This year’s Budget is increasingly being positioned as a matter of political life or death. But for many small businesses it’s more important than that.

Small business confidence

The O2 small business confidence survey of 3,000 SMEs released today highlights resilience and some cautious optimism with over a fifth of small firms expecting growth over the next six months (21%) and 66% determined to survive the recession.

A Forum of Private Business survey at the end of last week also showed some green shoots with 25% of their panel of SMEs saying they’d seen an improvement in the demand for their products and services over recent months.

Nevertheless that leaves a huge number of small firms feeling the pinch and living a precarious existence. Nearly half (49%) in the O2 survey said their confidence was at an all time low and the majority still cited cash flow as their biggest threat to survival, with 62% seeing scant improvement in bank lending behaviour.

An SME survival divide?

Both anecdotally and from surveys it looks like there’s a small business divide appearing. At the centre perhaps 50-60% of businesses are doing what it takes to survive and although this may be the worst recession for 60 years, they are quietly confident of getting through tough times.

But at the extremes, there are 20% who will flourish during recession and 20% who are in serious danger of sinking.

It’s very much a thrive, survive or nosedive outlook.

Budget leaks

Treasury purdah is dead and these days most of the Budget is heavily trailed. In a carefully and clearly briefed piece in the Financial Times last week, the government put a scheme to top up supply-chain insurance at the heart of its Budget response to SME concerns.

Andrew Jupp at accountancy firm Tenon suggested to me that this move was valuable as part of the overall efforts aimed at small and medium sized businesses.

But he also pointed out that just like the Enterprise Finance Guarantee (EFG) Scheme we’ll only be able to judge its real impact when we see how it’s implemented and how many businesses are, in practice, able to benefit from it.

The Telegraph has also hinted at business-related moves expected in the Budget.

These include tweaks to Export Credit Guarantees, a temporary increase to £50,000 in the annual investment allowance, but no immediate support for high tech companies struggling as VC funding has fallen by 70% in 2008 alone.

What SMEs really need from the Budget

All these elements are relatively minor and perhaps indicative of the huge debt government is increasingly saddled with.

But when it comes to the crunch most small businesses focus on cash and tax, if you ask them what they want from the Budget.

Budget 2009 - the small business twitterati speak!

A quick poll of Twitter found startups, SMEs and freelancers focusing on cuts in National Insurance, extending the VAT threshold, amending corporation tax rates to benefit small, rather than big businesses, more pressure on banks to lend and incentives for investors, like extending tax relief on the Enterprise Investment Scheme.

Meanwhile, The Federation of Small Businesses (FSB) has a whole raft of Budget proposals including resurrecting a post office bank and the introduction of a ‘corporate mediator’ to intervene in disputes between banks and their business customers.

It also points out that National Insurance and basic rate tax thresholds have fallen behind increases in the National Minimum Wage. This means benefits for the employed, benefits for the Treasury and SMEs being £8.28 a week worse off per employee.

So, in common with many businesses it’s calling for an increase in the NI and tax thresholds.

Others want to see the temporary VAT reduction extended to avoid more administrative headaches in the run-up to Christmas.

The FSB also proposes automatic business rate relief (less than 50% of small businesses eligible actually receive it at present) and reform of the AIM market for growing businesses.

AIM needs help

AIM and many of the growth businesses listed on it are suffering badly since the banking crisis hit home. It’s seen a 34% drop in the value of trading in 2008 compared to 2007 and IPOs are a sixth of what they were.

As a result both AIM itself and the FSB want to see Venture Capital Trusts allowed to participate in trading on the market to help increase support in public equity funding for smaller businesses.

Heads will roll

This year’s Budget is bound to be shrouded in nitty-gritty, indecipherable detail.

But SmallBizPod will be recording its regular Budget podcast so look out for it on Wednesday afternoon for some clarity on what it means for your small business.

Finally, as one surreal twitterer responded when I asked him what he wanted from the Budget: “Bring me the head of Alfredo Garcia”.

No doubt opposition parties will be calling for the head of one Alistair Darling. Whether the clamour will be added to by small business owners after Wednesday remains to be seen.

[Update: Take a look at our analysis of what The Budget means for small businesses and our annual Budget Podcast for more information and advice]

OK, I think we’ll take all the digs about journalists going off that nice Mr. Darling because of the hikes on alcohol as read – suffice it to say a lot of us will be binge buying very quickly.

