robin

TC Group merges with London-based accountancy practice

TC Group merges with London-based accountancy practice

TC's rapid growth continues apace following a merger with London-based practice, Berley Chartered Accountants, a well-respected independent firm in the West End.

This latest merger again proves TC to be the fastest-growing accountancy practice in the country, as they further expand their presence in London.

Last year, TC entered the accountancy Top 40 in the UK, having jumped 14 places to 34. TC also recently became the first UK accountancy firm in the country to offer a full range of investment, mortgage, legal and HR advice.

Founded in 1985 by partners, Mark Levy and Jeremy Berman, Berley is a chartered accountancy practice that specialises in business growth advice. Both Mark and Jeremy are optimistic that the expanded operation will enable more rapid growth and are excited by offering their clients a greater range of services.

Mark Levy, partner at Berley, comments "Over recent years we have been approached by a number of interested parties. It was very important to us to find the right firm moving forward to merge with not only for our clients but also for our staff. We have known TC for nearly 4 years and realised they have been very successful in growing where others have failed. By keeping the DNA of the firms they merge with intact which is fundamental. We are very excited about the opportunities this will create for all concerned.”

Tim Saxton and David Leigh, partners at TC Group, says: 'Berley has a well-established reputation across London and further afield. This merger provides a significant boost to our London operation and for servicing clients right across the Capital. It reflects perfectly our strategy of seeking progressive firms with whom to merge and grow. We are also very grateful to WJP Brokerage Limited who recognised the potential for this merger and made the initial introduction.’

by robin

The Benefits of Cloud Accounting in the Post-pandemic World

Great accountancy has always been a foundational hallmark of successful small businesses, yet it's cloud accountancy that is showing its true value during a time when so many companies are struggling to survive each and every day.

cloud accounting benefits Whether in times of plenty or in times of paucity, accountants have been an invaluable asset to so many successful businesses of all sizes and across all industries. However, the effect is perhaps most impactful when it comes to small businesses. In normal times, the benefits of accountancy are clear: keeping track of income, cash flow, assets, liabilities, tax and much more. As such, it's SMEs that often need to keep more of an eye on these numbers than larger counterparts.

However, we're living in an 'abnormal' time right now. The threat of a pandemic and local lockdowns – the effects of which are totally outside of a small business owner's control – is changing the way that we do business. While some are thriving on the conditions of the pandemic, many are being hampered and even facing the distinct possibility of closure as a result of the measures and effects.

These unusual and chaotic times have led to many small business owners having to examine (and continually re-examine) their financial position on a near-daily basis. However, traditional accountancy doesn't necessarily make this an easy thing to achieve. As such, we're now starting to see the true potential and benefit of cloud accounting solutions.

Small business accountancy challenges

Even outside of a pandemic, small businesses face numerous challenges that can be solved by accountancy. Here are some common accountancy issues that SMEs face and how they have been further impacted by the pandemic:

Payroll management

To the non-accountant, payroll is a mess. You have to understand tax codes, pay employees on time, keep records, apply correct deductions and all while managing this against your cash flow. For a small business owner to do on their own, it's a lot. COVID-19 adds a whole other layer of stress to this process. Paying employees on time becomes more of an issue if business is down and this creates problems for staff morale and motivation levels. Investigating subsidies and how they apply to your financial position is stress-inducing. Proper record-keeping becomes harder as you are trying to keep up with changing governmental and regional legislation regarding pandemic measures.

Cash flow problems

There's no doubt that cash flow is a major concern for small businesses in the best of times. For many companies, it can be a dance between operational and dysfunctional. It's thought that well over three-quarters of small businesses don't have a good grasp of the principles of cash flow. So when business is being hampered, reduced or totally eliminated due to safety precautions resulting from the pandemic, the need for good cash flow management is essential for survival.

Late payments

According to cloud accountancy software provider Xero, small businesses are on average owed £24,871 from late payments and that 78% of all small businesses are owed money at any one point in time. Just as cash flow affects payroll management, late payments affect cash flow. It reduces your ability to loan money and to employ/train new people. At a time when finances are more strained than ever, and with the threat of employees having to call in sick for a week because they were in close proximity of someone who tested positive for COVID-19, that could be catastrophic for your business.

Pandemic problems

There's no area of SMEs that hasn't been affected by this pandemic. As well as a huge dose of stress, most businesses have lost money, have faced difficulties with their supply chain, have to abide by seemingly ever-changing restrictions and have to deal with losing regular customers who are vulnerable, shielding or have changed their buying habits since the lockdown. All of these issues impact on the numbers that need to be balanced.

What is cloud accounting?

To many small business owners, these issues can seem absolutely insurmountable and hopeless. As such, there's a lot of fear right now about the future. That's even if you have the energy to think about the future as dealing in the present is tiring enough as it is. However, consider the possibility that you needn't do this alone. Consider the possibility that technology can allow you to better plan your better circumstances and your future. And consider that you don't need to pay a huge amount of money to get access to such a service. This is where cloud accounting can help.

For those uncertain by what we mean by 'cloud technology', this essentially refers to computing services that are accessible over the internet. So when you access something like Gmail, Microsoft OneDrive or Dropbox, these are cloud computing services. They work by utilising servers – often decentralised – where huge amounts of data is stored and is then accessible by individual users, as opposed to information that is stored locally on a single computer. While this may make it seem like everyone will be able to access all of your data, every bit of information is secured via a process called encryption whereby only those who have permission to access certain data can actually access it. It's safe, secure and it means that you can view your financial records from multiple devices with ease – even on devices were it wasn't originally saved.

There can be absolutely no doubt that the value of cloud technology has been demonstrated by the COVID-19 pandemic. Many businesses have been able to pivot their day-to-day activities thanks to this tech. Pubs that were otherwise unable to open have been able to sell food via online takeaway hubs that utilise cloud technology; farms that have lost business due to restaurants being closed have used online platforms to sell their produce directly to local consumers. None of this would have been possible or feasible just a decade or two ago, without the power of cloud technology allowing small businesses to better manage their services and finances.

When it comes to cloud accountancy, this refers to services that provide tools and storage to keep a company's books and financial records online. This includes payroll, records, liabilities, assets, invoices, bill management... all of it accessible at any point from any location. Whether it's in an office, behind a till or at home at night, you can access up-to-date records and give yourself a complete picture of your business at any point with minimal effort from you or your staff. It's safe, secure, and the most effective way to manage an SME's finances during these difficult times. All you need is an internet connection and a device that can connect to these platforms. Even smartphones can access this information with just a few swipes.

How cloud accounting helps small businesses

While cloud accounting was fast becoming essential for small businesses at the best of times, it's undeniable that it has become a game-changer for many during the pandemic. With small business owners feeling the strain and worried about financial security, cloud accounting services provide both owners and their accountants easy access to the company's financial data. Additionally, with business moving towards tax filings being totally digital with HMRC's 'Making Tax Digital' initiative, there has never been a better time to consider cloud accounting as the alternative to traditional, computing accountancy.

Cloud accounting works by essentially setting up systems that allows the real-time tracking of financial data related to your business. This can be set up so that this data is automatically transferred to your accounts via the cloud. This drastically reduces the amount of manual labour required to keep track of financial records, allowing income and sales data, as well as expenditures, to be up-to-date on a day-to-day, hour-to-hour and even minute-to-minute basis. Additionally, it also reduces the number of mistakes in the data resulting from human input error. Even if a mistake is present, it's possible to track the error down in just minutes.

As this financial data can be accessed from anywhere, due to it not being saved in just one place, this also allows multiple people to access this information – including selected members of staff and accountants. As we are currently living in a time of social distancing for the foreseeable future, cloud accountancy is a great way to provide cohesion and clarity when it comes to your finances while minimising the amount of emails, phone calls or meetings that need to be sent or made respectively.

In fact, a recent survey of accountants by SmartVault, a cloud-based provider, has shown that accountants who were able to best respond to the pandemic and their clients needs during this time were more likely to be using cloud-based technology. With accountants shouldering a huge amount of the emotional support that small business owners need as a result of fears and worries stoked by the pandemic, it's essential that your accountant be well-established cloud accountancy specialists so they can give you the best service without distraction from their own pandemic-related problems.

Lastly, it is very important that up-to-date financial data be available for small business owners to consult at speed as this is the type of information that will be required to make an application for any potential government subsidies that could be absolutely vital to keep a business running. The sooner this data can be accessed, the better.

What is the best cloud accountancy service?

The question of what constitutes the best cloud accountancy service really depends upon the size of your business and what your business does. For businesses with just a few employees on their books, it's worth considering a service specifically tailored to small businesses. One such service is Xero. With over 2 million subscribers worldwide, Xero is considered one of the best options for SMEs on a budget.

