Listen up, eyes open!

Having been a Business Consultant, Problem Solver and Mentor for over 5 years, I thought that it was about time that Hall of Finance put down on paper some of the “common” themes that it has come across when dealing with SMEs and Owner Managers (OM’s).

These themes would appear to neatly fit into ten headings, so here goes:

1. Oops, too late!

Why, oh why, is the British mentality not to ask for help until it is too late, rather than obtaining ongoing support and guidance to avoid the problem occurring in the first place, or at least to stop it from escalating out of control!

This seems to stem from the fact that SMEs/OMs don’t really want to invest their limited working capital resources in preventative action. However, it then ends up costing them twice or three times as much in finding a cure, assuming it is not too late to find one.

Hall of Finance provides a Board Meeting Facilitation service where we prep, organise, chair, action plan and follow up on the meeting to help keep SMEs on track, which should then avoid the need for “Oops, too late“!

Such board meetings can be held monthly or quarterly to suit. The prerequisite to the first one is the Banking and Financial Health Check covered in the next point.

2. There is nothing wrong with the health of my business!

One of the services that Hall of Finance offers is a face-to-face meeting of a couple of hours to undertake a Banking and Finance Health Check, covering an examination of the bank accounts and all company financial outgoings. Clients would get change out of £150 for this service and this low investment can yield big returns if bank borrowing/other finance charges can be restructured.

For example: “a solid overdraft of £10,000 rescheduled onto a three-year loan would save £300 in arrangement fees alone and at, say, 3% OBR (on both overdraft and loan), around £525 in interest charges based on a reducing loan balance – in total £825.” As they say in the USA, do the math!

Saving £825 – Investment cost of Hall of Finance Advice £150 = 550% ROI! Not bad.

A couple of other notable finds on these checks have been:

  • Advising the company directors that their Combined Insurance Policy was covering their employees for using the company vans over the weekend and had done so for the last five years! Once stopped, the future annual saving was £150. Lost savings through unnecessary additional costs over the previous five years was £ 7500…. OUCH!
  • A lapsed Public Liability Insurance Policy
  • Payments for services which were no longer being used, but where the direct debit or standing order had not been cancelled.

A few of my clients undertake these health checks on an annual basis, as a “reassurance exercise” that they are on the right path. In the big scheme of things, and even when no savings have been identified, our Hall of Finance fees are negligible against the peace of mind that they obtain. The majority, however, baulk at any such proactive involvement and bury their heads in the sand. Knowledge is power, an important point to remember.

3. All Banks are the same – aren’t they?

An emotive question on which we could write a whole blog. Wait a minute, we have done already!

In summary, however, if you want your bank to work harder for you and be more personal than the following is key:

  • Identify what you bank is looking for from your relationship
  • Know your local management team, not just your own relationship manager, but also their boss and support personnel. Names, phone numbers and email addresses.
  • Get all deals confirmed in writing to avoid misunderstandings that will only end in tears.
  • Be realistic in your requests and have projection data that you can back up with facts, track record evidence and research.
  • Never help yourself first and ask later!
  • Be prepared to accept some risk yourself. Start negotiations at 50/50 as there is no such thing as SME/OM risk-free borrowing.

4. They are going to pay me, they said so!

I have lost count of the number of times that I have visited a business and enquire about debtor collection and establish that there is no formal set procedure for escalating overdue debtors to management, assuming that it is not already (by default in the case of an OM) a management responsibility in the first place!

Often, I am told that everyone is too busy chasing new work, which may not get paid on time anyway!

Always remember, cash is king! It generates the working capital required for any business to survive and it pays the wages, including the Director’s!

My thanks to The Guardian Newspaper for what to do if you have not been paid.

5. My cheque is in the post, honest! –  a too frequent response to someone chasing an overdue payment from you.

This should only happen if you don’t keep control of your debtor collection. However, we did once come across a medium size business whose credit controller prided himself in paying creditors on the day that their bills came in. Notwithstanding that, this caused the company to dip into their own overdraft. When asked about his debtor collection, he said: “well I don’t like to put pressure on them as times are difficult and they have never let us down.”

The MD of the company who was with me needed to sit down afterwards as he felt faint! It had been going on for years and was costing them about £2000 a year in interest charges.

This shows the importance of having management accounts showing debtor and creditors on an aged basis and, most importantly, making sure management actually look at them!

This has been part one of this blog and I will leave it here for now. I shall leave you with time to digest my findings and I shall share the next 5 issues with you soon.

Until then, ears and eyes wide open, please!

By Graham Hall, Hall of Finance

“Helping businesses of all sizes to survive and thrive, through a mix of hands-on problem solving, mentoring and as a sounding board.”

Give Graham a call on 07889 780170 or drop him an email at [email protected].