SME Business News

The Federation of Small Businesses (FSB) has attacked large companies that delay invoice payment and impose new terms and settlement fees on small businesses.

The recent post about Alliance Boots has led to the FSB obtaining a copy of the letter that was sent out to the companies suppliers in June.

The letter states that as of April 2008 bills will be paid 75 days from the end of the month of invoice with a 2.5% settlement fee.

In other words between 75 and 105 days after you have raised your invoice, the bill will be paid, with a 2.5% discount for the privilege of dealing with our enormous organisation!

John Wright, FSB National Chairman, said:

“Big companies appear to be aware that small businesses are afraid of taking them on over payment terms and are abusing their power as a result.

“Making small businesses wait 105 days for payment and charging them for the privilege of doing so is nothing short of outrageous.

“At a time when small businesses are finding it difficult to deal with a slowing economy and rising costs, it is shocking that large companies think it is acceptable to use them as an unofficial source of credit.”

UK bank HBOS has announced that it is to set up a single business division in an attempt to move itself into the SME banking market place.

The bank plans to merge it’s business banking and commercial businesses by the end of 2009 as part of strategy to boost it’s market share in the £800million business deposits market, dominated by ‘big four’ banks, Barclays, HSBC, Lloyds, and Royal Bank of Scotland.

HBOS claim that the ‘big four’ hold an 85% share of the SME banking market.

The bank says that the restructure will see around 1000 positions shift from it’s retail to its corporate division. The move could cost the jobs of 650 employees over the next eighteen months.

A small business that employs just two people has forced multinational retail store Alliance Boots into back tracking on its payment terms.

After receiving a letter from Alliance Boots that said that the company was changing it’s payment terms from 30 days to 75 days from receipt of invoice, the husband and wife team of training firm MTa International threatened to cancel a planned training course with the company.

A report in the Financial Times says that after the threat from SME owners Justine and Martin Thompson, Alliance Boots backed down and agreed to re-introduce it’s original terms.

A victory for the small business man for a change, but small business groups are growing increasingly concerned at how long big businesses are taking to pay SMEs, with reports of  some companies taking 105 days to pay.

Although the law allows companies to charge interest to late payers, it is a recourse that many SMEs avoid as in most cases the business is crucial to them in turnover terms although few of us consider the costs involved in collecting outstanding monies.

Accounting Software company Kashflow, recently surveyed Small Business owners to evaluate what they perceive as the major factors in growing a company from Small to Medium sized in business.

The research revealed these top five milestones that small business owners consider they have to reach before they can consider their business to have grown to Medium size.

1. £250k-£500k cleared profit in the business bank account
2. Won a business award
3. Product or service having featured in national media editorial
4. Purchased their own offices
5. Large team of employees – (50 or above)

Interestingly the European Union defines a Small Business as employing up to 50 people and Medium sized business has having 50 to 250 employees.

On a personal level, the top five things that small business owners would like to achieve to consider their business a success are as follows:

1. When they don’t have to work but choose to
2. When they have a large cash amount in the bank (£1m+)
3. When their mortgage is paid off
4. When they can afford to own and run two homes
5. When they can whisk friends and family off for all expenses paid holidays

Have you made it BIG?

Actress and entrepreneur Jane Asher shares her experiences of setting up a business during a recession, offering tips and advice to small businesses on surviving an economic downturn.

Jane Asher set up her business Jane Asher Party Cakes in 1989, on the back of her best selling cake decorating book. It has since grown to become one of the Uk’s foremost bespoke cake makers.

Watch Jane Asher talking about her business here.

Government proposals that new out of town supermarkets should be prevented if they negatively impact on smaller shops, have been welcomed by small business groups.

However there is concern that the scrapping of the current ‘need test’ is unnecessary until the new system is proven, with businesses sceptical whether the new policy will afford them the same robust and objective criteria for assessing the likely impact of a new development on an existing centre.

Communities secretary Hazel Blears responded by saying, “That is why we need to ensure that our policies maintain their effectiveness and they are responsive to future challenges.

“We need a policy which provides the right degree of protection for smaller retailers who are facing very challenging trading conditions and increased levels of competition.”

The proposed changes mean that an ‘impact test’, will use factors such as consumer spending, loss of trade, retail diversity, and impact on town centre investment would be taken into account.

The current ‘need test’ means planners are only obliged to consider whether the market has capacity for a new out-of-town shopping mall. The government claims that this has “unintentionally stifled diversity and consumer choice”.

