of our second method.

Early payment discounts of 2% if you pay within 7 days. This is like a 24% p.a. discount on the invoice value, not a bad way to compensate for the overdraft interest charges from your bank.

Surly you supplier is interested in your business, and is not going to decline both offers – you win either way – if they decline, then look for a new supplier. Because you are not only helping yourself with your cash-flow, but theirs too.

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Small Business Checklist: Business Costing

Aug 15, ’07 6:46 PM

Author Stefan Töpfer (Editor) Categories Business Checklists, Finance, plan cash-flow

Do you know what your overheads and variable costs are in your business – have every worried about that? If you have then you must keep up-dating your costing every few month, as they will change as the business grow and changes. Here are a few things to look out for:

Yearly costs – like insurance, spread them over 12 month and add them to your monthly cost estimate.
Bank charges – easy to overlook, you may notice your banker never talks about these, check an compare them.
Fixed costs – rent, rates, utilities bills, make sure you add these to your monthly out goings.
Time – do you know where and on what all the time in your business is spent – you should – time is money.
Bad debts – look at your past performance, come up with an average monthly figure and mark your products and services up accordingly.
Buying – keep control of your spending, make one person sign off on all purchases, ideally that person should be you.
Keep up to date – update your cost sheet on a regular basis.
Mark-up – make sure you review your mark-up on a regular basis to protect your margins.
Budget – create a budget and put it in your cash-flow.
Cash-flow – compare your cash-flow fore-cast with the actual numbers on a regular basis and learn from it, it’s not about being spot on, but about knowing what happened so you can control it.

The more you know about where your money goes, the easier it is to figure out how to optimise your capital usage for maximum business benefit.

Many small business and start-up business, like SOHO-, SME, SMB-, Micro-, Lifestyle-, Home-, DIY-, Hobby-, Boomer-, Professional-, Personal businesses, fold because they don’t look after the money.

For more of my checklists see the Small Business Checklists category and as always please add to my list with your comments, tell us what works for you.

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Private Equity and Small Business

Aug 8, ’07 7:20 AM

Author Stefan Töpfer (Editor) Categories Finance, News, Personal Business, Small Business / SOHO

Private equity plays a crucial role in the manner in which new entrepreneurs can shape their business and work at making it a success. And thus it is understandable that there is a growing concern in the manner in which the Government seeks to change its policy regarding Private Equity.

The British Chambers of Commerce (BCC) has expressed concern on the manner in which small business, like SOHO-, SME, SMB-, Micro-, Lifestyle-, Home-, DIY-, Hobby-, Boomer businesses, will be affected if the government decides to clamp down on capital gains tax relief.

BCC director general David Frost says,

“While the BCC recognizes the advantages private equity managers can take of capital gains taper relief to pay lower rates of tax, we worry that any knee jerk changes could have serious implications for the entrepreneurial culture embedded within our membership.”

Currently the capital gains policy supports budding entrepreneurs who utilize private equity for their businesses and create jobs. On its part the government maintains that it needs to take steps to make the private equity industry more open and transparent.

TUC general secretary Brendan Barber says, it wants the Treasury to review the tax paid by private equity investors, and calls into question the ease with which the super-rich can claim non-domiciled tax status.

The government policy with regard to Private Equity will have a deep impact on the manner in which business start-ups work and SMBs need to pay keen attention to it.

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Want to waste some more time before you start your business?

Aug 2, ’07 7:43 AM

Author Stefan Töpfer (Editor) Categories Entrepreneur, Finance, How to ..., Personal Business, Small Business / SOHO, bootstrap, find funding, plan cash-flow

While it does take a great idea to make a good business the fact is that is just not enough to make it successful. Now that you know what your great idea is, it is time to get down to reality and facts. To begin with it is essential to have a cash-flow forcast that is viable and realistic, do a SWOT analysis and spend on hour or two – not more – reading through a business plan questionnaire, just to make sure you have not overlooked something – otherwise business plans are highly overrated for business start-ups.

There are some basic things that need to be looked into and checked before you are set to start your business. To begin with there is the financing of your small business, like home-, micro-, lifestyle-, mobile-, SME-, SMB-, SOHO-businesses, that is of utmost importance.

Remember one of the main reasons that many small businesses across a globe close down is that they did not anticipate the cash or finance they would require to get their business up and running and give it a fair chance or to put it more plainly – they simply run out of money.

It is important to understand the cash flow in the business and hence you must have an accounting system with integrated cash-flow forecasting in place, that does away with the need to pen down expenses and credits and allows you to go through your financial details in a comprehensive manner.

Is writing a business plan bad? No, but wasting to much time on it is. Ask yourself all the questions critically, but don’t spend hours, days or even weeks on it. I would do a SWOT analysis, SWOTs are:

Strengths: attributes of the business, products or services that are helpful to achieving the objective.
Weaknesses: attributes of the business, products or services that are harmful to achieving the objective.
Opportunities: external conditions that are helpful to achieving the objective.
Threats: external conditions that are harmful to achieving the objective.

