Hilton-Baird Financial Solutions’ latest biannual SME Trends Index, which questioned 417 business owners and finance directors last October, has shown most respondents enter January 2012 more apprehensive about the future than they were in April 2011.

With late payment rife, order books down and the challenges involved in accessing traditional funding well-documented, only 31 per cent of respondents are expecting their business to expand over the next six months. Meanwhile, a worrying 20 per cent predict it will contract. Yet there was an underlying theme amongst respondents that the national media is largely to blame for the length and depth of the downturn due to its constant negativity.

Further analysis of the data confirmed that confidence is crucial, as one respondent summarised: “It would be helpful if all types of the media stopped spreading negative news. It is so depressing when it is all doom and gloom. If people feel there is hope, everyone can face the future with a more positive outlook. Now there is never any good news – everything is talked down.”

Such negativity can become a self-fulfilling prophecy that has a detrimental impact on businesses and their future investments and outlook. Given that the independent Office for Budget Responsibility has downgraded its economic growth forecast for 2012 to just 0.7 per cent, the chances of grim vision becoming a reality look increasingly likely.

This mindset has therefore resulted in business owners opting to hoard their cash rather than invest in their future, as one respondent reveals: “We should be recruiting more staff, but the economic outlook is so uncertain that we are holding back on all major decisions. If confidence is boosted, I expect strong growth for our company, if not we could be in for a very rough ride and all bets are off.”

The blame does not lie solely with the media however, with others instead highlighting limited access to funding – which is required to overcome businesses’ cash flow challenges – as a reason for the sustained downturn: “There is not enough money circulating,” explained another respondent. “Businesses are relying on bigger and bigger overdrafts where previously none were required. Small businesses cannot carry the financial burden of non-payment of bills while the banks are not prepared to facilitate credit to the level it is required.”

Managing director of Hilton-Baird Financial Solutions, Evette Orams, has urged businesses to take a thorough look at the wider options available to them: “It is clear that UK businesses – and SMEs in particular – are suffering from a distinct lack of confidence currently. This inevitably leads them to at least think twice, if not defer any decisions regarding investment in their business’ growth.”

She continued: “The difficulties firms have faced in accessing traditional sources of bank finance has served to exacerbate issues, but, by exploring other options available, owners can give themselves the best chances of growth and take measures towards safeguarding their long-term stability. Our survey found that 50 per cent of invoice finance users expected their business to expand in the next six months, demonstrating that by securing a more flexible and targeted cash flow solution businesses can set themselves up for growth.”

A new national programme which will focus on helping small and medium manufacturing businesses to grow has launched.

The new Manufacturing Advisory Service (MAS) is now available to all manufacturing businesses across England. It will be delivered by the MAC, which is comprised of Grant Thornton, Pera, WM Manufacturing Consortium Ltd and SWMAS Ltd. It has been estimated that the new MAS will help to generate £1.5 billion in economic growth, 23,000 jobs and safeguard 50,000 jobs.

Businesses interested in finding out more about the programme can find out more by visiting www.mymas.org.

Business Minister Mark Prisk said: “Manufacturing contributes half of Britain’s exports and has much higher productivity than the rest of the economy so it is essential to our plans for growth. That is why we are taking steps to ensure our industrial base is thriving as part of a strong and balanced UK economy.

“The new Manufacturing Advisory Service will play a key role, providing tailored advice to businesses helping them to grow and thrive, with a specific focus on helping SMEs improve competitiveness and unlock their growth potential.”

Karl Eddy, head of government infrastructure advisory at Grant Thornton and head of MAS, said: ”This type of programme is vital to support Britain’s businesses and economy in growth. MAC is driven by a passion for dynamic, innovative business and has proven experience in delivering advice for growth. As we drive this historically successful programme in to a new era we encourage business leaders, innovators and entrepreneurs in the manufacturing sector to contact a local adviser to find out more about how MAS can deliver real benefits for their business.”

Small manufacturing businesses will also have access to a new initiative recently announced by the Government to improve the global competitiveness of UK advanced manufacturing supply chains. The up to £125 million fund will cover the whole of England and will help to support the UK supply chain, encourage new suppliers to invest in the UK and support economic growth.

There has been a slowdown in the rate of recovery in the Scottish economy, according to the latest Lloyds TSB Scotland Business Monitor.

For the three months ending November 2011, results showed that just under a third (30 per cent) of firms surveyed increased turnover, 37 per cent experienced static turnover, while a third (33 per cent) experienced a decrease. This gave a net balance of minus three per cent; a very slight deterioration from the zero per cent of the previous quarter and the zero per cent of the same quarter one year ago.

This latest Business Monitor shows a slight deterioration and a slowdown in the rate of recovery. A return to recession is not indicated but expectations for the next six months have dropped.

The overall net balance for turnover for firms in the production sector in the three months to end November this year was plus nine per cent. This is better than the zero per cent of the previous quarter and significantly improved on the minus one per cent of the same quarter one year ago.

Service businesses have not experienced such benign conditions with the overall net balance for turnover for the three months ending November at minus eight per cent – well down on the zero per cent of the previous quarter and the plus two per cent of the same quarter one year ago.