With packages starting at just £10/month, Xero offers up a powerful suite of accounting software that receives excellent support – including fully functioning apps for both iOS and Android smartphones. It's this ease-of-use, as well as the ability to scale up to a £30/month package if more invoicing and billing services are required, that makes Xero such an attractive option.

Getting the most out of Xero with Berley

When it comes to Xero, it's best to have an accountant there as your cloud accounting sidekick to help you get the most out of the service. Xero is a great tool that can be used by small business owners who are savvy when it comes to finances. However, with an ever-changing landscape to worry about, now is as good a time as any to let a trained professional handle the books. At Berley, we are finding that it is an emotionally charged time for our clients and, as such, our accountancy has become an even more valued service that small business owners can rely on during uncertain times.

As one of Xero's certified Silver Champion Partners, we help our clients get the most out of their Xero subscription. We provide excellent financial support and advice to our clients so we can extract the most value out of this subscription to help SME owners make the right decisions at the right time. However, if you just need someone to manage the books, handle tax, VAT or make financial year-end preparations, we are also able to provide that service to a high standard too.

We like to think of our clients as our superheroes who are taking financial risks to fulfill their dreams and passions that most people just won't take. However, it's true that every great superhero needs the right tools and a good sidekick to be as successful as possible. So if you're the Batman or Batwoman of your story, think of Xero as your Batmobile and our accountants and bookkeepers as your reliable Robin.

To find out more about how we can support you, simply give us a call on 020 7636 9094, email info@berley.co.uk or get in touch with us via our contact page and we'll be back in touch as soon as possible.

by robin

Probate when an estate includes property

Small wooden house with probate tag attached

When someone dies there are a number of matters that need to be taken care of. Their death needs to be registered, their funeral arrangements made and their estate dispersed. It’s a difficult time for everyone and a time when a superhero guiding the way can make a real difference.

Dealing with someone’s estate after their death generally involves a process known as probate and depending on whether they left a will, what assets they had and what family survive them can be fairly straight forward with plenty of paperwork or extremely complex with even more paperwork.

Property so often makes up a significant part of an estate these days. The rise in property prices has meant that there’s an excellent chance that the estate might exceed the £325,000 threshold for Inheritance Tax which is paid at 40%.

Yes dealing with probate, inherited property and dispersing an estate can be a real challenge for the individual even when there’s a Will in place.

Who will inherit?

Let’s take a couple of examples to see what sort of issues might be encountered following a death.

Person A has died with 2 properties, one jointly owned with their spouse or civil partner. They have 2 children and have left a will indicating how they would like their estate dispersed.

Person B also owns 2 properties, one jointly owned with their spouse or civil partner. They have 2 children and have not left a will.

While they can work through the process without help this starting point might be the ideal time to do so. Probate accountants such as Berley, have the expertise to support probate applications and the disposal and distribution of assets.

In both cases, the first thing that needs to be calculated is the value of the estate. In the case of person A, this will be done by the executors who are named in the Will. For person B either their partner or children will need to volunteer to become the administrator for the estate.

Their starting task will be to calculate the total value of the estate. Call upon an estate agent to help with the valuation of any property. Get it in writing as you’ll need this later if there are queries from HMRC. you don’t want to find yourself in a situation where there are suggestions of undervaluing to avoid Inheritance Tax or Capital Gains Tax.

Property Valuation

With the value of the estate calculated application for probate can begin.

The probate application process usually takes around 4-8 weeks and will result in either a grant of probate or letters of administration. These are important because they show that you are authorised to deal with the person’s assets and that they can be released by a bank or other financial institution on your authority.

How do you divide an estate?

The next question is how the estate will be divided up and this depends on a number of factors.

Let’s start with the jointly owned property. This would automatically pass to the surviving partner assuming the relationship had been formalised. It would not be subject to inheritance tax.

Then there’s the value of the estate. If it was below £325,000 then it is not subject to inheritance tax.

So for person A, the executors would get to work to divide and distribute the estate in keeping with the wishes of the deceased. If an estate is subject to Inheritance Tax then this will need to be paid upfront from the estate.

Pay Inheritance Tax

There will also be other costs involved. For example, a property may be rented out and continue to raise income for the estate. Such income would then be subject to Income Tax. This kind of issue is why accountants deal with probate as a specialism, as they are also experts in tax matters. Other issues that might call for specialists in both law and accounts could be possible insolvency of the estate, the deceased holding property or other assets outside the UK or a dispute over who was included or not included in the Will.

Meanwhile, the administrators for person B would need to see who would legally be entitled to inherit from the estate. In this case with the surviving spouse or civil partner would stand to inherit the first £270,000 of the estate. After that, the children would stand to inherit a percentage. However, don’t forget that there is still potential for Inheritance Tax (as your accountant would no doubt remind you).

How much have UK property prices increased?

The trend toward rising property prices has pushed up the value of estates that contain property. The average house price in the UK in June 2020 was £237.834. Compare this to the threshold for Inheritance Tax. Passing this limit can make an estate less valuable than initially anticipated by the beneficiaries.

Another often overlooked aspect that will impact the value of an estate is Capital Gains Tax. This is charged at the point of sale when an asset such as property or shares has increased in price since the time of purchase. If the house is your designated home property then it is exempt but any other properties will still incur the charge. In relation to probate, this can mean that Capital Gains Tax is applied to an increase in the value of a property between the deceased passing away and the property being sold.

As house prices in England currently increase by 3.5 each year there is an excellent chance that there will have been an increase in the price of the property between the deceased dying and it being sold.

Do I need a solicitor to get a grant of probate?

When people think of probate they assume that a solicitor is necessary and the only possible source of advice. But it’s not the only way. Getting a clear idea of the processes from GOV.uk is a good idea. Since 2014 accounts have been able to offer probate services independently rather than via solicitor which provides another option. The simple fact is, quite often, a solicitor will probably have to involve to an accountant to assist with all the estate's financial matters.

If you do decide to call on a professional at this difficult time then it’s good to be aware of how they will work with you. If you have an accountant who you already work with this familiar face might preferable during a difficult time to an unknown solicitor.

But their knowledge of probate will also count for something. You want a source to draw on, particularly when it comes to ensuring that your understanding of the processes and law are correct and not coloured by common misconceptions. For example, they would be aware that ‘common law’ partners do not stand to inherit if there is no Will. Even if the property is considered the family home and they have resided there for many years. Likewise, foster children and step-children are not considered for inheritance in cases of intestacy. And that marriage or remarriage invalidates any previous will that has been made but divorce does not.

When choosing who support you consider the following:

Is their physical location important? - While the use of email has made location less relevant consider if resolving the matters of the estate will require regular face-to-face meetings which might more easily be achieved with someone local to you.
Expertise - Do they have appropriate expertise to resolve the matter or can they call on others to support as required? An estate with assets still producing income in more than one country is likely to need an accountant, expertise in languages other than English and an understanding of how probate and estate dispersal operates outside the UK. If you stand to inherit a substantial amount you may also need direction in wealth management.
Pricing - Consider how the fees are structured and how this will work in relation to the complexity and value of the estate you are dealing with. Berley keeps it simple by offering an hourly rate when supporting such matters.

Dealing with probate and estate dispersal can be trying. Make use of the support route that will be most beneficial to you and allow you to do your duty in carrying out the wishes of the deceased. The team at Berley are on hand, so why not give us a call to discuss a probate situation - 020 7636 9094

If you liked this article, you might also like:

This post is intended to provide information of general interest about current business/ accounting issues. It should not replace professional advice tailored to your specific circumstances.

by robin

Scams and how to spot them

The team at Berley works hard to help our clients succeed, both from a business perspective and personal wealth. So it pains us considerably to hear about those who have fallen prey to unscrupulous scammers - the dregs of society that haven't yet figured out a way to make an honest living. We thought it may be useful to share some of the latest ways scammers try and get their hands on your assets and how to spot them.

how to spot scams It might be the only good bit of news for 2020; a decline fraud was reported by the Crime Survey for England and Wales. However, before you start celebrating bear in mind that those 3.7 million incidents don’t include business fraud.

Rates for business fraud depend on which of the 3 reporting bodies (Cifas, Action Fraud and UK Finance) you consider. And depending on this you’re looking at an increase of between 7% and 47%.

Furthermore, Experian reported an increase in 33% increase in fraud during the lockdown period - because crime isn’t furloughed!

When does a fraud become a scam?

As far as police services are concerned there is no difference between a fraud and a scam although it’s seen slightly differently by financial institutions. Here a scam is identified as being a situation where the customer was tricked into taking actions which allowed for authorised transactions to take place.

