Regulatory compliance issues such as tax, health and safety and pension provision, place an ever increasing intrusion on directors’ time which can sometimes lead to the eye being taken off the ball on the things that really matter – financial management.
Running your own company can be a stressful experience at times, especially with the amount of regulatory compliance issues that affect pretty much every type of business. Gone are the days when all you had to worry about was whether orders would materialise and your customers/clients would pay. Now, not only do we have all manner of tax legislation to comply with, but there are mountains of health and safety regulations, money laundering considerations as well as an ever increasing burden of employment legislation.
All of the above take time to manage and for smaller businesses that don’t have the luxury or support of an HR or finance department, place an ever increasing intrusion on directors’ time which can sometimes lead to the eye being taken off the ball on the things that really matter – financial management. Whist health and safety and employment legislation are important areas to be compliant in, unless the company is making a profit, those issues will soon fade into insignificance.
Start with a sound business plan – this is imperative
For any new start up, it is absolutely imperative that at least a basic business plan is produced. This does not need to be dozens of pages long, but it should at least cover the following basic points:
- You need to understand exactly what your legal obligations are as a director – there are numerous websites that clearly set out precisely what your legal obligations are as a director – perhaps the easiest one is www.gov.uk/running-a-limited-company
- Whilst an obvious statement, you need to fully understand the market in which you are about to enter and what drives customers to your competitors. What will you be able to do that sets you apart from companies already supplying similar services/products?
- Can you compete on price or better service – if so, how will you go about getting this message across to prospective customers?
- What do you actually need to start – premises, equipment, stock, staff, finance, website – the list is fairly substantial.
- The name of your company is fairly important – do you want a name that reflects what you do, or something more funky that will act as a hook and get people talking?
- Staff is perhaps one of the most difficult areas for any business, especially start-ups – more so now that the new pension regulations are in force. Every company in the UK that employs more than one person, must now set up a pension scheme – this is a complex area of law and one that you really need to take specialist professional advice on. You will also need to be compliant with the legislation that covers the national minimum wage and also register with HMRC to set up a PAYE scheme.
- If your projected turnover is more than £83,000 per annum, you will also need to register for VAT – you can do this online at www.gov.uk/vat-registration.
- Finally, the key most important part of the plan is the profit and cash flow projections. Without these you will simply have no real idea how much cash you need to set up and more importantly how much cash you will need to fund the business until its own cash flow kicks in. Starting a business without producing forecasts is fairly irresponsible and could leave you open to potential personal claims against you if the company fails. The forecast will also be required by any lender that you may approach for funding.
The above is only a snapshot of the very basics to consider – if you haven’t run a business previously and have little financial experience, then it really is worth spending a few pennies with a suitably qualified professional to help you get started.
Keep a close eye on cash flow
Now that your business is up and running, what happens when things go slightly wrong? You’re doing everything correctly, but suddenly one of your key customer’s delays payment to you or worse still goes bust on you leaving you with a hole in your own cash flow? If it’s a delay, obviously you need to find out why the delay has occurred – is it because your customer has a problem with the services or product you supplied or is it simply because they have financial difficulties of their own? Do not delay – find out ASAP what the problem is. Only by knowing, can you do something to address the issue.
“all successful entrepreneurs have at some time during their careers encountered problems – the successful ones are those that address adverse issues as soon as they arise” Richard Saville, Senior Partner
If it’s because the customer has gone into some form of insolvency, then that could, depending on the size of debt be more of a significant problem for you. Again, do not delay – do not hide and hope that something else will come along – all successful entrepreneurs have at some time during their careers encountered problems – the successful ones are those that address adverse issues as soon as they arise. None of us like doing it – none of us like bad news – leave it though and you are effectively handing control of your business to others.
Don’t be Too Proud to Ask for Help
At first you may think that it’s the end of the road – far from it. There is a plethora of highly qualified professional advice available in the event that you cannot resolve the problems in house. You do though need to be careful who you select to help – depending upon the seriousness of the problem, you may think that it’s something that your accountant can help with.
If however it’s pretty serious, you may want to consider taking some initial informal advice from a licensed insolvency practitioner. NO WAY you say – those guys just want to kill off my company and get a fee! That’s a rather a cynical reaction – understandable, but still cynical! Call us, initial consultations are free.
Financial Problems – don’t leave it too late
“I have lost count of the number of times that I’ve been called into a company too late to do anything to save the business” Richard Saville, Senior Partner
The one real piece of advice that company directors should take on board is: if your company is having a few financial problems, forget about pride for the moment. Directors often do not want to admit that their skill set is insufficient to turn the business around. The sooner advice is sought, the sooner the process of help can be commenced. Asking for help early, usually means that the business will survive, rather than needing to be liquidated.