Much has been spoken about Ireland’s financial turmoil over the past couple of years yet the focus has tended to centre predominately on the economic struggles of both government and traditional financial institutions.

Little has been mentioned of the emergence of so-called non-bank finance in light of increasing caution amongst Irish banks meaning that they are reluctant to lend to SMEs. In other words, the kinds of companies that make up Ireland’s economic backbone, the kinds of companies that have witnessed their working capital dry up. It is for this reason that those very same companies are looking to alternative ways of unlocking cash tied up in receivables, a branch of invoice finance known as invoice discounting.

It is certainly becoming more popular as an alternative way of accessing credit in a cautious market. Typically, the borrower sends the lender a copy of their invoice(s) and up to 90% of the value of said invoice(s) is loaned immediately. The only requirement is that the annual turnover of the company is over £500,000, meaning that it appeals to a large number of businesses unwilling to put their faith in traditional lenders. In the majority of cases, there is no need for the customer making payments to the borrower to know about the invoice discounting process.

A look at some of the deals taking place in Ireland over the past few months would certainly give weight to the argument that the tide is turning in favour of alternative financing methodology. Three of the seven invoice finance deals to have taken place since the end of last year are for amounts in excess of €2million, whilst the smallest amount pushed £800,000, across industries such as manufacturing, distribution, IT services and food & beverage.

The landscape is certainly shifting. Whilst invoice finance may not be the prevalent methodology just yet, whereas previously the ratio sat at 80/20 in favour of the traditional lenders, it is now more of a 50/50 situation. As well as the resurgence of invoice discounting, there is a similar trend in areas such as car finance, leasing and foreign exchange. It is leading to overseas companies such as the UK’s ABN AMRO Commercial Finance considering establishing operations in Ireland.

Whilst the traditional lenders started broadening their horizons in the 1990s, offering a ‘one-stop shop’ service covering the whole financial services spectrum, it is only now that any real competition is beginning to show itself.

Content sourced from ABN AMRO Commercial Finance.

Bibby Financial Services is to start offering the Export Insurance Policy, which protects businesses against the risk of non-payment by overseas buyers, to its customers which will allow further funding for exporting businesses.

The policy is provided by UK Export Finance (UKEF), the government body created to support exporting businesses, as well as SMEs looking to trade overseas, by providing credit insurance policies, political risk insurance and guarantees on bank loans.

Regions covered by the scheme include high-risk zones, such as Greece, South Korea and Israel.

David Arthur, Regional Development Director for International Trade at Bibby Financial Services said:

“Many SMEs face the problem of identifying opportunities within markets which are deemed too risky by some insurers, and this can mean that they are unable to obtain the level of funding they require.

“In some cases, businesses themselves find the prospect of trading in certain regions too much of a risk and the Export Insurance Policy will give such businesses the security and reassurance required to pursue these overseas opportunities.”

Exported goods and services account for over 33 per cent of UK GDP and in last year’s budget, George Osborne announced the government’s target to double UK exports to £1 trillion by 2020.

A recent study from Bibby Financial Services found that one in five SMEs were considering exports as a gateway to growth over the next two years.

The past decade has been a phenomenally successful one for the world of ecommerce (otherwise known as online retailing). The growth of sites such as Amazon and eBay is testament to that, while many of the UK’s biggest firms – such as supermarket chain Tesco – have taken to online retail like a duck to water, the same cannot be said of many small businesses.

High-street woes

Overall, retail sales in March fell by 0.7%, but that doesn’t reflect the whole picture. With many famous high street retailers including JJB Sports, Comet and Jessops falling by the wayside, many retail firms large and small are looking to ensure they remain profitable by focusing more on their online operations.

Last month, the Office for National Statistics (ONS) revealed that, in spite of poor performances on the high street, online sales growth stood at 6% compared to February, while year-on-year growth was a much more impressive 29.6%. This statistic highlights more than most the importance of going online, especially during winter when footfall in shops is usually down.

Non-food items less popular

Partly due to the volatile weather which saw much of the UK blanketed in snow, non-food retail sales were sluggish. The biggest area of growth for ecommerce in March was food sales, which saw a rise of 15.8% year-on-year. On the other hand, non-food online retail didn’t perform to well, as the ONS showed that household goods stores saw sales fall by 10.2%.

In response to the mixed news for the retail sector, City Index’s expert Joshua Raymond had this to say:

“It has been a very challenging time for firms selling non-food items at the top end of the price scale, such as electronics. With no major summer sporting event taking place this year either, consumer spending in this space has been handicapped by anaemic wage growth and high inflation.

