Issue 4 Autumn 2014
Controlling costs for future growth With small businesses remaining cautiously optimistic about the economic recovery, in this issue we look at the rising cost of doing business and cutting costs to encourage sustainable growth.
News from Westminster
The cost of doing business
Recovery may have been a long time coming but the Office for National Statistics’ Quarterly National Accounts recently reported that the economy expanded 0.9% over the second quarter of 2014. Businesses remain cautious however, after one of the longest and deepest recessions on record, with 63% of Forum members seeing an increase in the cost of doing business over the last year. This issue of in.form looks at reducing business costs and keeping cash flowing – two of the biggest challenges for your business but the quickest and easiest way to boost your bottom line.
Having your say...
Be prepared for pensions costs Page 3
Cut costs to enable growth Pages 4–5
Giving us your views means we can lobby effectively on your behalf and also helps us to develop the products and services your business needs. Enclosed is our quarterly ballot for members which this quarter is on your plans for 2015. Complete the survey and return it in the envelope provided or complete it online at www.fpb.org/referendum210 by 10th November.
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Remember we’re here to help and advise you whatever your business challenges. Call us on 0845 130 1722
Legislation update 2014 has already seen some significant employment law changes. The last part of the year sees the introduction of several key changes that small business owners need to be aware of. Changes to the National Minimum Wage (NMW) With maximum penalties for non-payment of up to £20,000 and the possibility of being publicly named and shamed, it is worth making a note of these changes. The rates from October 2014 are:
∞∞ ∞∞ ∞∞ ∞∞
21 years and over – £6.50 per hour 18-20 years – £5.13 per hour 16-17 years – £3.79 per hour Apprentice rate – £2.73 per hour.
Shared parental leave Shared parental leave is designed to allow parents to share care for their child during the first year. Although the change comes into effect this year, it will only affect parents of children born or matched for adoption on or after 5th April 2015. In essence, both parents will be able to take shared parental leave and claim shared parental pay after the compulsory two-week maternity leave period. An employee taking shared parental leave can split the leave into up to three separate blocks, but has to give you eight weeks’ notice before a block of leave begins. The scheme also provides each employee taking shared parental leave with 20 KIT-style days. Further, provided that the employee has not taken more than 26 weeks’ shared parental leave, he/she will retain the right to return to the same job.
New rights for consumer redress October also sees the introduction of regulations giving consumers new rights of redress if they are affected by breaches in the Consumer Protection and Unfair Trading Regulations 2008 (CPRs). The CPRs allow consumers to bring a claim via the civil courts for redress where misleading actions or aggressive
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practices by businesses are found to have occurred and have caused them harm. The regulations will also allow the consumer to:
∞∞ Unwind from a contract and get a full refund within 90 days of the contract being entered into or goods being delivered ∞∞ Receive a discount (which will depend on the amount of harm and impact on the consumer), and ∞∞ Claim damages for any additional losses or harm they have suffered. These rules will apply to business and consumer contracts entered into, or payments made, on or after 1st October.
Fathers’ right to time off for antenatal appointments From 1st October, the Children and Families Act will allow fathers to be and partners of pregnant women, to take time off unpaid to attend two antenatal appointments with the expectant mother.
Changes to food labelling regulations From 13th December, restaurants, delis and other sellers of unpackaged food will have to ensure that all consumers are given comprehensive ingredient listing information to make it easier for people with food allergies to identify ingredients they need to avoid.
Reservists’ protection against unfair dismissal From 1st October if an employee is dismissed because they are a member of the reserve forces, the normal two-year service requirement for bringing an unfair dismissal claim will not apply. If in doubt about any law changes, remember we are on hand to help you on 0845 130 1722.
Save time and money on auto-enrolment Our recent survey on the cost of complying with legislation* showed that when it comes to auto-enrolment many of you are ahead of the game. A resounding 90% know of their staging date, and 39% have started taking the necessary steps to get ready. However, 51% of members who responded still had yet to make a start. Staging dates for smaller businesses may seem far away, but average auto-enrolment costs are estimated to be around £8,900, and these are only likely to rise the longer you leave it so here are our useful tips on what to do to keep your auto-enrolment costs down.
Don’t delay – start today! The key starting point is to find out your staging date, your responsibilities, the potential impact on your business and work back from there. If you don’t know your staging date yet you’ll find a useful calendar at the Pensions Regulator website thepensionsregulator.gov.uk. The sooner you start the less pressure you’ll be under and you will give yourself the time to consider the variety of options available.