Volumes of repeat business showed a deterioration from the previous quarter with the net balance on volume of repeat business at minus six per cent this quarter compared to minus one per cent in the previous quarter and similar to the minus seven per cent of the same quarter one year ago. The trend in the volume of new business is similar. An overall net balance of minus seven per cent was recorded compared to the minus three per cent of the previous quarter and the minus one per cent of the same quarter one year ago.

Export activity has plunged. In the latest three months the net balance of export activity was  minus 17 per cent – a significant fall from the plus 10 per cent of the previous quarter and a much worse level than the plus two per cent of the same quarter one year ago. Export activity appears to have been severely affected by the global slowdown and the sovereign debt crisis in the Eurozone economies.

Donald MacRae, chief economist, Lloyds TSB Scotland said: “This latest Business Monitor suggests the already muted recovery in the Scottish economy has stalled. Subdued domestic demand coupled with the global slowdown has hit both services and manufacturing sectors. There is no definite sign of a lapse into a “double dip” but every indication of an already slow recovery slowing further to the point where growth is negligible or non-existent. In the face of slowing global demand, falling business and consumer confidence in the UK and cuts in government spending, the Scottish economy is struggling to maintain growth and momentum. A more vigorous recovery awaits an uplift in both consumer and business confidence.”

Independent commercial finance company IGF has published 10 New Year’s Resolutions that every small to mid-sized business in the UK should adopt as best practice in 2012.

Tracy Ewen, managing director at IGF, gives her rundown of the Top 10 New Year’s resolutions below.

“A new year is a time for reviewing what’s worked well and what needs to be changed for the year ahead.  With this in mind, here at IGF, we have published our New Year’s resolutions for the UK SME market, with a view to helping businesses succeed in 2012.”

SME New Year’s Resolutions

• Plan, plan, plan! Prepare cashflow projections for next year, next quarter and, if you’re on shaky ground, next week. An accurate cash flow projection can alert you to trouble well before it strikes;
• The key to managing cash shortfalls is to become aware of the problem as early and as accurately as possible. Financial services providers are wary of borrowers who have to have money today. They’d much prefer lending to you before you need it, preferably months before;
• Cashflow problems can often be self-inflicted. Companies which send out incorrect invoices often find that their customers end up returning an invoice and requesting a new one. Make sure all your invoices are correct before they’re sent out to ensure your customers have no excuse for not paying;
• Make sure you have a robust process for chasing up your invoices;
• Balancing credit terms vs cashflow needs is something many businesses struggle with. Be sure to tell your potential customers upfront about your credit terms – before you provide your product or service;
• Know your customers! Some of your customers will pay on time every time – others will be perennial late payers. The more information you have about the customer, the easier your payment collection process will be;
• Don’t always associate higher sales with better cashflow. If large portions of your sales are made on credit, when sales increase, your accounts receivable increase, not your cash. Meanwhile, inventory is depleted and must be replaced. Because receivables usually will not be collected until 30 days after sales, a substantial increase in sales can quickly deplete your cash reserves;
• Consider using an invoice finance provider. These are financial services businesses that can pay you today for invoices you may not otherwise be able to collect on for weeks or months;
• You may be able to raise cash by selling and leasing back assets such as machinery, equipment, computers, phone systems and even office furniture. However, you could lose your assets if you miss lease payments;
• If your cash flow has become stable and predictable, you can consider investing your excess cash. You can earn additional interest income, as well as have the necessary cash to dip into during tough times.

 

73 per cent of the UK’s SMEs are concerned that cautious consumer spending this Christmas will have a negative impact on their business, according to research conducted by payment processing firm Streamline.

The research surveyed small business owners to find out what they expected from the Christmas period in terms of sales and their customers expectations. The results show that:

• 89 per cent predict that difficulty managing their finances will be a major concern for shoppers in the holiday period
• 83 per cent expect their customers will have to rely on credit cards for purchasing

Despite this expectation around card payment preference, less than half (48 per cent) of those surveyed currently accept cards and 76 per cent think that shoppers will be frustrated if they’re not able to pay by this method. In order to meet this demand and start to compete in this sector, a fifth (20 per cent) of those surveyed will look to start offering customers the ability to pay by card in the next six months.

Small business owners are also feeling increasingly pressured by their competitors coupled with it becoming increasingly challenging to capitalise on consumer spending, as demonstrated by the following findings:

• 77 per cent of those surveyed predicting greater levels of competition this Christmas
• 86 per cent of respondents predict that shoppers will go online to avoid crowds this festive season
• As a result, despite 42 per cent of those surveyed not currently trading online, 32 per cent are making plans to trade online in the future.

Jayadeep Nair, VP small business for Streamline commented: “Christmas is always seen as a profitable time of year but with recent reports of a double dip recession, it’s no surprise that many small business owners have concerns about their customers’ willingness to spend this holiday season. However, Christmas can still offer many opportunities, small businesses just need to adapt. Offering consumers preferred methods of payment, competitive pricing, increased promotional spend and a good atmosphere can all help to drive sales. Those business owners who are looking to expand their services next year, whether that is online or offering card payment facilities, are all moving in the right direction. To be successful small businesses must respond to customer demand.”