I also add a little list of what I want to achieve with my business, no more then five points each. This and your cash-flow forecast should be your constant companion, you need to read and work on these every week to stay focused and see problems coming a long way off.

Next you would need to ensure that your business complies with government regulations. Take into consideration all the practical aspects of running a business and you would have a list of the infrastructure you need to have in place for your business. Having an online office is an excellent way to keep in touch with your office wherever you go.

Proper marketing and image management can ensure that your business has a foothold in the market. Finally you need to pace the development of the company and try to stick by your business goals as far as possible.

Now add some bootstrapping techniques to your small business infrastructure and you could be onto a winner.

UPDATE: I have posted the following question on our forum “ Business Plans – Have you done one?” I would love to hear from you about it.

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Watch out, watch out, the taxman's about

Jan 10, ’07 2:13 PM

Author jason holden Categories Finance, SME-Blog

According to recent reports tax inspectors are being offered financial incentives, of up to £2,000, to encourage them to collect more tax.

According to a recent article in the Timesonline, tax compliance teams throughout the country have been told to increase the amount of tax that they recover, by one quarter in 2007.

The fear with this results related bonus system approach by HMRC is that this will lead to more investigations, which in turn may lead to unreasonable and protracted enquiries from inspectors under pressure to perform.

Yes, everyone should pay the right amount of tax, of that there can be no doubt, but, is this really the way to ‘build a strong economy’, one of Gordon Browns aims when he delivered his pre-budget report at the later end of 2006.

Tags: HMRC, Taxation, Self Employed, Self Assessment Tax

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Book-keeping requirements – Start Up Guides – Part 7

Jul 28, ’06 1:39 AM

Author jason holden Categories Accounting, Finance, SME-Blog, Software as a Service, Start-Up, Web Technology

Okay, I know this is the least favorite part of running your own business, having to keep ‘the books’.

As a practicing accountant I can also say it is my least favorite part when a client turns up with records that are in a mess, and as a result of sorting this mess out, I am then left with the quandary of a level of fee that does not represent any value for the poor client.

It is so important, boring and dull maybe, but, it is important that you understand you have to keep proper records, not only for the tax and vat man, but also for yourself, yes yourself, how else do you know who you owe, who owes you, or if your actually making or worse losing money.

You need to look on your books as your very own window on the health and well being of your business.

So, now you know why you need to keep books, but how do you go about it.

There are many ways to keep records, from nothing (not recommended), then there is manual and next you have countless software packages, all varying in price.

Nothing at all

Worth a mention I guess – DO NOT USE THIS METHOD! There, mention over.

Manual records

If you have decided that pen and paper is your preferred choice then it would be easiest if your records are maintained on what is called a ‘receipts and payments basis’.

You will record who you pay, and who pays you when the transaction takes place, and if you are vat registered your vat will be accounted for at this time also.

You can of course run your vat on what is called an ‘invoice basis’. This method involves you claiming vat back on expenditure and paying vat on sales when the invoices are raised, irrespective of when payment is made. This would mean you need an extra couple of books for this alone, and can lead to making the whole issue far more complex.

Manual records are great if you run a small business with little real need for tracking a significant number of transactions, but once your business starts to grow getting the right information from a set of manual records will prove time consuming, and time is something you may not have a lot of.

Computerised records

This is my preferred choice; using the right package for your needs and with suitable training and support of course.

This method allows you to keep your records in either the ‘receipts and payments basis’ or the ‘invoice basis’ as mentioned above, but which ever method you opt for it will not become a messy and complex affair because the software system will deal with everything for you behind the scenes.

Computerised systems now fall into two very different camps, the first are those that sit on your computer, and as such you need to take responsibility for ensuring you back your data up on a regular basis. Also, when you buy such a system the up front costs can be expensive.

Some such systems are Sage, TAS, Clearlybusiness, and VT transaction.

Next is the new generation of SaaS (Software as a Service) offerings, these operate in much the same way those that sit on your computer do, except you use them over an internet connection . They come with the distinct advantages that backing up of data is dealt with for you, you pay a low monthly cost (note: winweb is free for one user) and not an up front cost, you can access your records from anywhere in the world as long as you have access to the internet and your accountant can also log in and see what is going on financially in your business in real time.

Some of these providers are Winweb, Twinfield, Liberty Accounts and KashFlow.

You also need to decide who will keep your records, will this be you or your spouse? Keeping your books can be very time consuming, don’t under estimate this.

Some people will use their accountants and other will use bookkeepers. If you are going to use a bookkeeper, the first port of call should be a Professional Book-keeping Institute.

Which ever method you decide you are going to use take professional advice first, it may save you a lot of time and effort and maybe money to.

Tags: Business Development, Business Idea, Business Start Up, Entrepreneur, Micro Business, Self Employed, Small Business, SME, OMB, Book-keeping, Book-keepers, Accountants, Winweb, Twinfield, Liberty Accounts, KashFlow, Sage, TAS, Clearlybusiness, VT transaction, SaaS

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