Do your sums The next thing to consider is the potential costs involved. Some costs you can’t escape and the most obvious will be your employer contributions. Minimum contribution levels start at 1% but will rise to 3% in October 2018, so you’ll need to look at how you are going to factor these in to any longterm financial projections you are working on. Further costs to consider include potential upgrades to your payroll systems and the time and cost involved in running the scheme. The sooner you look at costs the longer you have to weigh up cost-effective options, e.g. software upgrades or outsourcing administration to a third party.
Don’t assume your current pension provisions will fit the bill Any existing pension plan you have may not meet the requirements to be an auto-enrolment qualifying scheme. If in doubt, contact your existing provider sooner
rather than later. As well as advice, they can let you know what options are available. You’ll also have time to shop around to look for an alternative scheme that will suit your firm from a cost and operational point of view.
Seek advice There is no doubt that auto-enrolment can appear quite daunting. Going it alone may work for some, but it’s not something to enter into lightly. If you have no experience of running a workplace pension scheme, don’t bury your head in the sand and leave preparing to the last minute. Seek advice sooner rather than later. The Forum has a pensions partner who can provide a free initial consultation and assessment, together with a written report explaining timescales, illustrative costs and how this will work for your business. They can also provide an extensive cost-effective analysis, set-up and ongoing advice service for your new pension scheme. For more information, contact us on 0845 130 1722. The Forum has also produced a free electronic guide to pensions auto-enrolment which can be downloaded at www.fpb.org/pensions.
Further advice and information on this and any other business issue is also available from the member helpline on 0845 130 1722.
Cut costs to help your business grow Reducing business costs and keeping cash flowing are two of the biggest challenges for small businesses – but they are also areas where you can make a big difference to your profits. In the last Referendum survey, 63% of you told us you had seen costs increase in the last year. For 51%, this meant that you couldn’t grow in the way you wanted to. So, how can you combat rising costs whilst still managing to grow profits?
Look for savings
When you think of growth, cutting costs maybe isn’t the first thing that springs to mind. It can be easier to focus on the ‘sexier’ sides of business like sales and marketing. But business costs are really just the other side of the same coin.
If you don’t know where to start looking, remember that there are specialists who can do this for you, and also help you find the best deals.
Every pound you save is a pound that goes straight on to your bottom line and, unlike a sale worth the same amount, it doesn’t incur a cost. If you’re looking to grow your business then cost cutting is where you can make a big impact, quickly.
Know your numbers In the back of our minds, we all know that we could run our businesses more efficiently, and who doesn’t like saving money in the process? But before you start cancelling services and cutting costs, it pays to go back to the basics. Review your business plan and cash flow. What business functions do you need to maintain to achieve your goals? Is your cash flow healthy? Do you know where you make most money and where you spend it? “Your costs are a key indicator of the profitability of your business, but many businesses don’t have a good insight into this. It’s a critical function and any business wanting to grow fails to notice this at their peril”, says the Forum’s purchasing adviser Matthew Roper from the Buying Support Agency. “How can you seek further costs savings and improve your bottom line if you don’t know where you are right now?”
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Once you know where you’re spending most of your resources, pay close attention to these areas. Are they essential purchases and activities, or somewhere you may be wasting time and money?
Although the amount of information now available on the internet makes it easier to look for and compare prices, you need to factor in the time this searching can take away from other important profit-building tasks. “It’s easy to forget about the time costs of buying,” says Mr Roper. “This may be appropriate when a company is just starting out, but as a company grows, the ownermanager’s time is even more precious, so be sure that you’re investing that time in growth activities.”
Build relationships with suppliers It also pays to have a good relationship with your suppliers. Like most things, this can take time, so think carefully about which suppliers give you most value and where the highest risk to your business is. “We see too many businesses who think that the supplier relationship is just a simple transaction. As well as being able to use a good relationship to negotiate a better deal, you should be able to tap into your supplier’s expert knowledge of their own supply chain,” says Mr Roper. “You might be missing a trick if you don’t sit down and take advantage of those relationships by sharing best practice and finding ways to keep costs low.” Other day-to-day costs – those ‘necessary evils’ like utilities or telecoms – can be outsourced to a third party like a buying group or purchasing consultant who will ensure you’re getting the best price.
Knowledge is power It’s an unfortunate fact of life that costs rarely go down. So how you plan for and deal with price rises is important. Keep an eye on the market, benchmark prices and stay in touch with suppliers and brokers to stop any nasty shocks that could disrupt your business. This gives you time to take advice and plan early.
for the actual materials and how much is transport or insurance? That way, you’re in a better position to ask intelligent questions when prices do increase.”
“For most raw materials there will be price indices that you can keep an eye on to pre-empt any knock on effect,” says Mr Roper.
