Friday, 28 June 2013

How to Take Control of your Cash Flow

With British businesses being hung out to dry when it comes to the recurring issue of late payments, it’s no wonder that hopes continue to fade for recovery of the current financial climate. Legislation to reduce payment terms and bind in the contracted parties still doesn’t formally or legally exist, and has adversely affected the cash flows of businesses all across the UK.

A recent survey by BACS Payment Scheme found that 44% of SMEs are currently experiencing issues with late payment, waiting on average 38 days for payment after the agreed terms. With the recovery from the recession widely reported to be hinging on the prosperity of UK SMEs, these issues must be resolved before we continue to see more downward pressure on everyone’s margins.

So how can businesses become proactive towards handling payment issues? Signing up to the Prompt Payment Code, which is a government scheme of commitment to timely payment and encouragement of best practice between organisations and their suppliers, would be a good place to start. However, more can be done by individual businesses to implement the aims of the payment code.

How can this be achieved? Provided below is some guidance that will help your business improve its own financial position and speed up cash flow:
  • Commitment to the best payment practices outlined in the Prompt Payment Code will put pressure on large suppliers to change their buying behaviour and minimise the bargaining power they currently exert over SMEs.
  • Consolidation of payment services through a single provider will speed up settlement times and reduce the hassle of managing multiple relationships and reconciliations.
  • Selecting a merchant acquirer who prioritises prompt settlement of funds from card payments will enable your business to access those funds more quickly.
  • Using an electronic invoicing service can be far more efficient than traditional paper invoicing for both you and your customers to make and receive payments. Invoices can be settled instantly online, allowing your business to get paid faster.
  • Ensure that your business has the ability to accept payments through your customer’s preferred payment method. Electronic payments are fast becoming the norm, so it is important that you possess a variety of payment acceptance facilities.
Amending your businesses’ financial processes in conjunction with the aforementioned guidelines will boost your cash flow and inspire confidence in both your customers and suppliers. Certainty of payment is essential for staying afloat in this time of recovery, and will create numerous opportunities for growth throughout your supply chain. If you are to prevail through these rough economic times, your business must be proactive in creating a positive change in the way payments are handled and processed.

Thursday, 20 June 2013

Business Support – are you feeling it?

One of the biggest aspirations for most businesses is to grow. This at times can seem like an unachievable task, especially in a climate fraught with barriers and limited support. So the question I ask is, does there need to be more support to help guide businesses through the murky waters to growth?

It is clear when speaking to businesses that there is a definite gap in the providers of support and advice being given to SMEs. If you need business advice and guidance, where do you go? The banks, who have traditionally been seen as a reliable source of business support have reduced the decision making power of their bank managers, - or in some cases removed them altogether - leaving businesses to fend for themselves when it comes to sourcing the right financial services for their businesses.

Just one example of this, which highlighted the issue of awareness, or lack thereof, of government lending schemes, came after a conversation with Alan Todd, Director of Cambridge Business Advisers. He made a very good point that “There’s still little knowledge of what Government schemes can offer. Despite all the money that is going into the various schemes there has been little promotion of the schemes themselves. The two examples of Start Up Loans and grants to manufacturing companies – often SMEs are totally unaware these exist. Going back a few years, organisations like Business Link and its advisor network would have been advising local companies on what support was available. Business Link has now all but disappeared; it’s just a website. The Department for Business, Innovation and Skills now has to consider how they communicate with SMEs.”

This just goes to prove that even in an area as crucial as advice on sources of business finance, there is a serious lack of knowledge share transferred to businesses. This is seen right through to lack of more general business advice, with a recent FSB survey showing that 37% of businesses go to friends and families for support and guidance, as they don’t know where to turn. Of course, the people they’re speaking to are likely not trained professionals with vast years of experience in managing and running a business, so are usually not the most reliable source of information!

There are however some companies who are seeing this unnecessary and potentially fatal gap for businesses and filling the void. Just one example is the business advisory group IBD who offer a full business advice service for businesses of all sizes. These type of companies are going to be crucial in not only providing support for businesses now, but also in bringing about change at a higher government level to ensure businesses are better served in the future.

CashFlows is also stepping up to the plate by creating a Business Growth Guide. This is full of information and top tips for online business or those thinking of using e-commerce as an additional sales channel. Check out the business growth guide here.

It is clear that more needs to be done to support businesses in their struggle for growth, and offering useful and intuitive advice is what is desperately needed. The government has the power to change and improve the support system for businesses, and this needs to be a priority, or the economic growth targets will not be achieved.