Essentially, a scam involves handing over personal information or making unnecessary payments. The familiar image of scams is that of an elderly person handing over their life savings for a dodgy roof repair or in response to an email from a Nigerian Prince. And this view suggests that it’s something that only happens to other slightly foolish people.

But being scammed can happen to anyone and it’s not just individuals. 65% of fraud and cyber offences are reported by businesses. And there are indications that scams are massively under-reported.

And don’t underestimate the potential impact of a scam. Victims of scams are impacted by the loss of funds and, in many cases, the psychological trauma of being duped. For a business, the loss can be more than just financially damaging. It can also cause reputational harm particularly in cases involving counterfeit goods or data breaches. With scammers increasingly targeting businesses and individuals with a higher worth we want you to be aware of the different types of scams and how to recognise them.

How do I know if I’m being scammed?

Scams are designed for criminals to get their hands on your money one way or another with a huge variety of approaches. But generally, they are a reworking of a handful of methods designed to get personal details, information or the cash itself. They can be worked both offline and online. Developments in technology might have appeared to offer protection in some cases. For example, it’s much easier to make payments so no need to keep large sums of money at home. But the rise of email, social media and online banking have simply opened up new scamming opportunities. Remixing scams means there’s plenty of overlap between different scam types making them more difficult to spot.

Below we’ll look at some of the different types of scam and how you can protect yourself, your money and your business. At a basic level, all scams are using a mix of the following:

Assuming authority - the email or phone call comes from a source you would trust
Playing on greed - it sounds too good to miss out on
Identity theft - stealing your personal details
Obtaining access - either by gaining key information or getting you to do their work for them
Phishing, smishing and vishing - duping an individual into handing over details by email, telephone or text message.

Financial scams

The big investment scam

You’re contacted out of the blue with the offer of a big investment opportunity. It sounds like an amazing chance that you wouldn’t want to miss out on. But you’re told that you’ll need to move fast and invest if you want to be in on the big returns. Types of investments can include land banking, early pension release, unregulated markets, foreign exchange and binary options. Bitcoin investment is a new development in this area.

Spotting the scam

There are 2 big flags for this one; does it seem too good to be true and are you being rushed? Take a step back and check if the firm is registered on the FCA website. The investment and firm may even be legitimate so be suspicious if you only have a mobile number or an email address doesn’t look quite right.

What’s a money mule?

It sounds harmless. You agree to have funds deposited in your account and then to move them on as directed. Essentially you’re money laundering and your role is known as a ‘money mule’. Young people are increasingly being targeted for this but any age might fall for it when it’s presented as helping out a new ‘friend’ or as a work from home scheme.

Spotting the scam

Be wary of anything that asks you to transfer money whether in the form of a new job, helping a chum or making an upfront payment to claim a prize. If payments made to you are in an odd form such as gift cards or vouchers then alarm bells should definitely be ringing.

What is a 419 scam?

Known as a 419 or advance payment scam, you’d easily spot this one when if it came from royalty overseas who want you to help them move money out of the country. Yes, you’ve been specially selected and you’ll supposedly get a cut for making an upfront payment. Another approach involves offering a job/loan/clairvoyant reading if you can just help out by making one or more upfront payments. Essentially you’re being asked to hand over money for access to a bigger sum of money or opportunity.

Spotting the scam

There are endless variations on this including cheque clearing, loans, recruitment and romance! Ask yourself if it’s usual to pay an upfront fee for whatever is on offer.

How do overpayment scams work?

This one is mainly aimed at businesses although it can sometimes be combined with aspects of the advance payment scam. It involves a new customer who makes a big order, pays upfront and then requests a speedy refund. The original payment then fails to clear leaving you out of pocket. Individuals can be targeted if they are selling high price items such as cars. The failure of the payment to clear can them leave both out of pocket and without the sale item.

Spotting the scam

A sense of urgency from the ‘buyer’ can be a warning sign. Be wary around large upfront payments particularly by if they are by cheque or the payment method changes from that agreed. Don’t acquiesce to requests for refunds or release goods until the funds have cleared and are in your bank.

How did I get malware?

Scammers use various methods to get illicit software on your machine. In some cases, the badly spelt email from a bank you don’t have an account with is easy to spot. But it might not be that obvious. A malware insertion attempt could take the form of files from a colleague or supplier. Or a software update that you need to download in order to view a video on social media. Possibly a phone call claiming to come from your internet services provider alerting you to a fault. Once you’ve downloaded the malware them the scammer can record keystrokes and remotely control your pc.

Spotting the scam

Be suspicious of links or download requests of any kind. If in doubt don’t click on the link. If the communication claims to be from a company you have links with then contact them to check (and don’t use any of the contact details from the suspect message to do so).

Can chip cards be skimmed?

Financial scams aren’t just happening online and skimming is on the increase. Your card details can be stolen while you’re out and about. Your bank or credit card can be skimmed if you hand it over to anyone. This could be while making a payment or even giving it to a ‘friend’. Skimming picks up details from the magnetic strip. A scammer might also attach a device to a cash point to collect this information or trap your card and use a camera or false keypad to capture your PIN.

Spotting the scam

Try to avoid giving your card to anyone to take payment in another location. Suggest that you take the card to the payment device instead. Check cash points careful for anything odd looking. This might include parts of the cash point that are a different colour, scratches, and tape marks. Keep a careful eye on payments made on your card. Businesses need to keep an even more careful eye if there are multiple individuals authorised to spend against an account. Check transactions on a very regular basis to catch fraud early.

Counterfeit and fake goods scams

Door-to-door fraud

Legitimate businesses do sell door-to-door but it’s also an approach used by fraudsters. Goods or services that are offered are often poor quality or are never delivered at all. Also, watch out for surveys that are just an excuse to harvest personal information.

Spotting the scam

Urgency is often a giveaway. If they can’t wait then consider giving the offer a pass. Meanwhile, check out how legitimate the company is.

Fake goods

Scams involving goods are wide and varied. A recent example involved counterfeit Coronavirus tests being sold by a surveyor in one incident and a pharmacist in another. Variations on this can be online or in-person and might include event and concert tickets, holidays, goods offered on online shopping or auction sites and prizes. Either the goods will never be delivered or you’ll what you’ll receive is not what you were expecting. Items may be poor or a different thing altogether. In the case of prizes, you may be asked to pay an admin fee.

Businesses aren’t immune from fake goods and are at real risk of reputational damage if they sell them. They might also be targeted with fake requests for payments for business rates, data protection registration or advertising.

Spotting the scam

In many cases, goods or requests for payment can appear genuine and you won’t realise until inferior items are delivered (or fail to appear) that there’s a problem. Apply the ‘too good to be true’ rule and check reviews. Businesses need to have robust systems in place for approving payments and checking suppliers prior to placing an order.

Property scams

It’s a scary thought that property can be remortgaged or even sold without your knowledge. It’s rare but it does happen. Properties that are rented, empty or mortgage-free are most at risk. Also watch out intercepted payments when making a payment or a deposit for a property. If you’re asked to change the account you’re sending the payment to at a later point in the proceeding be wary. Your email exchanges are likely being watched by a fraudster who is waiting for the right moment to make a move and divert the funds to their own account (before moving it on).

Spotting the scam

Protect your property by putting a restriction on the title and signing up for alerts of any changes from HM Land Registry. If you’re buying or leasing a property, particularly as a business, take precautions. Ensure that the property actually exists and the person leasing or selling it has the authority to do so. Be alert for any changes to payment methods and check by phone using a number you trust before proceeding to make a payment.

How do I know if I’m being scammed?

As scams change frequently and become more sophisticated you might not instantly spot that you’re dealing with a scammer. As a general rule always bear in mind that if it seems like an amazing deal or opportunity then you might benefit from applying some caution. Other ways to keep the fraudsters at bay include:

Keep a tight rein on expenses and statements and check them regularly
Don’t give personal details out and be wary of how you dispose of items containing them
Check sources for links, email addresses and phone numbers before you click or dial.
Be suspicious of anything that changes – payment methods, contact details

What can you do if you get scammed?

If you’ve been the victim of a scam you need to act to protect yourself against further risk.

Change passwords
Check for malware
Report it to the police and your bank

With the huge range of scams taking place in the world today, it’s vital that everyone is vigilant to protect their property, businesses and other assets. Stay alert. As 2020 has shown every new development means new scams to combat.

by robin

Eight tips for managing your business in tough times

During a crisis, finding the time to stop and think can be the first solid decision you make. Fight the impulse to rush in and fix things, as this may cost you further down the line. Here are eight thoughts on how to manage your business during a crisis and get back to growth.

Running a business during tough economic times can either bring out the best in a business or highlight fundamental weaknesses in it. It’s during a major crisis that business owners get to find out what it is they are in control over and where they should perhaps exercise more control. Also, for those with more of a ‘carpe diem’ attitude, it can be a time to exploit the weaknesses in your competitors or previously unconsidered gaps in the market.