In a bid to save small businesses from being driven out of the UK’s high streets, the Federation of Small Businesses (FSB) is urging the government to support its Keep Trade Local campaign.

The Communities Secretary, Hazel Blears, made some welcome comments on planning this week, but the country’s biggest business organisation is challenging her to deliver by launching a Keep Trade Local manifesto that covers changes to five other key areas which would benefit small businesses as well:

•  Parking charges;
•  Business rates relief;
•  Crime prevention;
•  Post Office closures; and
•  Public procurement.

The FSB’s Keep Trade Local Manifesto sets out how our high streets can be kept alive through grassroots change. The manifesto also raises awareness of the value that small businesses provide to consumers, including local produce and personal service.

The full FSB manifesto can be seen at www.fsb.org.uk

To support the FSB proposals sign the peteition on the Downing Street website.

The British Chamber Of Commerce (BCC) has warned that Britain is at ’serious risk’ of a full scale recession, with suggestions that the economy is now slowing down much more quickly than experts had previously predicted.

It is the backbone of UK businesses, the service sector that is showing the worst signs, with more firms now seeing a sharp downturn in the number of orders being taken for the second consecutive quarter this year.

Business confidence amongst the service sector, which is responsible for 75% of the UK economy, is also continuing to fall, heading for it’s most depressed level since 1990.

Expert predictions from City economists are also incredibly way off the mark, as National Statistics showed that manufacturing output fell by 0.5% for May, five times faster than the 0.1% predicted. Figures for June are now expected to show a similar pattern.

The BCC warned the UK now faces a “serious risk” of moving into recession, with its data suggesting a “menacing deterioration” in the outlook for the UK.

David Kern, the BCC’s economic adviser, said: “The outlook is grim and we believe that the correction period is likely to be longer and nastier than anticipated.”

The European Commission has made proposals to allow VAT cuts on labour intensive and locally provided services, a move that could help many small businesses and high street shops.

The commission began a three year experiment in 1999 to see whether reduced rates of VAT in certain sectors would have a positive impact on job creation and combating the black economy. National governments could submit to reduce VAT to not less than five percent in two labour-intensive areas. This experiment has been extended several times, but now the Commission has suggested formalising the arrangement to allow national governments more flexibility in applying reduced rates to stimulate the economy.

The list of areas under which national governments could apply for reduced rates now includes:

1. The housing sector – supply and construction of all housing (including renovation, maintenance and cleaning);
2. Minor repair of tangible movable goods, including bikes but excluding other means of transport. Examples include shoes, clothes, computers, watches;
3. Cleaning and maintenance services of all these goods and, in this case, other means of transports are included;
4. Domestic care services (e.g. home help and care of the young, elderly, sick or disabled);
5. All personal care services (including hairdressing, beauty services);
6. Gardening services;
7. Restaurants.

The Federation Of Small Businesses (FSB) has backed the proposals and is urging the UK to support and implement cuts.

Tina Sommer, EU and international affairs chairman, said:

“As the credit crunch bites, some of the first luxuries to go will be home improvements, eating out and a trip to the hairdressers, so local businesses in these areas will welcome this move. The British government must take advantage of these proposals to ensure our high street can survive the economic downturn.  The UK has been allowed to exclude certain items, such as newspapers and children’s clothing, from VAT altogether, and this historic exemption must continue.”

A recent survey on the UK Business Forum asked the question, “Has The Slowdown Affected Your Turnover’”

Results from the poll showed that 40% of small business owners report that turnover has actually increased during the first part of this year.

However. of those that are seeing a growth in business the majority admit to being more proactive than in previous years, targeting areas of their market where they are confident of growing business.

25% of respondents reported that business was down slightly with 20% admitting to a significant drop in turnover. The balance of 15%have not seen any change in the turnover of their business.

All business owners are facing a tough time, with general reports of customers constantly looking for a bargain, extra discount or haggling over prices and free inclusions.

There appears to be more competition for business from larger companies who are often better placed to offer customers better prices and as always in recession will take business at any cost. But there is also a general feeling that customers prefer to deal with smaller businesses where they invariably get a better service and personal attention.

So the message to SMEs is don’t just lie there and accept it, be proactive and seek out areas of business where you can offer a niche or unique service if possible. But the main thing is to keep in constant touch with current and possible new clients, talk to them and reassure them that you will be there when they need you.