“With the Bank of England’s newly announced mandate now making it easier for the central bank to look more towards pro-growth measures likely to see inflation rise even further, and there being no major sporting event this summer (unlike previous years), sales of non-food items will rely on faster UK growth and good weather in the UK”, he added.

“To this end, it is firms that have a solid footing in online retail and a low cost base that will succeed.”

One click away

Nevertheless, the fact is that going online can, if managed properly, help to provide firms with another valuable income stream. If not necessarily guaranteeing profit, it can at least help to offset any losses from other parts of a business, but how can SMEs make good use of ecommerce and what are its benefits?

By using ecommerce, small businesses can:

• Increase their customer base by selling to a wider audience

• They make their firms, as well as their online sales department, more easily marketable

• They can reach more consumers who might not have the time nor means to visit a shop or warehouse

• They can compete with rival firms who have already got an ecommerce operation set up

• Give themselves an opportunity to sell more goods in general

Content supplied by City Index and ONS

Beatrice Bartlay, managing director of jobs agency 2B Interface, is spearheading a campaign to ensure that small businesses such as hers don’t suffer as a result of larger companies taking a lax approach to paying outstanding invoices.

In perhaps one of the most significant pieces of VAT news for quite some time, Bartlay is calling for late payers to face a 20% VAT fine should they exceed a 60-day payment window. After this point, the offending company would pay additional VAT on the goods or services that they haven’t paid for. This ‘extra’ VAT would not be recoverable upon payment of the invoice, meaning offenders end up paying 20% more to their suppliers, whatever happens.

The proposals are gathering support across the business world and particularly amongst smaller players whose operations depend largely on being paid promptly. For example, it has been rumoured that Sainsbury’s routinely takes up to 120 days to pay suppliers, double the amount of time proposed as the maximum by Bartlay’s campaign, a surprising figure given that the supermarket giant is signed up to the Prompt Payment Code.

“This rule change could lead to additional cash being released throughout the supply chain and give Britain’s SMEs a real boost in tough times,” said Bartlay.

Whilst if actioned this policy change could result in a VAT reporting headache for suppliers, it would indeed benefit small to medium-sized enterprises as Bartlay suggests. It is however debatable whether or not major players would be so keen on widespread change such as this. Indeed, the government, whilst expressing sympathy for those suffering as a result of late payments, has all but ruled out legislative change as it does not want to meddle in commercial arrangements between companies.

The government unleashed a major piece of related VAT news in March by enacting the Late Payment Of Commercial Debts Regulations 2013, including the stipulation that businesses could claim reasonable additional recovery costs incurred in pursuing a late-paying business client. But business owners such as Bartlay feel that the legislation doesn’t go far enough and continue to push for a new VAT-based penalty, enforced by law. SMEs will no doubt await the results of her campaign with baited breath.

Content provided by Accordance VAT

New research reveals that small to medium sized business owners in the UK are neglecting to provide staff with adequate training and development support, with almost half (47.6%) of those surveyed feeling that their boss doesn’t take their personal development seriously, and a quarter (27.90%) admitting to having never discussed training or personal development at all.

While the recession may have forced some SME owners to focus their priorities elsewhere, with the economy slowly improving employers need to place a renewed focus on providing structured personal development to avoid staff losing motivation and becoming unengaged, a scenario which directly impacts productivity, morale and ultimately the success of the business.

The Personal Development in the Workplace study, also reveals that the majority of respondents (66%) haven’t been provided with any kind of personal development plan, so are essentially working day-to-day without any long term focus.

However, the research highlighted that process doesn’t necessarily equate to happiness, as despite staff in companies of between 51-250 being 16 per cent more likely to have a development plan, staff actually feel more engaged and discuss their personal development more frequently in small companies of 1-10 staff.

The regional picture also reveals some interesting trends. Notably, that respondents in Scotland feel the most engaged at work, with 62 per cent believing their employer takes their personal development seriously, which is 18 per cent higher than in East Anglia where less than half (44.62 %) felt their personal development was a serious focus for their boss.

In addition, despite being the UK’s largest centre for employment and industry, London and the South East is actually one of the worst regions in terms staff development, lagging behind the majority of the UK (see report for breakdown).

Reacting to the findings, Jonathan Richards, CEO & founder of breatheHR, said: “The results clearly show a fantastic opportunity for small to media sized businesses to gain competitive advantage by spending time developing employees.

“The good news is that it needn’t cost a fortune and with relatively little effort they will increase productivity and reduce costs.”