During times of crisis, what should business owners be considering? We have put together eight thoughts to help guide the way.

1. Time to reflect on the big picture

A business can come under threat for numerous reasons, perhaps because of client loss, competitor activity, a disruptive market force, or a severe economic problem within its industry or the country as a whole. It’s easy for management or the owner to recoil and look at the situation within, rather than ‘without’. Often, this means that business owners focus too much on the most apparent problems. This may make excellent business sense, but may not take into full account of the external situation. As a result, this could lead to the changes made becoming obsolete quite quickly.

Yes, look at the internal problems that need resolving. But, also take a step back and look at the business and the environment more fully. Are there more changes or potential unknowns on the horizon that may threaten the short-term; challenges that may not seem so evident at present? Perhaps the most important thing to do is to look at how the crisis is affecting your customers and suppliers. Also, look at your money supply. If you have loans or other external funding, how are the providers going to react in a market downturn? Is your cash supply secure?

The temptation in a crisis is to act tactically and quickly. But this should be tempered with a thoughtful, strategic view of what is happening on a grander scale. This should stop you from making quick tactical plays that may prove damaging or even fatal later.

As the saying goes: “Take a step back, the ocean is wider, and the sky is higher”.

2. Doing nothing is making a decision

Probably the worst decision to make is the decision to do nothing. If your business is in crisis, it can be too much for some, and denial sets in. This only ever ends badly.

As a business owner in crisis, now’s the time to stand up and take responsibility for the company. Basically - lead! Worst case - you may ultimately be looking at dissolving or liquidating the company, but making that decision before somebody does it for you, is a positive step, as it keeps you in charge. Best case, taking an initiate early to try and fix a problem could lead you to a better solution, or to those willing to help you because you have shown the desire to take action responsibly.

3. Staff by function and priority

Cutting costs is the quickest and easiest (physically) action to take and one almost always necessary in a crisis. But what costs to cut?

The two biggest expenditures a company has are likely its office/equipment costs and its payroll. In times of crisis, companies often look to cut headcount. If the problem the company faces is a loss of business, perhaps due to non-competitiveness, aging products, or lack of demand, cutting heads may be prudent. However, in times of crisis, although headcount cost cuts may be essential, it pays to look carefully at what is needed to help the company recover. Again, this is big picture thinking.

Some ‘specialist’ staff may not be utilised as fully as they might be during the crisis but, if the company is to recover, it may be that these staff will also be the hardest to recruit. It pays to fully consider such cuts and the priority the business has through its various product lines of business channels. In other words, don’t just make cuts for the sake of cutting costs.

4. Maintaining cash flow

During a crisis, cash is not just king, but more the empire. Access to cash is critical. All companies should have contingency plans where cash is concerned.

Profitable businesses may have the relative luxury of maintaining a healthy cash balance, typically 4 to 6 months of operating capital. If your business isn’t so fortunate, then taking advantage of any government lifelines will be critical. Failing that, overdraft facilities, or other loans from the financial institutions and private loan companies may be possible. If business owners can’t raise the necessary cash from the banks, then the last resort is to consider offering shares to private investors.

All loans will need to be paid back, even if they are offered at very low-interest rates. Indebtedness is how many companies fail, and business owners need to thoroughly think through the real cost of the loan.

Another fundamental question to ask, is whether the business actually worth saving? Is it time to realise the truth and move on? What’s the opportunity cost of continuing? I.e. What other, more profitable initiatives or opportunities could you better spend your energies on?

5. The devil is in the detail

The ability to take decisive action in a crisis is contingent upon having the necessary data to hand. During military battles, battle commanders are driven by two things - intelligence and observations, and the data they reveal. Similarly, in business, you need to know what’s happening on your battlefield.

Use your intelligence gathering resources to acquire data, not just on your market and competitor's actions during the crisis, but also on how your own business is being impacted. This might be related to footfall, unit sales, website visits, etc.

Regarding the details of your own business, it’s time to dig into the day-to-day operations and look at the financials in more detail. For instance, how are your forecasts matching current reality, what will the impact be in ‘x months’ time if specific clients or lines of business face issues? Are you factoring in cost changes and changes in revenue or cost reductions to entice new customers?

The other standout factor to consider when reviewing the scenarios your business is facing is that of payments. Payments in the form of aging receivables will dramatically impact cash flow, very quickly if you don’t maintain a good cash reserve. Also, without cash from customers, your business may not be able to buy the raw materials it needs. This is a recipe for disaster as the situation can quickly spiral out of control, particularly if on the other side of the coin, the suppliers are not being paid.

Having your finger on the financial pulse of the company, sometimes minute by minute can be the difference between the life or death of a company. The detail can be overwhelming and present a headache to a company’s operations, as it may take the business’s finance department some time to gather, collate, analyse and report back on issues within the business. This may not be fast or streamlined enough to make a difference.

This is one reason why we at Berley are advocates for cloud-based accounting, software applications like Xero, for instance. This not only simplifies and streamlines the accounting function but also provides highly valuable management information data that a business can use to make strategic as well as tactical decisions supported by the intelligence it is getting from its operations. Better still, the data is accessible wherever you are and at any time, unlike your accountant.

6. Stay true to your brand

It’s easy during a panic and with the urge to cut costs, to fundamentally undermine the principles the company’s brand was built on. This is especially true where quality is concerned. Cost-cutting can degrade quality; not just product quality, but customer service quality too.

Stay true to your brand, and your clients will remember that. If you don’t and your cost-cutting undermines aspects of your brand value, when you do recover, you may have fewer clients and a tarnished reputation to recover from.

It’s a tough call. For some business, this decision may be life or death, and consequentially the decision to essentially do whatever it takes to ‘live to fight another day’ is for the company’s owners to make.

7. Managing expectations

As a small business owner, you have a lot of emotional capital built up in the brand. This can be sorely tested during times of crisis. The heart can easily overrule the brain.

Take time to step back and discuss with a trusted adviser or with friends. You simply may not be able to realise many of the expectations you had prior to any crisis you may be facing. Rather than doggedly driving after a goal that may simply not be attainable at this point, it may be time to shift tracks for a while and pursue some shorter-term, more reasonable goals. Reconcile this within your thinking as not so much giving up, but making a smarter decision so as not to jeopardise your original goals and expectations.

8. Finally - embrace change, don’t fight it

The one constant in life is change. In today’s business world with advances in technology and evolving consumer trends and expectations, companies simply must reinvent themselves or at least aspects of themselves, or face becoming irrelevant.

Change in today’s business world is rather like water, a force of nature to be worked with, not against. Maybe now is the right time to re-examine your whole business model too!

Here are two quotes to inspire you to think differently, and that embrace this idea are:

In the words of Bruce Lee (actually his character in Longstreet): “I said empty your mind … be formless … shapeless like water … now you put water into a cup, it becomes the cup … you put water into a bottle, it becomes the bottle … put it in a teapot, it becomes the teapot … water can flow … water can crash … be water, my friend.”

And, in the words of Sun Tzu: Water shapes its course according to the nature of the ground over which it flows; the soldier works out his victory in relation to the foe whom he is facing.

So, businesses today definitely need to embrace change, be adaptable and . . . “be like water”.

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This post is intended to provide information of general interest about current business/ accounting issues. It should not replace professional advice tailored to your specific circumstances.

by robin

Does the July mini-budget really help SME’s?

Yesterday, the Chancellor, Rishi Sunak, delivered a mini-budget that on the face of it appeared to deliver a great deal of aid to struggling businesses. But did it really?

Just 24 hours later and the bones of the package are being pulled apart by all and sundry. Most notably, the Labor party saying that it isn't focused enough. This post isn't politically inspired, far from it; it's business inspired. But is there a point here? Will it deliver the much-needed assistance to the companies that need it?

Let's have a quick look at some of the points affecting businesses.

Ending the furlough scheme and the job retention scheme

Well, free money had to end sooner or later, we all know that. However, that does mean that businesses now have a stark choice to make. To restart employment for millions currently furloughed or simply letting them go.

Nothing particularly positive has happened to the business environment to warrant a company suddenly returning to where they left off before the crisis. If anything, it's got much worse. We are facing a recession as bad if not worse than that of the '80s.

Retail businesses may be able to open, but their footfall is severely reduced:

By a general reluctance to visit a store, due to the uncertainties that remain around the virus.
In-store customer flow control and protective measures.

Neither is conducive to business as usual. Let's also not forget that a lot of high street businesses were already struggling because of the trend of internet shopping.