Thursday, 13 June 2013

Putting The Brakes On British Business

I wrote a blog last month that spoke about the unnecessary friction within our industry and the simplicity that all of us who shop online crave. Having taken some time to think about this, I’ve come to realise that this friction isn’t just for consumers but is also prevalent for businesses in their dealings with financial services providers.

Let me give you one example. A new business wanting to sell online will require both a merchant account (for accepting card payments) and a business bank account. Simple? However, all but one of the banks have sold off their merchant account divisions. So what impact does this have? Well, it means two separate application forms (most likely paper), two sets of separate correspondence to keep up with and (more often than not) two, three, four, five, even six weeks before their accounts are approved and you're ready to trade. Throw in a web developer, accounting software a shopping cart and that’s enough friction to start a bonfire!

Once up and running, things don’t get any easier. You start growing and see a potential customer base in Europe, so want to open a Euro account. Repeat the above process all over. You want to integrate your expense reports and payroll into your banking? Best of luck, you’ll need it! Want to see the sum total of your business transactional activity in one place to save you time and hassle? You’d better be good at Excel or know someone who is!

I’ve previously written about new entrants into financial services and the success they’ve had in shaking up the market. One of the inherent advantages these providers bring is the speed at which they make decisions and can adapt to business’s needs. Clearly there are regulatory requirements that cannot and should not be avoided in setting up and managing business bank accounts. Sometimes though, innovation should be simply about solving the real issues that customers have, rather than creating solutions to problems that don’t exist.

Consolidation within the UK financial services industry has caused many of the banks to sell off their merchant account division together with other services deemed peripheral. Unfortunately the requirements to source these same services remain identical for businesses wanting to trade online. Business owners have no real love for their financial services provider – and after the last five years, who can blame them? – but it’s difficult to disagree with the argument that they are being short changed by cumbersome processes and legacy systems that at best are an irritant and, at worst, result in unnecessary friction turning into the brakes being clamped onto a business’ growth.

Any financial service provider who can remedy these issues truly would be innovating.

Tuesday, 4 June 2013

Rise of the Alternative Payment Solutions

With consumer behaviours rapidly evolving, the ability to choose how, when, and where to pay for goods and services has never been so important. As alternative forms of payment are emerging, a flexible approach to accepting payments is vital to the customer shopping experience. Whether it is online, mobile, e-wallets, or contactless payment acceptance channels, businesses have opportunities to generate increased sales by offering these options to their customers.

The global economy has seen significant growth from the emergence of electronic payments, with additions of over $983 billion between 2008 and 2012 according to a recent Moody’s report. This can be attributed to increased convenience, greater access to an increasing number of channels, and guaranteed payments for both consumers and businesses. The content below is to inform you on methods of alternative payment used by consumers that should be considered by your business:

Online: E-commerce has driven significant economic growth in the UK, with contributions by this channel to the GDP expected to reach £225 billion by 2016 according to a recent study by the Boston Consulting Group. Accepting online payments through your website will provide your customers with a convenient, secure way to pay for goods and services with just a few clicks of their mouse. Online payment processing can be integrated with your business bank account, making it easier to reconcile your funds and accelerate your cash flow.

Mobile: Developments in mobile commerce have allowed businesses to offer improved access to their products and services via mobile apps making it easy for consumers to make payments on their mobile devices. Consumers can now make purchases anytime and anywhere, without sacrificing efficiency and security. Businesses can also take advantage of mobile Point of Sale solutions allowing them to accept card payments whilst they are on the move.

Electronic Invoicing: Electronic invoicing is a highly efficient way to accept payments from your customers, accelerating the speed of incoming payments and reducing the time and hassle of chasing customers. It will enable your business to track and manage your invoices and balances, while also dramatically reducing the time and costs associated with invoicing. Look for a solution that is integrated with your credit card processing for easier management and quicker access to your funds.

E-Wallet: Electronic wallets are used for online and mobile purchases where a customer can securely save their credit or debit card details, automating the order form process. This eliminates the need to re-enter card details when making multiple purchases, and can be accessed by password, PIN, or even voice biometrics. Protecting the contents within the e-wallet is the responsibility of the e-wallet provider, allowing you to avoid situations regarding mishandled or misused customer information.

Contactless Cards: Although they can only be used in a physical store, contactless cards allow consumers to make low-value purchases quick and easy by just placing their card in front of the card reader. Contactless provides a more efficient transaction process, allowing you the opportunity to serve more customers through reduced queues.

Flexibility towards emerging and alternative payments can become a huge asset for your business. Only accepting cash and cheques will limit how and when you can serve your customers, and will put you in a competitive disadvantage to those businesses that have already embraced the emerging technologies. Prepare your business for the future, and adapt to customer expectations. You don’t want to be in a position where you are scrambling to catch up.

Written by: Ronnie Kondub