Comments now working properly

You should now find it easy to comment on the blog posts.

I have only just discovered that I had the blog set to only allow posts from registered users. I have now corrected this, so anyone can leave comments.

Please add any thoughts you have on reading the articles.

PBR - Can anyone see how the VAT rate cut can work?

I am struggling to see how the 2.5% VAT rate cut can stimulate the economy. If passed on across the board, it would mean a price cut of 2.1% in goods sold in the shops. I can't see how that will cause consumers to go out and buy things they weren't already going to. The stores are already running sales with 20%-25% savings in an attempt to kick start spending, 2.1% will be a drop in the ocean.

Part of the problem is that the government have created this expectation of a rate cut across the board. The retailers may be able to stimulate spending if they were to use the extra margin available to strategically target price-cuts, allowing them to show big discounts on some items. However because of the expectation built up in the consumers' minds that there will be a 2.1% price cut on everything, it will be difficult for retailers to do this.

There are also significant costs attached to the change, both to retailers and businesses selling to other businesses, who will get no direct benefit. Accounting systems across the land will need to have their rates changed, although in most cases this is hopefully quite straight-forward. Worse are all of the areas we forget about. In my small business (where all of my sales are to other businesses who claim the VAT back anyway), I have come across four today:

1. My training fliers need re-printing because although prices are quoted excluding VAT, the payment amounts stated need to be changed;
2. My expenses forms (in Excel) that calculate the VAT element for fuel need editing;
3. My Paypal account needs its rate changing for online sales of Excel training courses and videos
4. Numerous spreadsheets calculating commission payments need editing

These changes are in addition to the changes to my accounting system, and my business is tiny compared to most. I also know I will stumble across many others over the next few days.
As far as I can see, this change will introduce a significant administrative cost to virtually every business in the UK, and the benefits even to retailers (who are the only businesses who can directly benefit from this) are dubious.
I hope I am wrong, I would appreciate any comments from everyone else.

PBR - Pay your Taxes when you can?

It would appear that Alistair Darling said in his Pre-Budget report that business will be given as long as they need to pay VAT, PAYE, and Corporation Tax.

Clearly there must be limits on this, and the following page of the HMRC website gives you full details of who you need to call to discuss what is available for you.

http://www.hmrc.gov.uk/pbr2008/business-payment.htm

You can download the full Pre-Budget Report from the treasury at:

http://www.hm-treasury.gov.uk/prebud_index.htm

Good luck!

The Seven Wastes

by Andrew Nicholson of Nicholson Consultancy

Lean for the Workplace is a way of applying the principles of Lean Manufacturing to non-manufacturing processes. As in Lean Manufacturing, the ultimate aim is to eliminate waste. The following are descriptions and examples of The Seven Wastes.

Overproducing - Producing more than needed or producing too much too soon does not improve efficiency. It consumes resources and leads to other wastes. Examples include keeping paper and electronic copies of documents; producing reports, which are put in a file and never studied.

Waiting - Waiting for people, machines (printer, photocopiers etc), information. It adds no value to the service, and can be most aggravating to employees. Examples include waiting for a signature; waiting for a phone call.

Overprocessing - Having a process that's over complicated. Examples include checking someone else's work; paying by cheque instead of by direct debit, requiring multiple signatures.

Inventory - Excessive stock can take up space, and become a Health and Safety issue. Examples include a cupboard full of stationery materials; files that are no longer used. (How many post-it note pads, pens, etc do you have in your desk drawer?)

Motion - Any motion that is not necessary to the successful completion of an operation/process is waste. Examples include walking to the next room to retrieve print outs from a printer; walking to another room to pass on documents.

Defects - Producing defective work that needs to be redone. Examples include computer data entered incorrectly.

Transport - Transporting something further than is necessary. Examples include files kept in a central filing office; office supplies moved to a temporary location before being put away.


Once you start thinking about it in these terms, you can quickly begin to identify where your processes are "wasteful" or inefficient, which is the first step to making them more streamlined.

Andrew Nicholson is Managing Director of Nicholson Consultancy Limited, specialising in Business Strategy and Lean Thinking. Andrew contributes to the e-zine, “Better Today”, with information for those who are interested in making improvements in their business. If you’re interested in Lean Manufacturing, visit Andrew’s blog, Manufacturing Times.

Recession?......what recession?

by Les Hodgson of Next Level Financial Management

Now that we are officially in a world wide recession what should we be doing? If we listen to those that have just realised we are in recession we might think all we need do is hold on until things get better next year. But if they did not know the recession was coming until things were really bad, how do they know when things are going to get better?

We are also told the recession is world wide but the UK is better placed than other countries – so why is Sterling going down against the Dollar and the Euro?

While we need to listen to what the ‘experts’ are saying we also need to get on and make the best of the situation.