So, on the one hand, with nothing much happening to change the pre-Covid business environment (in fact the opposite), and on the other hand a raft of measures to encourage employees to retain staff . . . are they likely to?

The Chancellor has offered businesses £1000 for every employee furloughed that they keep continuously employed until January 2021, as long as they are earning at least £520 a Month from November to the end of January. The question is, 'is £1000 even an inducement to do so?'.

This is where the argument gets going. If you have work for employees that you'd naturally keep until February, then you'd likely keep them anyway! So why do they need the money in the first place? It's a nice bonus, for sure, but isn't that a bit of a waste? At least that's one of the questions bouncing around the papers and the opposition party.

If you are the owner of an SME, we're sure you'll take the money anyway, but only for those you know you'll keep on, otherwise, you'd need to pay it back. Think about that for a minute. Or, maybe, you'll keep them on, just until February, although that may be a tall order for only £1000.

Apprenticeship incentive

Getting a bonus for employing an apprentice isn't new, and the availability of an increased number of new places is good news. The Kickstart scheme takes it one step further, though. Offering employers up to £2000 to create a new apprenticeship position is a step up and could be worthwhile for those businesses that have the staff to work with, help train and mentor new starters like this. It's to something to take lightly.

Also, you should read up on the legal rights of apprentices. Employing an apprentice isn't the same as hiring a regular employee; there are protections in place that make it very difficult to let an apprentice go if the business gets into trouble. However, as several of our clients have found, good apprentices are worth a lot and can become highly valued full-time employees at the end of their apprenticeship. Plus of course, the government pays for their education and training and is now paying you £2000 (or £1500 for those over 25).

Kickstart scheme

This scheme is for those between the ages of 16 and 24 'on Universal Credit and at the risk of long-term unemployment'. The idea is that the placements are for work experience, not actual jobs, and will end after six months. It's a good idea (similar to Labour's scheme in 2009, the one that David Cameron scuttled once PM), as many younger people are struggling to get the work experience and necessary confidence they need if they are going to get a full-time job.

The government will pay 100% of the national minimum wage for 25 hours a week. It's up to employers if they want to top this up.

One concern is that the scheme is open to abuse and nobody seems to know how it will be policed. More unscrupulous employers could use it as a way to get cheap Labour. It could also lead to those 25 to 26 years olds who may have presented better potential, loosing out.

The other question that comes to the fore is that these positions need the utmost supervision, as they are work experience positions. So, somebody has to be doing the actual work to be experienced - which as we have seen, presents its own set of problems.

Still, as the unions commented, "It's a good first step".

Final thoughts

The measures presented don't have all the answers, but then what does in such challenging and rapidly changing times. The critical thing is, something is being done.

We hope that there's something in there that works for some companies and employees. It does, however, leave those with established experience, families and mortgages, exposed. There is more incentive to hire younger people, in their 20's than those in their 30's and 40's, who, because of their existing commitments, probably need more help than the younger ones who are probably still living at home. Maybe the parents (who have their own employment problems) can see the bright side, and let the kids become the breadwinners for a while - now that's real work experience!

This post is intended to provide information of general interest about current business/ accounting issues. It should not replace professional advice tailored to your specific circumstances.

by robin

Is it time for a business model shake up?

There’s one certainty that the Covid-19 pandemic has brought about, and that is many businesses are taking a second look at their business practices and some, at their primary business model - their whole reason for being.

Time to shake up your business model All businesses need to review how their employees conduct daily business life, especially if they are in customer-facing roles or large office-based teams. But, what about the broader impact this pandemic has had on business in general? How might this make you look at your business differently for the foreseeable future? What triggers may be responsible for this?

Berley is a business advisor

The team at Berley Chartered Accountants are more than accountants. Our experience with a multitude of different business over many years, means we are uniquely placed to assist business owners to look at how they can adapt and change their business models in the wake of the recent pandemic and help them become more resilient to the fast pace of change we typically see.

It’s business again, but not as we remember it.

An area of business management we at Berley have noted many times with clients is that of cash flow management and maintaining adequate cash in the bank to support operations in times of weak market conditions - the ‘rainy day fund’. Well, we’ve certainly had that recently, and it has tested businesses cash and overall liquidity positions severely.

Total closure of business premises and the inability to reach their customers saw some business go to the wall soon after, as they quickly ran out of cash, despite funding available. Companies in retail, travel and hospitality were hit hardest. While loans are possible, they are ‘loans’ and must be paid back. So, while the temptation is there to seize the cash, the prospect of mountain debt can be enough to put business owners off.

According to some reports from the City, up to half of the business owners that took advantage of the Government’s BBLS facilities may face difficulty paying them back, even defaulting. A reason for this is that the loans are likely being used just to pay debts and maintain essential payments, or to accommodate changes in the way they have to manage customer footfall in the immediate future. However, these loans may not be used to change the way a company operates significantly. In other words, the loans are not being used to increase the value in the business and adapt them to fundamental changes in how they do business in the future.

For many companies, a return to business is far from ordinary. During the crisis, some businesses realised that the only way they could operate was through the internet or by running takeaway services. Those that appear to have thrived the most were businesses that were able to run on a distance basis, or through online channels and offer home delivery. Some companies did manage to adjust and add an ‘online’ channel to their model, although hastily added.

Even as the restrictions on businesses are relaxed, there’s the ever-present threat of them being reapplied. Not only that, but the precautions companies will have to take for the foreseeable future will likely reduce footfall in retail establishments and direct contact with clients. For many, customer volume is the lifeblood of their business, and such reductions will place them on a knife-edge.

Businesses most at risk and whom need to review their business models

McKinsey & Co recently released research highlighting the business sectors especially threatened by the Covid-19 outbreak. A summary can be found here:

It’s clear from this that a variety of different businesses are highly susceptible to pandemics of this nature. The rather obvious conclusion from the chart is that those businesses that rely on close personal proximity to engage their clients successfully or to operate effectively in teams have the most risk.

For these businesses, they must look at how their business models can adapt under the circumstances we have seen, especially as it’s likely there will be more in the future.

Adaption will look different in each business type. For instance: Many healthcare services rely on close personal contact - caregivers as an example. Solutions here mostly come down to improved safety equipment and procedures when interacting with patients. However, alternatives to private healthcare exist, especially for those in most need. An example is live-in care. This type of service, along with more advanced monitoring services, could offer solutions to companies prepared to adapt.

Other businesses may find it very hard to adapt; the travel sector, for instance. Mass travel is how pandemics spread. But, even this opens opportunities. Easily affordable travel had seen a boom in overseas holidays in recent times, but these have now been hardest hit. Because of this, the ‘staycation’ is likely to see a significant resurgence for the foreseeable future. Also, although not as fulfilling, virtual travel may offer some short term relief.

Business models may need adjusting more often

Businesses should regularly review the basis of their business against changing customer behaviour. Understanding the ‘customer journey’ and the intent behind it is essential if a company is to engage effectively and fulfil successfully.

The main pain points for businesses affected severely by the pandemic have been customer engagement and fulfilment. Although the crisis has brought these issues into sharp focus, a trend already existed that threatened many traditional retail models, as we saw with some high profile retail establishments shuttering their doors. The motivation to adapt to changes in consumer behaviour was already there.

With many traditional retail outlets, this means a brick and mortar shop window. As their weakest link during such crisis and given consumer’s online trends, a physical presence is a potential liability in the future. But, it need not be, if these businesses can achieve a balance. Many already have online portals but found it difficult to make up the loss from their physical shops. The question is why, when so many online businesses have thrived. Here are some possible reasons:

Existing commitments: Commercial property rent is a significant factor running a business through a shop front. As such, much effort is concerned with paying the rent, paying the staff and then making a profit. The online store came second.

Scale: The extent of a businesses physical operation can be a double edge sword. On the one hand, it can yield the type of back of shop operation that can support diversification in its sales channels. On the other though, that same operation may be difficult to adapt to requirements in online sales and fulfilment.

Complacency: When times are good, it’s tough to make changes, especially to a business that may appear to be working quite well. Companies can get a little lazy in their approach to long term security. As such, when it came time to react, they couldn’t as the business needs to go through a lengthier change process. Similar situations occur when an industry or product sector faces a new ‘disruptive’ competitor; a market entrant that can upset other businesses with a new paradigm that could force them into obsolescence if they can’t adapt.

A weak online presence: Companies need to be visible online. It’s not enough to have a website or shop on eBay or Amazon; although that helps. A considerable effort needs expending to make the online dimension of business work, especially if a physical side to the business already exists, as this can often take priority. This involves having a suitably funded digital marketing strategy and ongoing campaign to increase online visibility.

