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I thought readers would welcome a change from doom and gloom.  So I’ve rooted around this wonderful thing we call the internet and come up with some positive news for you.  Every cloud has silver lining after all.

Every business cloud has a silver lining

You and your business may be struggling with gas, electricity and oil prices (although they should be falling now), but they’ve prompted people to look at energy saving seriously which is clearly good for the environment.

According to a recent survey from Click4Carbon 60% of us will not turn on our heating in order to reduce costs and the knock on effect is we’re also helping to save the planet. Doesn’t that make you feel better?

And did you also realise that for some the credit crunch could be benefiting their pensions?  How so you wonder? Well, according to David Fripp at KPMG long term corporate bond yields have risen from 5% to 7% helping to reduce some companies’ pension fund deficits.

Falling property prices?  Well, at least those children of yours who’ve not been able to afford to leave home, could soon be able to get themselves on the property ladder and leave you in peace. Now that has to be good news for those who thought children left home in their early twenties.

What about the banks themselves?  Well they may be in trouble, but it looks like they ought to be keeping lending to SMEs up.

But as a result of the banking crisis there’s also been greater focus on social lending.  Internet companies such as Zopa are increasing their responsible, social lending books.  A more responsible approach to lending must be a good thing.

Then there are all those discounters.  Aldi and Lidl are reporting very good results, as people head to buy their cheaper products.

Universities are apparently reporting renewed interest from graduates wishing to stay on and take further degrees rather than face an uncertain employment market.  They’re enjoying a quiet boom which may even result in an influx of better qualified potential employees in the next few years.

The UK travel industry has struggled of late with people often preferring overseas sun to the British weather.  But according to recent reports, bookings for UK travel breaks for next year are nearly double those in recent years, as people opt to stay in this country and save money that way.  Good news for our own tourist businesses.

OK, so I have saved the best for last … The credit crunch is now officially responsible for a massive sales hike in…. wait for it, yes the good old, baked bean.  A food for our times.  Good to see the humble bean finally blowing its own trumpet!

[Picture cred: paparutzi @ Flickr]

Mortgage Black Monday is what it’s been called. The day when one in ten mortgages were pulled.

And that’s been just one day in a shocking few weeks when banks have been collapsing or being swallowed up by new super-banks, while governments around the world are bailing out the financial sector … or not. It could hardly be called a good month for money!

With everyone clamping down at the moment and trying to keep on top of their cashflow, big businesses are not playing fair. Small businesses are being held to ransom as those higher up the food chain delay payments by as much as two months to maintain their own cash-flow.

With Boots leading the way earlier this year announcing it would now pay on 75 days and not the previous 30 days, it’s the small business that’s feeling it most.

So what can be done about it then?

Have you thought about tightening up your credit control? Do you have terms that you send out stating payment dates? Do you have procedures in place to make sure you keep on top of your debts?

Most people don’t enjoy chasing debts, but if you don’t, then it’s you and your business that suffers, so get a procedure in place.

Issue the invoice then make contact several days later to see if your customer has firstly received it, and secondly make sure it’s correct and they are aware of payment terms.

Then don’t fail to chase it two days after it’s due, if it’s not already been paid. You might find this approach uncomfortable, but if cash flow dries up it’s death for your business.

There is no need to be rude or aggressive. Polite and friendly will often get you further. Should a customer be having problems paying, work out a repayment schedule with them. Remember, something is better than nothing in this instance!

OK, so you have your credit control working for you, but still face the possibility of cashflow shortages. Well perhaps this is the time to go and talk to your friendly business banking manager.

Just think, if you are still solvent and moving forwards, you are more likely, even with the current climate, to get a positive response, even if it’s just arranging a small overdraft facility or loan. Don’t forget that even with controls tightening, banks still have products to sell and profits to make.

You don’t like surprises and neither do the banks (oh, how they must be suffering right now!), so a decent business bank manager is much more likely to be open to your requests before you find yourself in desperate financial straits.

I’m really pleased to welcome our latest guest blogger, Gill Millington, to SmallBizPod.  Gill has a wealth of knowledge about finance and small business which she’ll be sharing with us once a month. Do check out her profile and say hello in the comments here, if you get a chance.

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I thought I’d use my introduction here on SmallBizPod to get the inevitable credit crunch post out of the way first.  How’s it affected you and what steps have you taken to counter the financial implications for your business? 

I’d love to hear what you’ve done on this front, but in the meantime here are a couple of suggestions from me.

What often happens when the economy takes a dip is you find you’re trading well with business still coming through the door, but your customers start  dragging their feet as they don’t have cash readily available to pay you. 

And then suppliers need paying on time to keep your accounts with them running, so the knock-on effect begins to get uncomfortable for your own cash flow.  It’s a vicious circle that, if not dealt with, will drag you down.

There are plenty of ways of easing cashflow, but I thought I’d take a look at the pros and cons of a couple of financial products for small businesses out there that might prove helpful.

Factoring

First of all, factoring.  What is it and how does it work?

A factoring company will take one of your greatest assets, your outstanding invoices and pay you a percentage of them up front as soon as they’re issued.  That’s the basic principle, but what are the costs?

There are typically two costs involved: a service charge expressed as a percentage of sales factored, and an interest charge for the cash advances. The service charge, covering sales ledger management, collections services, and if you wish, bad debt protection, can range from 0.60% to 3.0% of turnover.

So the downside?  Well certain types of business will only qualify for what is quite a low % of release of funds against invoice.  Some are typically as low as 60%, and should the invoice be queried, very often the factor will ask for a return of funds until the matter is sorted out. 

Another downside is that very often you will be signing up for a 12 month contract which could make the service expensive if you end up having problems with disputed invoices.

Wage Bill Advance

An alternative option is releasing the value of another major outlay, your wage bill.  There are various options on the market, but one in particular that I know well is called Wageroller. 

Basically, your wage bill is paid by Wageroller for two months or 9 weeks, thus allowing you to use this money for other things.  Then in the third month you pay for month one and so on, and your staff know nothing about it. They all get paid as normal.

Costs involved? Well you pay a one off set up fee for this that is typically in the £1k+ mark, then you pay various fees that would usually equate to approximately 0.75% of the amount outstanding that month as a monthly service charge.

With this particular service, you sign up for a mere 13 weeks and can dip in and out of it as and when you want.  You only pay the set up fee once, and need nothing more than management accounts to apply for it.  No business plan required, no credit checks, and very quick to arrange too.

The downside? You need to be a limited company that has filed accounts at Companies House and has a wage bill of £25K each month.  So that rules out the one man bands unfortunately.

Either product will certainly improve cash flow but talk to an advisor or your accountant to look at them in depth and make sure they fit your business.  You always want to make these types of financial services work for you, rather than you working for them.