A recent survey by the Federation of Small Businesses found that SMEs value the skills and experience older workers bring to a business. Nearly two thirds employ staff over the age of 50, and a quarter employ staff over 65.

Significantly, almost eighty per cent of SMEs say they do not enforce the default retirement age, believing that retirement should be based on a mutual decision between employee and employer.

Interestingly, 90 per cent say they would consider an employee going part time or switching to flexible working before thinking about retiring them.

These findings demonstrate the flexibility of the UK’s SME sector in adapting to the changing patterns of retirement
and embracing the new realities of flexible working. It is this resilience that has helped many of them weather the recession, and hopefully will stand them in good stead as we move into recovery.

Perhaps even more telling were the findings that 46 percent do not know what their break-even point is and 49 per cent do not know their gross profit margin!

It is always important for businesses to be on top of their cashflow and to know what their profit indicators are saying, but in the present economic climate failure to do so could be catastrophic.

In our experience businesses owners fail to put adequate financial management procedures in place either because they are too busy with the day-to-day work of running the business or because they are reluctant to make the modest investment needed.

But this reveals misguided priorities. Too many otherwise promising businesses have gone to the wall because of poor financial management.

It doesn’t take much to be on top of your game when it comes to good financial management - but taking your eye of the ball can be fatal.

Please contact us if you would like to know more about how we can help you with your financial management.

To make matters worse, recent research reveals that an alarming 62% of SMEs are now considered to be above the normal credit risk as regards the likelihood of their defaulting on trade payments or getting into financial difficulties.

In part, this is due to a lack of available information on SMEs’ accounts making it more difficult for the relevant agencies to assess their creditworthiness, a situation that has resulted from the reduction in the amount of information SMEs have to file with Companies House.

In the days of easy credit, this shortage of reliable financial information was less of a problem, but in today’s tight financial climate it seems to be having a harmful effect on the creditworthiness of many smaller busi¬nesses.

Without reliable and current information, banks, suppliers, credit insurers, and of course credit rating agencies will naturally be cautious in their assessments.

One way to mitigate the situation is to provide relevant parties with regular monthly management accounts prepared to acceptable standards. Indeed this is something that is now being required with greater frequency.

We would be happy to assist with this if you wish, and discuss other ways in which you might improve your creditworthiness. Please contact us if you would like to know more.

However, there is evidence that HMRC is starting to take on board criticisms that the scheme is overly generous and allows businesses that are essentially no longer viable to continue trading even as they accumulate un-repayable debts.

Businesses wishing to apply should not be surprised to see stricter vetting in the future, and those who have already agreed an arrangement should be prepared for a rougher ride if they seek an
extension of their debt repayment period.

In any event there are many who predict a significant rise in company failures when this scheme
eventually comes to an end and businesses that think any of their customers or suppliers might be among them would be wise to remain vigilant.

Moreover, when the business climate is so volatile with both customers and suppliers more unpredictable than usual, automating key elements of your accounts, can provide management with more finely tuned tools, and therefore greater control over their business.

If you’d like advice on improving your accounting processes please contact us.

In his final Pre-Budget Report before the next General Election, Alistair Darling faced the twin dilemmas of a soaring public finance deficit and a recession-driven reduction in Government income. While conceding that the economy in 2009 had shrunk by more than previously forecast, the Chancellor stuck to his predictions for a modest return to growth in 2010.

The Chancellor also outlined Government ambitions to reduce the budget deficit by half within four years. Some spending cuts were put forward, including a planned public sector pay settlement cap. As for boosting Government income, VAT returns to a standard rate of 17.5 per cent (though no higher as some feared) and there is to be a further increase of 0.5 per cent in employers’ and employees’ national insurance contributions as from April 2011.

Time will tell whether Mr Darling’s final Pre-Budget Report speeds the slow economic recovery.

Figures from over 5,000 firms indicate that both the manufacturing and service sectors showed improvement in the third quarter of the year, the BCC’s latest economic survey reported.

The results suggest that the long decline in business activity is finally coming to an end, although the recovery, the BCC insisted, is fragile.

Confidence was up across the board, the survey found, particularly in manufacturing where turnover confidence climbed 34 points to 36.