Given the business volatility we have seen recently, and how quickly attitudes can change, businesses need to review the basis of their operation more often and be prepared to adapt to such change faster than they have in the recent

Moving forward

The saying, “necessity is the mother of invention”, is very appropriate at the moment and a reminder of just how vulnerable businesses are to sudden change.

Change in our society is occurring at pace. Driven by several factors, significantly, in terms of technological advancement, attitudes towards aspects of life and the expectations these can bring from the market place.

Businesses must find a balance between established modes of business, and the expectations such change can bring. For some, this may be embracing online sales to a much greater degree, while maintaining a more traditional high street presence as a way to experience the brand for those who still want that experience.

Other businesses may want to move entirely to an online model and perhaps gear existing facilities more to fulfilment side of the customer experience.

Those in the service sector can explore opportunities this change has brought about. Previously thought unprofitable services, may have a new opportunity.

Which ever industry you work in, there’s bound to be new ways to conduct business or in which your existing business model can be adapted. You just need a little help in getting there; and that’s where Berley can help as business strategy advisors.

We are small business accountants – call today on 020 7636 9094

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This post is intended to provide information of general interest about current business/ accounting issues. It should not replace professional advice tailored to your specific circumstances.

by robin

Insolvency: consequences for company owners

A worried business man

When a company is insolvent, the stressful situation affects company directors and the staff. Find out your options and your responsibilities as a director of an insolvent company here.

Events leading to a company’s insolvency are unpleasant. Poor cash flow and unsustainable loses often lead to frequent pressure from unpaid creditors, causing company owners and staff much stress.

As a company owner, it is natural for you to feel emotional and maybe even confused. Can your company still trade if it is insolvent? What are your duties as a director of an insolvent company? What are the consequences of insolvency to the business, as well as to you and your family? Can you be disqualified from running a company again? Questions like these are valid and we encourage you to discuss your situations with a qualified insolvency practitioner as early as possible. This is because early intervention may put a stop to creditors pestering you, as well as increasing the likelihood of the company surviving.

At Berley Chartered Accountants, we are London-based insolvency experts. We help many worried and stressed out small business owners who are fearful of the future when the company can’t pay its financial obligations. To help alleviate the fears and uncertainties surrounding insolvency, we aim to discuss the consequences of insolvency and what business owners should expect in this article.

What is insolvency?

Insolvency happens when a company either doesn't have the money to meet its financial obligations, or its liabilities are greater than its assets. In most cases, the signs of a company approaching insolvency can be spotted many months or weeks before, as this informative article How to tell if your business is in trouble and what can you do about it explains in great detail.

Options when a company is insolvent

If your company is insolvent, you have three options to keep your company in business. They are:

1. Reaching an informal agreement with creditors

A sensible option when your company is experiencing short-term financial difficulties is to contact your creditors and make arrangements to repay the debts on different terms. However, as these arrangements are informal, creditors can withdraw them at any time if they don’t think that you are able to manage your debts.

2. Entering into a formal agreement

This takes the form of a Company Voluntary Agreement (CVA), a binding agreement between your company and its creditors. A CVA allows your company to pay its debts, often at reduced amounts and over a longer period, while the company continues to operate as normal. This process must involve an insolvency practitioner who will:

Work out an arrangement on how your company is going to pay and when. The insolvency practitioner must do this within a month of being appointed.
The practitioner will write to creditors about the arrangement and invite them to vote on it. If 75% (by debt value) of the creditors agree, then the CVA is approved. Otherwise, your company could face voluntary liquidation.

Once the CVA is approved, the practitioner will then become the middleman who will receive the scheduled payments from you and pass them to the creditors. Their role will continue until the debts are paid off. As long as you stick to the terms stated in the CVA, you will be safe from any legal action and pressure from your creditor.

3. Administration

This process involves handling your company to an insolvency practitioner who acts as the administrator. Once the administrator is in charge, your creditors cannot take legal action against your company to recover their debts or start compulsory liquidation without the permission of the court. In the meantime, the administrator aims to:

Restore the company’s viability
Work out a CVA and seek approval from your creditors
See if it feasible to sell the business
Sell assets to pay preferential or secured creditors

If none of these options is tenable, then liquidation may be the only option – which will see your business struck off from the Companies House register, and the company’s assets will be sold and distributed to the creditors.

It is worth noting that you need to act quickly because your impatient (secured) creditors can appoint an administrative receiver to sell the company’s assets to pay off the secured debt. This option removes all choices from you and it can only be avoided if you contact an insolvency practitioner as early as possible.

Company liquidation

When all options are exhausted, liquidation brings an end to the long process of fighting for the survival of the company. Liquidation is a process that involves an independent insolvency practitioner (who becomes the liquidator in this case) taking control of the company, overseeing the wound-up, and making arrangements to settle debts in an orderly manner.

There are two ways in which an insolvent company can be liquidated:

A creditors' voluntary liquidation which will see a company's creditors pick a liquidator to take over the company
A compulsory liquidation where company directors agree to wind up the business themselves

Liquidation ensures that company contracts are transferred or completed, legal disputes are settled, and the business is no longer making transactions. Assets are then sold and any outstanding debts are collected on behalf of the company. This money will then be used to pay creditors and any remaining amounts will be paid to the company's shareholders.

What are the consequences of insolvency for a company director?

Business owners whose company faces insolvency know first-hand the stress from events leading to this point. When you are stressed and worried, it is best to avoid making impulsive decisions that will put your personal wealth at risk.

As a director of an insolvent company, your duties include:

Do not allow the company to incur further debt
Do not continue to trade
You must protect the interests of all creditors (debtors, employees and other stakeholders)
You must safeguard all company assets (do not sell them below their market value)
If a liquidator is appointed, you must hand over the company’s records, paperwork and assets to the liquidator

The best approach is to contact a qualified insolvency practitioner as early as possible so they can conduct a solvency review of your company and discuss available options with you before liquidation.

One of the questions we get from company directors is what will happen to them personally. The answers depend upon your past actions prior to the company becoming insolvent and what you do during the insolvency process. For example:

If you have provided personal guarantees to any loans obtained by the company, you will be liable.
If you have overdrawn the director’s loan account, you will be liable to pay back.
If you have not exercised your duties as a director, like if you have been using company funds for your personal purposes or engaging in wrongful trading while the company is insolvent, you could be disqualified as a director for 2 to 15 years.

Being personally liable or disqualification has serious consequences, which is why we encourage company directors to speak to a qualified insolvency practitioner first.

If you have been acting in good faith and have carried out your duties as a director diligently, then there is nothing to stop you from launching another company even if your current company is insolvent. However, your new company cannot have the same or similar name to the old company. If you want to read more about this, check out Section 216 of the Insolvency Act.

Will I go bankrupt?

One of the main worries for directors of insolvent companies is personal bankruptcy. Companies can’t go bankrupt – they become insolvent – but individuals can.

If you are a company director and you have carried out your duties diligently, your liability is limited to the number of shares held when your company fails. However, if you have not acted in good faith, like you have continued to rack up debts knowing that the company cannot possibly repay them, then you are at risk of being held responsible personally and/or being disqualified as a director.

Your personal wealth is at risk if you have provided personal guarantees to any loans obtained by the company. For instance, you have used your personal possessions and assets (property, cars, etc) as collateral for a loan, then you may well lose these assets. The loss of these items of value, as well as any other debt to which you may be liable, could well cause you to go bankrupt.

How Berley can help directors of an insolvent company

The stress of having a business become insolvent is undeniable; however, it isn't the end of the world. Your best way out of the situation is to seek help from a qualified insolvency practitioner as early as possible.

Insolvency practitioners like our team here at Berley can conduct a solvency review of your company and discuss available options with you. Highly discreet and ethical, we do not judge your circumstances or focus on past mistakes. Our aim is to make sure that you are in a position to continue the company or start afresh.

Quite a few directors prefer to put an insolvent company into administration to alleviate or stop pressure from creditors. This process allows the appointed administrator to restore the company’s viability, create a CVA and see if it is feasible to sell the business. Regardless of what your choice is, you can be certain that we are here to support you throughout the process and ensure that there is a positive outcome in place for all parties involved.

Call our experienced London insolvency practitioners today on 020 7636 9094. We encourage you to act fast and avoid receivership – this means your impatient creditors appoint a receiver to one or more of your company’s assets in order to recover the debts owed – as it leaves little options for you.

You can also email us on info@berley.co.uk or use our contact form to leave a message.

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This post is intended to provide information of general interest about current business/ accounting issues. It should not replace professional advice tailored to your specific circumstances.

by robin

How to tell if your business is in trouble and what you can do about it

Insolvent concept image Businesses don't often fail without warning. Learn how to identify common causes that can sink a business, spot warning signs, create counter measures and be clear about insolvency.