In stormy times cash is king, so close attention must be paid to making sure cash is closely controlled. Instead of the profit & loss being the primary focus, attention needs to be switched to cashflow. Key areas to look at include:

• Accurate forecasting of cashflow on a monthly basis for 12 months and a daily basis for 8 to 10 week is essential. Performance against the daily forecast needs to be continually monitored and adjusted – this means looking at it every day.
• Money from debtors needs to profiled and collections closely controlled – the telephone is the greatest weapon in the fight to get paid.
• Credit terms and limits need to reviewed and applied rigorously. Tight credit control is crucial to the process – if customers do not pay on time or go beyond their credit limit - stop supplying immediately.

Cost control is also important and all costs must be closely scrutinised and suppliers changed where appropriate. If you are not already using the services of companies like

FC Procurement then you need to see what they are offering.

Rapid change and fast moving situations always throw up many opportunities – you need to spot these opportunities and be ready to grasp them. Having access to a pot of cash or access to capital is a great position to be in!

Areas to watch include:

• Sterling weakness is an opportunity to look closely at overseas markets. A poor exchange rate makes UK goods and services cheaper for overseas buyers. There is a lot of help available from

UK Trade & Investment.

Companies are failing at an alarming rate and there are a lot of opportunities to purchase these businesses or their assets at a knock down price. Even if you do not have the cash, liquidators will often accept a phased purchase.

Review staffing levels and remuneration strategy. Uncertain times mean employees are more receptive to changes in pay and conditions, such as the ending of final salary pension schemes.When competitors are cutting back watch out for opportunities to capture their star players – they usually come with a lot of knowledge and new customers. Of course be wary of unsettling your own star players.

Well good luck going forward; hopefully things will improve sooner rather than later!

Next Level Financial Management is a specialist Chartered Accountancy practice dedicated to turn round & rescue and VAT & PAYE arrears arrangements. Email les@4nextlevel.co.uk or 0191 548 6000 / 07939 809 249.

Follow My Leader - To Effect Change, Leaders Must Walk the Talk!

by Glen Feechan

A leader's role

In any change project, a leader must wear many hats,
however his/her role can be split into two key areas:

1. Set the strategic direction of the change and;

2. Convince everyone of its importance.

The importance of the first part of this role is generally
understood and is for another article on another day, however the second part is
often overlooked (or done very badly) and can be of even greater importance.

Where this point is addressed, it is generally done by
giving presentations and distributing memos. Although these can be necessary,
they are often ignored or just paid lip service if the most important method of
communicating the importance of the project is missed - action.

"Do as I say, not as I do!"

Many of us will have heard this line from our parents
(some of us just might have been known to use it with our own kids now and
again), but can we remember how patronising it felt?

Too often this is the message communicated to employees
from senior management during a major change. Employees are expected to attend
seminars and workshops (and are sent memos and emails stressing their
importance). These may even be preceded by a major presentation from the
managing director, stating that everyone must give full support to the project.
The senior management then continue to go about their day-to-day jobs as if
nothing has changed.

The Managing Director misses a session he was scheduled to
attend because he has a meeting with a major client then the Sales Director uses
this excuse at the next session, which the Finance Director also misses because
he has a meeting with the auditors. In the next round of workshops, there are no
salesmen able to attend (they all have meetings with clients), the payroll clerk
cannot attend because the wages must be processed and the management accountant
makes his excuses because he is under pressure to get the month-end accounts
out.

Pretty soon the project is completely off the rails and
the managing director is wondering what went wrong. The simple fact is that
people follow the examples of their leaders rather than what they are told. When
the Managing Director demonstrated that his meeting with a client was
more important than the project, this message was picked up by the Sales
Director (who also has important meetings with clients), then comes the Finance
Director, who is quite sure that his meeting with the auditors is at least as
important as any client meeting. This message is then cascaded down to those
reporting to these directors, until no-one is attaching any importance to this
project.

Perception is reality

Not only must the senior management team give the project
the priority it deserves (and that they are telling everyone else that it has),
they must go out of their way to be seen to do so. This is often best
done by doing something out of character that clearly (and publicly)
demonstrates the importance of the project. This may involve such activities as
missing a regular golfing trip to attend a workshop session (no-one said it was
going to be easy) or coming in on a Saturday morning to attend a session with
Saturday staff. The trick is to get people talking in the canteen about how
important the management must see this project as, if the managing director is
missing his golf/Saturday mornings, etc.

Listen and act

As a project progresses, one of the best ways to
demonstrate its importance is to listen to feedback from workshops, etc. and act
on it as soon as possible. This demonstrates that the project can really make a
difference and that this is everyone's opportunity to contribute to how the
business operates.

If senior management can demonstrate this level of
commitment, the project is well on the way to success.

Report in Excel like an OAP

When I work with clients on their management reporting I usually advise them to separate out the process into three, using my OAP approach.