Employment in the services industries climbed to its highest level since the third quarter of 2008.

While still a problem for many firms, cashflow has also shown signs of improving: manufacturing cashflow rose by 22 points to -10, while in the services sector it advanced 9 points to -8.

Domestic orders and sales were likewise on the increase.

David Frost, the BCC’s director general, said: “The most encouraging feature of these results is that confidence has strengthened dramatically in both manufacturing and services. In the face of huge challenges, British businesses are showing resilience.

It is, therefore, important to be ready for the changes and the impact they will have on your company.

One of the principal changes, among others, that will come on stream on 1 October will affect the roles played by a company’s memorandum and articles of association.

Company’s memorandum

Under the Act, a company’s memorandum will become a pared down document. For any company incorporated after 1 October 2009, all the memorandum will need to do is to contain a limited amount of information, stating that the subscribers want to form a company, providing the company name and setting out the initial share capital. The memorandum will still be an essential document when it comes to registering a new company but it will be fixed; it won’t evolve as the company itself develops.

What about existing companies? The information contained in the memorandum - the location of the registered office, the company’s objects, the statement of its limited liability, the share capital, the confirmation that it is a public company should that be case, etc - will be regarded as part of the company’s articles of association. When a company wants to amend or change its objects - the statements that set out a company’s activities - it can do so by altering the articles.

New model articles of association

The government, in an effort to simplify company constitutions, is introducing new model or template articles. There are separate model forms for private and public companies limited by shares (the old Table A regime covered all companies limited by shares). The idea is to meet the needs of smaller, owner-run businesses. Should a company want to include issues that are not covered by the model form, it can, of course, add them or create its own articles. Given that many public companies will want quite specific articles, the model form in their case is more of a draft document than a template.

What about existing companies? They simply retain their existing articles. They can, however, opt to update them, dropping any outmoded provisions and including new measures, such as the opportunity to have unlimited objects, a freedom that also comes into force on 1 October 2009, providing the appropriate resolution is passed.

If you would like any help or advice on the new rules, please don’t hesitate to contact us.

The Forum of Private Business (FPB) believes that many small firms will actually struggle to cope with a post-recession upturn in business.

Consequently, the government should step in and make sure both private and public funding are available so that SMEs can take advantage of the recovery.

The FPB was making its submission to the Rowlands Growth Capital Review, set up to establish whether state intervention, along the lines of the old Industrial and Commercial Finance Corporation, will be needed to help SMEs access the capital they need after the recession ends and to ensure growth among smaller businesses.

An inability to secure finance has been a persistent problem for smaller businesses during the credit crunch, the FPB said, and the fear is that, once business activity picks up, many firms will not be in a position to exploit the new opportunities.

Pointing out that there is significant demand for longer-term financing among SMEs, the FPB argued the case for a scheme that provides public as well as private capital.

Specifically, the FPB said that financial institutions should come up with long-term investment options other than venture capital.

Funding should be focused on start-ups but should also enable established businesses to create new products and services.

Moreover, the funding criteria for businesses should be made more flexible. At levels below £100,000, investors need to be offered greater financial incentives, while investments of between £100,000 and £500,000 should be increased and restrictions on lending reduced.

Noel Guilford, the FPB’s national chairman, said: “Small firms are finding access to finance a huge problem and the smallest firms are finding it almost impossible to raise bank finance.

The Rowlands Review will report back in the autumn, and its findings are due to be covered in the pre-Budget Report.

Contact us is you’d like to know more.

Proposals set out in a discussion paper by the International Accountancy Standards Board would mean that all leased equipment - including cars, commercial vehicles, machinery, PCs and photocopiers - be added to firms’ balance sheets, even by the smallest businesses, the Finance and Leasing Association (FLA) has argued.

This would have an impact on up to 400,000 SMEs across the UK, the FLA said, the number that both lease equipment and must prepare financial accounts.

The FLA, jointly with the Forum of Private Business (FPB), has urged that a more sensible approach be adopted, one that takes account of the costs and benefits to small businesses of including all leased equipment on their balance sheets.

We can advise on many issues facing business owner managers, including leasing. Contact your partner to find out more.