As with everything in life, businesses go through ebbs and flows. Sometimes there are periods of success but there are also periods of stagnation. The former and the latter, however, aren't in the laps of any divine beings. A series of important decisions made by you, as well as the level of aptitude for problem-solving from key staff, can make a business sink or swim.

Even when you do latch onto success, the world can start changing. For instance, things look very different for many businesses now when compared to a decade or two ago. Today, traditional high-street retailers are struggling to stay afloat as the digital boom provides a new online battleground for sales supremacy. Technological solutions have also revolutionised the way we approach day-to-day activities in our businesses, like we perform electronic transactions, use cloud computing to back-up files, take meeting notes with an app, among many other tasks.

In more ways than one, business owners are keenly aware that approaches that once worked have become outdated. Also, what is effective today may quickly be replaced. So whether it is through changing landscapes, strict adherence to old methods, a series of bad judgment or simply inexperience, established small to medium-sized businesses can struggle to adapt and thrive, putting the company at risk.

New businesses can also face distress. Numerous studies have noted that about 20% of new businesses fail within a year; and a whopping 60% shut down within three years. This means that learning how to spot when your business is approaching insolvency is a test of your ability as a company director to adapt and steer the company through choppy waters. The majority of these ominous indications cut across all industries and, as such, can be found in businesses up and down the country and around the world. In this article, our London-based insolvency practitioners aim to help you identify these troubling causes and signs. Also, we aim to share what you can do to effectively manage them.

Eight common causes of failed businesses

Comparable to a person’s health, when a part of our body fails or when we face an illness, there are usually a number of signs and symptoms that tell us something is happening. We can choose to either ignore these problems until the symptoms get worse and unmanageable, or we can choose to get treated once they appear. The same goes for businesses – as a business owner, it is vital that you can correctly identify the problems and work on immediate solutions.

But in order to know if the signs and symptoms are serious enough to cause business failure, you must first know the causes and this can be challenging as the reasons are vast and varied. Having said that, there are eight common causes that are often blamed in the failure of businesses.

1. Poor management of cash flow

Poor cash flow management is always a bad sign for any business and is usually the prime culprit in business failure. It can even happen when your business is raking in the profits. This can be caused by a number of factors. If your business is profitable, yet is hampered by poor cash flow, this can suggest that there could be high expenditures, too much outstanding receivable, or that something insidious may be going on behind-the-scenes (such as inaccurate or even fraudulent transactions).

In the UK, late payments from clients are a serious issue and quite often, you may even pay have to VAT or tax to HMRC on income that you stand no chance of receiving first, which can further deepen your cash flow woe.

Over-expanding the business rapidly can also cause cash flow problems – a difficult challenge for even the most experienced of business owners. Additionally, inaccurate or hastily thrown together cash flow statements can also lead to critical failure. Work with reputable accountants who can review your numbers and produce accurate cash flow forecasts that allow you to make informed decisions.

In short, unless you run a business that experiences known seasonal fluctuations, consistently poor cash flow is the key indicator of a business that is on its way to collapse.

2. Inadequate financing

To kick-start an idea, to expand, or even to address a temporary cash flow gap, you need money. If you do not have enough cash in the bank, chances are you need to borrow. In our article What is the right source of funding for you, we discuss nine common types of funding for small business owners and they are:

Self-funding or love money
Start-up loans
Bank loans
Secured finance from a specialist lender
Angel investors
Venture capital
Crowdfunding
Peer-to-peer lending
Grants

Apart from your family members and friends, it is safe to say that no company would loan you money voluntarily. Small business owners must be prepared to compile financial data into easy-to-understand charts and be ready to answer many tough questions from potential creditors.

3. Ignoring customer needs

It is fair to say that almost all customers want good products or services at a fair price. They also prefer the buying process to be relatively easy (without hassle), and they want to feel valued throughout. If they believe that they cannot get any of these from you, they are likely to go elsewhere.

It takes a great amount of data to understand customer needs – why they shop and how they shop. Listen to what your customers are saying (and also what they are not saying) will allow you to create effective marketing messages that can convince your customers that they need your products or services.

The trick, of course, is to make sure that you are always one step ahead, meaning you shouldn’t start listening to customers only when your sales are down – because by this point it could be too late to save your business.

4. Loss of key clients

Following on from cause above, the inability to retain your key and loyal clients is a sure-fire sign that your business is heading for the knacker's yard unless it changes. There are a number of reasons as to why this often happens. It could be that your customers are getting better offers from competitors; your customer service may not be good; you may be offering outdated products and/or services; and, most importantly, you may not be meeting their expectations.

A sensible counter measure is to review your customer service efforts, your prices, what you're offering in comparison to competitors and your product or service line-up.

It is worth bearing in mind that losing clients are unavoidable sometimes – your clients may move away, retire, or their business models may have changed. To soften the blow of losing clients, you must have new prospects whom you can convert into paying clients. Cultivating prospects usually takes time and effort so make it a regular exercise, otherwise losing clients will surely result in a significant decline in sales and revenue.

5. Lack of management control

In order for a company to be operating as intended, managers have to exert a level of influence over staff to ensure that strategies that benefit the business are routinely adopted and correctly applied. Known as 'management control', it is the process that allows managers to determine if a business is performing in-line with its expected standards and whether resource usage is effective or not. A lack of management control occurs when managers are no longer influencing their staff to implement strategies, and when the management loses sight of these standards.

This lack of control can lead to bad decisions (or even no decisions) spiral out of control, putting the company in trouble.

6. Bad employees

Following on from the previous cause, poor recruitment practice that hires bad employees can also sink a business. The words bad employees refer to staff who come to work late, have a poor attitude, rude to customers or even steal from the company. Very quickly, rude employees can reduce the levels of productivity of your good employees, your stock, or even your cash. In the UK, it is said that 40% of fraud is caused by staff, which amounts to some £76 million a year – now that is a staggering sum, isn’t it?

The management or you (the company director) must regularly review staff performance and get tough on bad employees before it is too late.

7. Growing too fast

Every business exists to make money and grow, either organically or inorganically. Organic growth means using your internal resources and processes to achieve better output – this process is sustainable but slow. Inorganic growth, on the other hand, means you achieve instant market share and revenue boost by acquiring or merging with another company.

When you grow too fast, mistakes can happen. Even in organic growth, the moment you have mistaken temporary demand for long-term prosperity, or you lack a robust process to handle additional client requests, you are likely to make decisions that are clouded by errors, leading the business down a path where it can no longer make enough profit to cover its expenses.

8. Legal action

The cost of legal action – whether you are taking action against another company or you are being sued – is significant. If your business loses its case, the company may have to pay fees that can easily wipe out all the profits made previously. It is not just about losing money too. You also lose time and energy that could be better spent on improving your business. In short, legal action can be devastating for small businesses.

To avoid prolonged legal cases, consider out-of-court settlements, although prevention is a better approach. To avoid being sued, for instance, small business owners may consider:

Getting a solicitor to review all contracts prior to signing
Keeping accurate records and making sure that all sensitive data are safe
Implementing policies and procedures within your business
Being honest in business dealings
Being compliant with the law
Providing quality products if you are a supplier, as high quality usually lowers defects and lessen administrative and legal issues, as mentioned in the article 5 ways to manage rising business costs
Having the right type of insurance to protect your company

Six signs that your business is in distress and at risk of failing

Now that we've established some of the main causes of business failure, it's time to look at some of the symptoms and signs that can be identified before any of those causes come to pass.

1. Sales are down

If sales have significantly declined over a period of time – like sales dipped 20% in the last three months, which were already down 30% from the previous three months – you must realise that unless counter measures are put in place and they can turn things around quickly, your company will fail.

There are many reasons why sales are down and some of them are beyond your control, such as changing consumer taste or a virus pandemic. Irrespective of the reasons, if you don’t have enough cash on hand to tide the company over, then the business is at risk.

2. Little to no capital

Many reasons can contribute to a shortage of cash. Decreased sales, high receivable and big overhead are among the many reasons. Whatever the case, a lack of capital means that you cannot meet ongoing obligations.

3. Creditors are asking for immediate money

The moment demand letters from HMRC, landlord, utility companies and suppliers start to pill up, chances are, they are likely to take action against your company soon. This is a difficult position to be in, so please talk to a qualified insolvency practitioner like our team at Berley as early as possible. Our aim is to conduct a solvency review of your company and discuss all the options available with you.

4. Selling or refinancing assets to raise cash

Assets are an important resource – your need the machine to process order and the van for delivery, for instance. Consider refinancing first, and if you have to sell them to raise short-term funds, you are clutching at straws.

5. Lenders won't touch your business

If you're finding that you can't get any loans to help finance your business, it’s time to examine your strategies because something in your business is causing them to stay away.

