Banks, Lenders & Investors Cash Flow & Forecasting Finance General Rescue, Restructuring & Recovery

Is it time to introduce more resilient business systems for post-lockdown?

business systems need to become more resilientJust in time (JIT) business systems of supply for everything from supermarket stocks to manufacturing components and raw materials have been the dominant model for some years.
While it offers huge benefits, including less storage space needed and less capital tied up in stocks, the disruption caused by measures to contain the coronavirus pandemic has revealed some major flaws in the model.
When such an integrated global supply chain breaks down as has happened recently the impact on business is considerable where shortages of stock have arisen due to road, sea and air freight grinding to a near-halt.
Indeed, JIT relies on many different components arriving on time often from myriad sources such that any one item can bring all production to a halt. The current situation has magnified the vulnerability since all the different supply chains will need to be fixed before production can resume..
Systems resilience describes a system’s ability to operate during a major disruption or crisis, with minimal impact on critical business and operational processes and the pandemic has revealed that in many cases it has been sadly lacking.
While many businesses have ceased to operate as a result of the pandemic, thus reducing demand for some categories of stock, there will come a time when those that survive will need to resume, and where different business systems may need to be developed to make the production more resilient and perhaps protect it from future similar shocks.
So now is the perfect opportunity for businesses to consider how to make their business systems and models less vulnerable in the future.
Firstly, this will take a change of mindset away from profit at all costs towards sustainable profits that factor in risks and resilience rather than simply focusing on cost reduction. The profit at all costs mindset has many short comings, not just vulnerability but safety also and was a causal factor behind the Piper Alpha Disaster that led to 167 oil rig workers dying.
It is also interesting that the US investor Warren Buffet, of Berkshire Hathaway, has sold his firm’s entire holdings in the four major US airlines in the belief that the post-pandemic world is likely to be very different, saying “We will not fund a company … where we think that it is going to chew up money in the future.”
Buffet is widely respected for his investment skill over the decades, so it is worth paying heed to his decisions.
As part of the longer-term thinking about business systems, companies will also need to improve their balance sheets to help withstand future shocks like the banks have been forced to do since the Global Financial Crisis of over ten years ago.
However, business should also, in my view, consider the benefits to be gained from nurturing relationships with reserve suppliers as well as perhaps maintaining larger reserve stocks of those materials or parts they need to sustain productivity during interruptions to supplies.
It may be that this will mean larger onshore storage facilities than they have been used to, but while this might mean lower profits and lower dividends for investors in the shorter term, it will provide greater security for the business and its owners in the medium and longer term.
The so-called “new normal” is likely to be very different for businesses and economies as the restrictions on movement are gradually lifted and it is likely to be a considerable time before we get there, but arguably this is an ideal time for businesses to rethink their business systems and prepare for a more sustainable future on many levels.

Finance General

Updating the Data Protection Act 1998

keyboard illustrating data securityData on people is highly valuable and used by organisations for a variety of legitimate purposes, not least for targeting business marketing, but also for providing advice or monitoring health as well as other purposes such as for research.
But such information is also valuable for those with less honourable motives and rarely a week passes without news of an organisation’s database being stolen or “hacked” for nefarious purposes.
Any business that holds information about people must be registered with the Information Commissioner’s Office and must comply with the Data Protection Act 1998 which focuses on the use of such data. This is about to be updated to also focus on the security of data.

GDPR, the new EU-wide data protection legislation

The Data Protection Act 1998 will be updated by the GDPR (General Data Protection Regulations) which comes into effect on 25 May 2018 and imposes huge obligations on Controllers and Processors of Personal Data with scope for large fines.
The UK Government has confirmed that it will comply with GDPR regardless of the decision to leave the EU.
GDPR is designed to improve consistency in protecting and strengthening consumers’ rights over their personal data, although work is continuing on refining the regulations.
Even the smallest SMEs hold and process data on individuals. They are subject to GDPR and will be required to document decisions that are made about processing and the security of that data. This means showing that the data has been lawfully collected for specified and legitimate purposes, and that the details of what has been collected are specific and limited to those purposes.
The information must be protected, held securely and stored for no longer than required.
Businesses should be looking at their data collection, storage and processing systems to be ready in time for the new regulations.  This is especially important for those using CRM (Customer Relationship Management) systems and for those collecting information via their websites.
They must have permission from the individual concerned that they can collect and hold personal information and be able to prove they have permission. This is a specific opt-in requirement where the current assumption of silence or pre-ticked boxes will no longer be deemed as consent.
Among several rights businesses must give individuals are a right of access to and correction of the information being held, the right to its removal and to restricting it and the right to object. So, they will need to put in place acceptable governance to ensure all these rights are acted on, on request and in a timely manner. Businesses will also be required to appoint a designated Date Protection Officer (DPO).
Opt-outs from the regulations, known as derogation, will be allowed only in some situations – such as for national security reasons.
Failure to comply can result in fines of up to €20million or 4% global turnover whichever is the greater. Compare this with the £400,000 fine imposed on Talk Talk for failing to implement the most basic cyber security measures as a breach of the seventh principle of the Data Protection Act, following the theft of personal information it held on 150,000 customers.