OAP stands for Obtain, Analyse, Present:

Obtain - obtain the data. This may be through, say, an input sheet, but more likely from a database such as your accounting system or ERP package. Typically you would pull this in through an ODBC link. It should be pulled in in a format that is easy to analyse, i.e. in columns with unique headings.

Analyse - Analyse the data. The best way to do this is usually through Pivot Tables, particularly when combined with formulae, particularly lookup formulae, alongside the data.

Present - Consider whether the Pivot Table can be amended to present the data in an acceptable format, alternatively use the GETPIVOTDATA formula to populate any report, such as Management Accounts.

By treating each of these steps as separate, you will find that you can create far more flexible reports, simply.

Have a look at my video training course on Pivot Tables. Alternatively if you want to look at this whole approach in a lot more detail and you can get to Sunderland for 21st January, book yourself on my workshop.

Learn Pivot Tables Now

If you have been following my blog posts and ezine articles, you will know that I am a strong believer that you are only tapping in to a fraction of Excel's power if you do not understand Pivot Tables.

Pivot Tables form an integral part of the workshop I am running in January, along with a lot of other material you will find useful.

However, I am aware that a number of you are not based in the North East, and that training can be difficult to allocate budget to in a recession. To address these issues I am offering a video training package, available for immediate download, that will teach you the basics of Pivot Tables at a price that will suit any budget.

Please follow the link, and finally unlock the power of Pivot Tables.

"Invest to Survive" event

I will be speaking at the Invest to Survive event in Sunderland on 10th December, where I will be elaborating on my "10 Tips for Surviving in Hard Times" report, which is available free to those who sign up for the free "Not Just Numbers" ezine.

Also speaking at this event will be Andrew Nicholson, who will be talking about how to apply Lean principles to dealing with the recession.

For more details, or to find out booking details, visit here.

Painless Cost-cutting

The news is full of cost-cutting programmes, usually involving large-scale job losses. Only today, BT announced a further 10,000 job losses by March next year. In addition, every company I talk to is undergoing some form of cost-cutting exercise at the moment and it is easy to see these as involving nothing but pain.

It is important to note though that a significant level of cost-cutting is possible without any pain and without cutting your workforce or capacity to take advantage of opportunities. Those businesses that can remain at full strength through the recession are likely to profit from cut-backs at their competitors.

I am talking about reducing what you pay for your overheads rather than what you are paying for. Most businesses have a decent grip on what they pay for raw materials but invariably significant savings can be made across their overheads by switching to more competitive suppliers.

There are a number of reasons why existing suppliers might not be the most competitive, sometimes it is just complacency.

Also, many of these areas do not get looked at as often because individually they may not appear to represent a large percentage of total costs, however it is important to remember that these savings are not harming the company's ability to operate.

Would it be better to save £20,000 p.a. by laying off an additional employee or changing stationery suppliers?

Also, some of these areas are a bigger spend than people realise. On average, spend on printed materials accounts for around 1% of sales turnover. A saving of 20% on this spend has the same effect on the bottom line as a 1% increase in sales (assuming a generous profit margin of 20%).

At FC Procurement we provide a free service to our clients to help effect these changes with the minimum of effort on the client's part. We cover a wide range of supply areas, that is growing all of the time.

If you are a company based in the UK who is looking to save money without the pain, check us out.

Free online payroll software

Just a quick post to let you know about a free tool I have been using for a few months now.

I have been using an online payroll package that amazingly is guaranteed to be free for at least 5 years (for 50 employees or less).

It is HMRC approved, appears to have more features and be easier to use than most purchased packages I have come across. In addition, because it is online, you don't need to worry about year-end updates.

It is called Payroo. Have a look and see what you think. Please comment below if you have used this yourself or suggest any other free software you have come across that other readers might find useful.

Horses for courses with Lean Manufacturing

While at my son's football training tonight, I got talking to one of the grandads who was a shop-floor supervisor in an SME manufacturer.

He was talking about the NVQ training he was doing in Lean Manufacturing at work and how it all related to the big automated car manufacturers and was not relevant to his company.

This is such a common story where trainers provide generic and often inappropriate training, particularly where government funding is involved and 'bums on seats' means money.

The truth is that introducing some Lean techniques can be incredibly profitable for this type of company, if they are introduced by a consultant/trainer who takes the time to understand the business and its needs.

Someone I have aways admired for his ability to do this is Andrew Nicholson of Nicholson Consultancy. Take a look at Andrew's new blog.

Why all finance directors need to know about ODBC

I regularly come across companies that are paying a small fortune to their software providers for any reporting they want from their ERP system. This is not only expensive, but usually takes a great deal of time and effort from the company's employees in explaining their requirements.

Often no-one at the software provider mentions a free route to report from their software using a tool that staff are familiar with. A quick email or phone call (asking the right question) to their support team and this can be set up - free of charge.