6. Unpaid wages

Many small business owners tend to draw a low salary and use dividends to make up the income, but staff wages must be paid every month. If you struggle to pay wages, then you must let your staff know immediately and work out a solution.

What can you do to save your failing business?

As mentioned in the article, there are similarities between a failing business and a failing body. When we aren’t well, we don't try and treat the problem ourselves; we go to see medical professionals who will identify, treat, and cure our health problems.

It's the same when it comes to business. No matter what your experience level is when it comes to running a business (or businesses), not everyone is King Midas who could turn everything he touched into gold. Mistakes are common, changes in consumer behaviour is a given, other factors like changes in government policies, new threats from competitors, weak economic conditions are also beyond our control.

The moment you realise that your business is in distress, actions you can take to reverse the situations include:

Identify the issues – do this quickly so you have time to create counter measures.
Cut costs – it is easy to remove non-essential items, but reducing fixed overhead costs can be a challenge.
Generate new revenue – increase sales by expanding your client base, creating additional services, reducing prices, working with complementary businesses, among other ideas.
Negotiate with your creditors – be honest with your landlord, suppliers and other creditors about your situations as you seek to lower the bills or lengthen the credit period. If you owe HMRC, ask for Time To Pay (TTP) and provide justification.
Restructure your company – make your company lean and agile by improving every operational process.
Talk to a qualified insolvency practitioner – ask them about your options.

At Berley, our qualified insolvency practitioners will listen to you and access your situations, before discussing options that would work in your case. Our discussions will be honest and may include:

How can the company be rescued realistically?
Can you sell the company?
Can a Company Voluntary Agreement (CVA) apply? A CVA is an agreement between the company and its creditors that often leads to reduced and/or rescheduled arrangement of debt repayment.
If all options are exhausted, what liquidation would mean to you and your company?

Can your company avoid insolvency?

Unless a creditor has appointed an administrative receiver to take control of the company’s asset to recover their money, you can still avoid insolvency by talking to an insolvency practitioner and let us work alongside you to address the situations.

Even if insolvency is unavoidable, we can still explore a Company Voluntary Arrangement (CVA) or a pre-pack administration. A CVA, as explained in one of the above paragraphs, often involves paying your creditors a reduced sum over a period of three to five years. A pre-pack administration allows you to sell assets before the appointment of an administrator.

If liquidation is the only option, we would explain what it entails so you could move to this stage efficiently, ending the stress of creditor harassment and working to protect yourself from possible personal liability.

Contact Berley for trusted insolvency advice

The hardest challenge, admitted by many entrepreneurs we have worked with, is to acknowledge that there is a problem early on and seek help accordingly. The sooner one seeks help, the better the chance of avoiding insolvency. Sadly, we have seen too many times that small business owners chose to remain optimistic and hope that the problems would go away – they rarely do.

At Berley, our insolvency practitioners work with small business owners across London. Highly discreet and ethical, we do not judge your circumstances or focus on past mistakes. We also respect your confidentiality. Our goal is to conduct a solvency review of your company and discuss your options. The focus here is about your company’s future, particularly how you can be in a position to continue or start afresh.

Call today on 020 7636 9094 or email info@berley.co.uk for a free initial consultancy. Alternatively, you can get in touch via our online enquiry form and we will be back in touch with you as soon as we can.

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This post is intended to provide information of general interest about current business/ accounting issues. It should not replace professional advice tailored to your specific circumstances.

by robin

6 tips for rebuilding damaged business relationships

People shaking hands Strong business relationships can go a long way to help your company, but when a relationship is damaged, there are six meaningful steps you can take to repair it.

A successful business is all about having successful relationships with your customers, shareholders, investors, business partners, vendors, regulators and even the competitors in some cases.

Building and maintaining good business relationships with your business associates requires time and effort from you and the other party involved to establish a healthy level of understanding, openness, integrity and trust. But when disputes or other unfortunate events reduce the level of trust and damage the relationship between you and the other party, it is time to review the situation and do your best to repair it.

It is worth bearing in mind that a damaged relationship should not go unresolved for too long because it may end up causing both parties stress or even financial hardship, particularly when solicitors are involved and the case goes to court. Relationships also tend to outlast companies, so maintaining healthy relationships can go a long way to help you professionally. If a damaged business relationship is needing your attention at this moment, here are the six steps which can help you get a business relationship back on track.

1. Identify the issue

The first step in repairing any relationship is to recognise what caused it to breakdown. Ask yourself what went wrong and also talk directly with the other party to get their perspective. While there are numerous causes, common issues include:

Poor communication
Lack of collaboration
Lack of respect
Unmet expectations
Money
Unequal commitment between parties
Differing values
Personality clashes

Listening to the other party is key – understand that in a healthy business relationship, you and your business associates tend not to get upset with each other unless the trigger point is something serious. So the best approach is to assume nothing, but ask questions, listen attentively, and seek to clarify.

2. Tackle the issue

Once the problem is identified, a discussion is due with the other party to address it and stop it from escalating further. Sometimes disagreement is unavoidable, but it does not mean both parties cannot discuss the issues calmly and professionally. Avoid making personal attacks or taking things too personally.

3. Admit your mistakes

The moment you realise that it was you or someone in your team has caused the other party to take offence, acknowledge the mistakes immediately and show your commitment to change. Do not hope that the misstep will be forgotten or even forgiven. Remain in control and readily admit any wrongdoings is a sign of maturity and leadership.

If the other business party caused the mistakes – despite an apology is welcome, do not insist that they must apologise. Sometimes people may fear that their apologies will lead to further accusation and conflict, or they simply want time to process their emotions. Let it go if you can, and if you handle the situation gracefully, you will undoubtedly earn respect from your business associates.

4. Conflict resolution

Conflict resolution is at the heart of negotiation. Once you learn what has caused the business relationship to fall apart, you can engage the other party with a greater level of confidence and make sure that the objectives are aligned. If you would like to know more about the benefits of negotiation skills, this post Why negotiation skills are important for small business owners may make a good read.

5. Formulate next steps

Once the issues have been confronted and everyone has had a chance to air their grievances and cool off, it is time to formulate a plan on how to move forward collectively. A huge part of creating a plan is managing the other person’s expectation. Good questions to ask include:

“What would you like us to do to rectify the situation?”
“How do you see we can move forward?”

Defining and agreeing on a clear process moving forward, including how to resolve further conflicts in the future, will allow both parties to work effectively.

6. Rebuilding trust

To rebuild relationships, you need four secret ingredients – respect, empathy, trust and most importantly, communication. Take the step to show your business associate that you are ready to collaborate and you are committed to building a strong, long-term business relationship with them.

Rebuilding trust does not happen overnight. It requires both parties to communicate clearly, recalibrate objectives and celebrate success.

It pays to think about how you should communicate with your business associates so that nothing gets misinterpreted. If you are using email, it is essential that you make sure they can’t interpret your emails out of context. Communication in person is always preferred, even in this digital age.

Build healthy business relationships

For small business owners who are keen to work with everyone, having a damaged business relationship often causes unnecessary stress and financial hardship. So before any business relationships become unbearable, ask yourself what you can do to prevent the relationships from falling apart. The following exercise may help to influence your business relationships positively.

Describe your business relationship with each party that is vital to the health of your business. The party can include but not limited to your customers, shareholders, investors, business partners, vendors, and regulators. Ask yourself if the relationship is healthy (meaning goals are aligned)? Or is the relationship tense and adversarial?
Ask yourself what you can do to improve the business relationships, particularly the challenging ones? Put yourself in the other party’s shoes and see the situations from their point of views.
Focus on win-win even if your actions are not being reciprocated. Focus on the future and ready to be an ally to them is always better than waiting for someone else to change the game.

Berley is here for small business owners

As small business accountants in London, we have seen first-hand how healthy business relationships can help to drive growth. Within the company, our teams also work relentlessly to establish and maintain healthy relationships with our clients, our vendors, our partners, and even with ICAEW (The Institute of Chartered Accountants in England and Wales) which we are members.

Strong relationships help create a sustainable and successful long-term business structure. As a small business owner, if a damaged business relationship requires your full attention, and if you need a pair of helping hard to review certain financial numbers at the heart of the broken relationship, do not hesitate to give one of our small business accountants a call on 020 7636 9094. After all, we are here to ease your accounting workload, provide trusted financial advice and manage your regulatory risks.

Our services include:

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This post is intended to provide information of general interest about current business/ accounting issues. It should not replace professional advice tailored to your specific circumstances.

by robin

How to reach us during the Covid-19 crisis

Due to the current circumstances, the office will be closed until the ban has been lifted. If you need to contact us, email addresses and telephone numbers are as follows:

Understand what business support you can get from the government during the crisis here

Berley Chartered Accountants

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