Business Development & Marketing Cash Flow & Forecasting Finance General Rescue, Restructuring & Recovery Turnaround

How far do you take your business online?

working digitallyThe opportunities for putting a business online are almost infinite, regardless of the sector it is in.
At the most basic level it is rare for a business to not have a website. It is an almost-universal expectation from customers for even the smallest and most local of businesses.
In its simplest form a website is an online brochure for a business’ goods or services, but arguably they are missing a trick if they don’t use the opportunities for marketing, interaction and administration that a website offers.
Even a basic website can do much more than simply being a brochure. Including a news and blog page allows the business to keep clients up to date with its activities and share useful information.  Including customer testimonials and recommendations and having a contact form can help with marketing and handling enquiries.
These days additional software will allow for Customer Relationship Management, so that a business can capture contact details and respond quickly to queries by interacting with clients.
Including facilities for viewing products or services, placing orders and paying online are time saving and cost effective.

A website is only one part of the digital operations and marketing mix

There is software via cloud computing that allows a business and its accountants to update records and communicate with each other in real time.
Similarly, tracking orders from initial order through final delivery, invoicing and payment can be done online and for customers the option of tracking goods they have ordered can be helpful.
Digital confirmation of receipt of goods or satisfactory completion of service can also help resolve disputes and proof of debt when pursuing payment.
Some of these operations can be outsourced to other businesses to manage, but if security and confidentiality are concerns, a business might prefer to keep them confidential and manage them in-house.
Backing up data and records is vital and can be inexpensive if done via cloud services, as is remote IT support.
Then, a subject we have touched on before, there are the online opportunities for marketing a business. Social media platforms like Facebook, Twitter, LinkedIn, Instagram and others are now part of the mixture.
For some businesses a regular e-newsletter using a properly managed database service that includes regular analysis of interactions by recipients can also be a worthwhile investment.
We recently came across a business that has taken on board the digital message and runs entirely from the owner’s iPad. Every activity for his tyre fitting and MOT workshop is recorded on an iPad so when the owner goes home for the night, he carries his entire business with him, including monitoring the site security cameras 24 hrs a day.
(Image courtesy of Pixomar at

Business Development & Marketing Cash Flow & Forecasting County Court, Legal & Litigation General Rescue, Restructuring & Recovery Turnaround

Law firms need to get serious about their business plans and cash flow

Professional Indemnity insurance is advisable for most professional businesses but for law firms it is compulsory.
Renewal has been complicated by the fact that since 2012 insurers were required to disclose their credit ratings in order to become “qualified” by the SRA (Solicitors’ Regulatory Authority).
In the last year a number of qualified insurers have become insolvent and the financial situations of approaching 1,800 law firms are being closely monitored by the SRA. 
At the same time at least 185 law firms have failed to meet the deadline for re-insuring and if they fail to do so within 90 days under SRA regulations they must close down. Already one London firm, Harris Cartier Limited, has entered administration, the first of what may be many.
Is it time that the culture of law firms is changed so that they see themselves as businesses like any other, requiring a proper business plan with a forecast to support the plan. Such plans might also benefit from input by other experts such as accountants and marketing specialists where lawyers have tended to do it all themselves.
Given the lengthy time between taking on a client, completing often complex legal proceedings and the point at which the job is complete some law firms may need the help with running their business and if necessary restructuring it if they are to ensure they are not forced into closure by failing to put in place the systems that any other business would regard as normal.