There’s a lot of positive stuff in this budget, though – and after Northern Rock there needed to be. It won’t meet the approval of every business; increased tax on larger cars is going to appease the green lobby but not people who need the vehicles for their livelihood, for example. The money to get people back to the workplace is welcome, though, as is the small drop in corporation tax. CGT remains untouched, in case anyone was wondering but the small firms loan guarantee’s pot will be increased and there will be funds available to get women into business.

Nothing dramatic or unexpected, then. There is more tinkering; the law that would have stopped husbands and wives splitting their tax allowance is delayed which is a relief as many thought it would be unworkable.

The really fun bit, though, is the threat to start taxing plastic bags if shops don’t start charging for them. It will be entertaining to watch the inevitable backlash against this one. At the moment loads of people have agreed that plastic bags are a bad thing, in fact I’ve seen only one view questioning the received wisdom that they are harmful. Noticeably I haven’t seen much coverage of the actual science behind getting rid of them. I wonder how long it will be before someone starts asking: are you *sure* about this..?

When I first started my own business some three years ago, I was an avid frequenter of small business and startup forums (and I still am). 

While picking the brains of various experts on the boards, there was one name that kept cropping up with really excellent advice on the nitty-gritty of basic small business bookkeeping, accounting, tax and VAT.

Among UK startups on those forums I reckon he built quite a reputation for himself.  In many ways he was one of the internet’s first ‘social accountants’.  Someone who understood the social and marketing dynamics of the web, even before the phrase Web 2.0 had been coined.  It seems appropriate then that he became my accountant.

Well, James Smith (for it is he) has just released a very practical, clear and concise collection of advice on small business bookkeeping, accounting, VAT and tax in a new book called ‘Keeping It Simple’ published by TaxCafe.  And I’m not going to miss the opportunity to plug the fact that my very own accountant is now a bona fide celebrity in print as well as online.

The book really is an excellent guide for any startup or SME.  It’s not rocket science, but it does give you in one place all the basics and real life examples.  It’s not full of ‘accountants’ speak.  It’s full of advice that any layman will find easy to understand.

I admit here and now that my own basic bookkeeping and accounting left quite a lot to be desired for a year or two.  Getting it under control, however, makes a big difference to your business and how you plan for success.

So, if you’re in the market for some guidance on the subject, I’d highly recommend you check out James’s book. 

[Please note, not all James's clients tan themselves on Caribbean beaches, laptop in hand, but we can all dream!]

This is getting disturbing. I know, I know, I should be spreading Christmas cheer and with a bit of luck and a prevailing wind I’ll do so next week. You’ll be preparing for tonight’s office party (fact: more companies have this Friday as their office party than any other night) and want a bit of light relief.

I’m talking about the development widely reported yesterday in which our Government, as well as several others, has agreed to step in and help banks when they run into trouble. The Times comments on it here, the Telegraph comments here and there are of course others.

So the Prime Minister thinks it’s a great idea, no surprises there. And the Telegraph is critical of the PM’s apparent policy – no surprises there either.

My fear is that things are slightly worse than we thought. There have been recessions before. The Depression in the thirties, now slipping from living memory, was appalling. At no stage, however, did anyone turn around and ask the world banks to pump money in to shore things up. Just how bad does it have to look before the UK and several other countries insist on pumping loads more money in? I have an unpleasant feeling we’re being treated as the patient who hasn’t actually been told the whole truth, but who can see the massive amounts of treatment going on around him. I hope I’m wrong. As Jeff Randall points out in the Telegraph piece, this isn’t a cancellation of a load of debt, it’s a postponement.

Oh, and I take it everybody noticed this? Good. ‘Tis the season to be cautious…

It’s December so I’m going to allow myself the use of the ‘C’ word. No, I’m not going all festive just yet, bah humbug to that until I start my Christmas shopping next week. However, there are things we need to consider about Christmas in terms of financials.

First, how much do you spend on entertaining your employees? The tax authorities say it’s all tax free but the smart money such as the tax advice network says keep it to £150 if you want to avoid your customers getting hammered for receiving a benefit in kind. Entertaining clients and prospects, meanwhile, is not tax deductable any more than during the rest of the year. So you can feed them by all means but whatever you do don’t buy any presents or cards and expect HMRC to help.

Another soiund financial practice if you’re the type that has office knees-ups in the office – or ‘buys a crate of lager and hopes that’ll do’ – is to check your insurance is up to any breakages and damage that might happen if someone gets carried away. Personally I’d be more inclined tokeep any celebrations safely away from the office, but what do I know.