Knowing what you’re spending and proactively seeking advice to help you become more efficient can make you leaner, more competitive – and ultimately contribute to a more successful business.
“You can also ask for total costs to be broken up into their individual parts, for example, how much are you paying
Many businesses bury their heads in the sand when it comes to costs, but if you wait until there is a problem, you’ll wish you tackled them earlier.
Save time and money – let the Forum review your costs! Members of the Forum can save time by making use of a free purchasing audit. Just give us your bills and our network of independent brokers do will do all the hard work for you to find you the best deal on a number of areas including: ∞∞ Gas and electricity
∞∞ Stationery and supplies
∞∞ Card terminals
∞∞ Business rates
We can also advise on managing employment costs and put you in touch with consultants who provide best practice advice on managing suppliers.
Call us on 0845 130 1722 to find out more. Visit fpb.org
News from our Westminster policy team
Small Business Bill
General Election 2015
The Small Business Bill covers everything from pubs, zero hours contracts, access to finance, late payment and insolvency and has now reached Committee Stage (where it is amended and the wording scrutinised). The Forum gave evidence in October on most topics and specifically called for the Bill to go further in tackling late payment. Next will be the Bill’s Second Reading (debate in the House of Commons) before further scrutiny and it will then be pushed through to the House of Lords.
Ahead of next year’s General Election the Forum has published its manifesto. There are a number of key issues high on our wish lists of wants to feature in the party manifestos. We are calling for some sizeable changes in business rates, regulation, fuel duty and banking finance, among others. The full manifesto will be available on our website soon.
97% of Forum members think property taxation is too high. In our Autumn Statement submission to the Chancellor we are calling for both short-term measures to mitigate the cost rises but also longer-term reform of the system to level the playing field with online retailers.
The Forum will be on a new advisory panel for the Prompt Payment Code early next year. The Code – which is voluntary – asks suppliers to treat their customers fairly. The Forum will be suggesting measures that support greater scrutiny of those that sign up to the Code to make sure that is the case, asking the Institute of Credit Management (ICM) which administers the Code on behalf of BIS not to be afraid to remove a signatory from the register and withdraw the right to use the Prompt Payment Code logo if they aren’t treating their suppliers fairly.
Scottish referendum Politicians, celebrities, journalists and most importantly the people of Scotland, made their views on independence known on 18th September and what we await now is the extent of new powers Westminster will devolve to Scotland. There will be a fine line between ensuring Scotland gets the powers it needs to thrive and making some Northern English towns uncompetitive next to their neighbours across the border.
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Forum manifesto The Forum was out and about at the political party conferences this year, meeting new candidates and lobbying existing ones. With our manifesto out shortly, the Forum has some concrete ideas on how to drive growth in the country whilst releasing some of the regulatory burdens faced by members and is already getting traction with political parties. Look out for its publication later this month.
Upcoming meetings The Forum’s policy team meets regularly with officials and ministers from across government to champion the views of our members. If you have any issues that we can raise on your behalf at the following meetings get in touch at firstname.lastname@example.org.
What’s stopping you growing?
Why small firms need the right environment to grow… Keeping costs low and making sure you have a healthy cash flow presents big challenges for smaller businesses trying to stay profitable and take opportunities in a growing economy. In the last Referendum ballot we asked for your views on rising business costs, here’s what you told us: 63% of small firms have seen costs increase at an average of 4.7% – 3 times the rate of inflation
Most significant costs
What help do businesses need?
could not put growth plans into action
Top tips to cut costs and grow your business
Cut the cost of red tape 28%
Understand your cash flow
Stronger legal powers to fight late payment 19%
Look for savings and find the best deals
Improved access to finance from banks 7%
Plan for cost increases
Better protection and consistency for small business customers
Tighten credit control procedures
The right support and advice to take advantage of opportunities
Explore alternative sources of finance
Get more tips and free resources at www.fpb.org/efficiency
Key dates & events to be aware of in the small business calendar
Global Enterprise Week
Forum Cash Flow Panel
Small Business Saturday
PLEASE NOTE The Forum will be closed from 11.30am on Christmas Eve to 8.30am on 5th January.
Security update We take our data protection responsibilities seriously and want our members to feel confident that the information they provide us with is safe and secure. We need to know who is authorised to speak to us on behalf of your business because only authorised contacts may access our member helpline or take advantage of our services. We do contact our members by telephone regularly but if a key employee leaves, or someone new starts and you wish them to be able to call, please let us have their details as soon as you can. If you would like to check who is authorised to contact us from your business, or add any new approved contacts, please call us on 0845 130 1722 or email us at email@example.com stating your membership number and the names of any approved contacts.
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Controlling costs for future growth in Business