Anyone with any useful insights into managing money over the Christmas period – particularly getting payments out of people when they think their accounts department should be on holiday – is more than welcome to comment to this blog entry!

Ouch. Someone loses a couple of CDs and HMRC – and the Government – have to admit that two twenty five million [edited] sets of details have gone missing. Very much an ouch, although there appears to be no need to panic as there’s no evidence to suggest anyone is misusing the data. My best guess is that the CDs went missing in the internal post.

The problem arose, you’ll remember (oh come on, you’ve read the story as avidly as the rest of us) when someone sent a couople of CDs in the internal post at HMRC and they didn’t get to their destination. So they re-sent them, and it was only when it emerged that the original CDs had gone missing that there was any outcry.

OK, let’s re-cap. Someone sent two CDs in the ordinary internal post which had 2,000,000 25 million address details on them, and plenty of bank account information. They didn’t record or register the delivery, send by courier or a security firm, it went in the internal post.

I don’t suggest there’s any deliberate wrongdoing in here. But funnily enough, my records are held by HMRC as well. And I can’t help but feel really quite strongly about it when I hear that if someone in another office needs them they’re likely to be whacked onto a disk and stuck in an envelope, then trusted to an ordinary postal system.

I’d guess we’ll be getting an announcement about a significant upgrade to the process any time now.

I had an interesting discussion with a commissioning editor last week. It was, you’ll recall, shortly after the mini-budget. Anyway, I had a case study of a company that had saved loads of money with remote technology rather than physically visiting people to do its work, and a nice study from the Carbon Trust about how small business could be saving billions if only it would get its act together and put some green measures in.

I’m the first to admit it’s a perennial story that had been told a number of times before. I couldn’t help but be surprised, though, at the answer – if it wasn’t about the shift in capital gains tax, the paper wasn’t interested.

So, do we assume that when there’s a single major event that it’s officially deemed that nothing else is happening of any interest? At all? The funny thing was that on the same day I had the polite turn-down I was chairing a meeting of small businesses, a focus group thing, and asking them what issues were affecting their day to day activities. Granted my pushing of a green agenda didn’t deliver anything they wanted particularly – green issues were a sidshow, they reckoned. You don’t have to agree with the view to accept that it exists. However, CGT didn’t come up much until they were pushed, either.

I’d be very interested to hear from readers about just how important the CGT debate was to them, and whether other financial considerations are actually more important.

So, what did we all make of that nice Mr. Darling’s speech yesterday? Odd not to see Gordon Brown telling us all what we won’t be able to afford for once, seems he’s found someone with even less presence to deliver the thing. Not that this should matter; a number of commentators have barracked Brown for not having much of a personality and twitching a little when he speaks; personally I’m delighted to have someone at the top who’s less concerned with their appearance than with what they actually have to say.

The problem is that for the business community not all of what they had to say was particularly helpful. The BBC has a point by point summary here, and two points apply in depth to entrepreneurs. The first is a unified rate of corporation tax. Believe it or not I’m quite fond of this one. It’s easier to keep track of where you stand and for once involves less red tape.

The other measure is a good idea on the face of it – increasing capital gains tax. The idea is to prevent wealthy people becoming even wealthier at the expense of everyone else by hammering them for tax when they sell a company. So buying a company for a song, cutting out some of the deadwood and flogging it on ceases to be the moneyspinner it was – if you want to buy a business you might as well do it for the long term.

Which is fine and an excellent thing. Only…there’s no real incentive to keep running it, either. There’s no tax break for longer-term business owners. My concern is that instead of simply discouraging the chancers, the private equity community and the asset strippers (I have reservations about condemning the private equity people out of hand but that’s for another time) it will discourage the genuine entrepreneur – the person who wants to set up a business, run it for half a decade then sell it to get their house in the country and let someone else take over. These people exist and are very good at starting companies – and we do need those ‘starter’ people as well as the longer-term managers.

So, my view is that it’s not a bad start but if that second measure could be tweaked by the time it comes into an actual budget so that it looks like more of a precision instrument than a blunderbuss, that would be a good thing.

(And yes, I know what people are really watching is whether this not-quite-a-budget can restore Brown’s credibility after the not-quite-an-election debacle last week, but this isn’t the place to discuss that. Also, I’ll bet people will be interested in the financials for longer than they’ll care about Gordy’s career prospects…)