This is not some specific tool from the software provider, but one that is available (free) for almost every software package out there. The tool I am talking about is ODBC (Open Database Connectivity) which allows you to automatically use Excel to report from all of the database tables. For most databases this is already installed on your PC, although you might not know it -for more obscure databases there may be some software to install, but this is usually included on your initial installation disks.

If you have any issues reporting from your software, ask your provider about using the ODBC links - they will almost certainly be available. If you want to read more about what you can do with the data you access, read:

Do your management accounts take weeks, days, hours, minutes…or seconds to prepare?

Good luck!

The link between the base rate and what the banks charge us

Following yesterday's rate cut, I came across this blog post from the BBC's Robert Peston, that is one of the clearest explanations of the complex links that drive the rate that businesses and consumers get charged.

Will a 1.5% interest rate cut do the job?

Today the Bank of England dropped its usual "steady as she goes" image to make a dramatic (and larger than anyone even asked for) rate cut to bring the Bank Base Rate down to 3%.

But as Mervyn King bends over the twisted body of the British Economy, shouts "Clear!" and applies the defibrillator, will it be enough to restart its bruised and battered heart?

If the rate is passed on (and quickly) to mortgage payers and businesses, it might just get people thinking that they can afford to go out and get some Christmas presents in, helping out the retail sector.

Again, if rates are passed on, and the banks are prepared to lend (big ifs), this could be a great time for all of those first-time buyers who have not been able to afford to get on the housing ladder to take advantage of cheap house prices and low interest rates - giving a boost to the construction industry.

Combined with a new president, and a new found optimism, in the US, maybe things won't be that bad after all.

Or am I clutching at straws.

What does everyone else think? Please leave a comment.

A salutory Excel lesson from Barclays and Lehman Brothers

I have reproduced the following article from AccountingWeb because I think it is a very amusing, yet sobering demonstration of the importance of using Excel properly, and ensuring that Excel spreadsheets are set up in a robust way:

Hidden spreadsheet rows hit Barclays with toxic Lehman
contracts

On Tuesday 5 November, lawyers for Barclays Capital appeared before the US
Bankruptcy Court in New York to try and extricate the company from taking on
Lehman Brothers liabilities accidentially included in a PDF copy made of an
asset spreadsheet. John Stokdyk reports.

Following Lehman's collapse in September, Barclays Capital agreed to
pay $1.35bn for the failed bank's assets once they had been stipped clean of
some of the more toxic elements.

Unfortunately, a docket submitted by Barclays' representatives Cleary
Gottlieb Steen & Hamilton LLP to the bankruptcy court in advance of the 22
September sale date included 179 contracts that should have omitted.

In an affadavit uncovered by the Above the Law.com website, the junior associate who compiled
the list explained what happened.

On the evening of 18 September a colleague asked the clerk to help
reformat an Excel asset spreadsheet and convert it into a PDF.

"Some of the rows of the original Excel spreadsheet were spaced too
close together or too far apart, making it difficult to read when printed or
converted to PDF format. I therefore globally re-sized all the rows in the
document to make it easier to read when printed or converted to PDF format." The
clerk also removed several columns that were not needed in the final document.

The coverted document was subsequently handed into the court, but the
clerk was not aware that the original spreadsheet included hidden rows, nor that
there were 179 contracts designated with “N” in a column to indicate that they
should not be included in the sale.

"I also was not aware that these hidden rows were exposed when I
globally re-sized the rows in the spreadsheet or that, once exposed, they would
appear without the original designations," the unfortunate clerk testified.

The law firm says that a junior associate had reformatted an Excel
spreadsheet into a PDF document to post on the court's website.

Clearly Gottlieb filed a motion to asking for relief from the final
sale order due to "mistake or excusable neglect" to extricate its client from the
potentially disastrous commitments.

Above the Law noted that the work took place just after 11:30pm. "Who
knows how much sleep anybody at Cleary got between Lehman crashing on the 15th
and the 18th when the mistake happened? And, as we all know, they don't teach
"Excel" in law school and they really, really should," it commented.

If you want to make sure you don't make the same kind of mistakes yourself,
take a look at the workshop I am running in January.

Hidden spreadsheet rows hit Barclays with toxic Lehman
contracts

On Tuesday 5 November, lawyers for Barclays Capital appeared before the US
Bankruptcy Court in New York to try and extricate the company from taking on
Lehman Brothers liabilities accidentially included in a PDF copy made of an
asset spreadsheet. John Stokdyk reports.

Following Lehman's collapse in September, Barclays Capital agreed to
pay $1.35bn for the failed bank's assets once they had been stipped clean of
some of the more toxic elements.

Unfortunately, a docket submitted by Barclays' representatives Cleary
Gottlieb Steen & Hamilton LLP to the bankruptcy court in advance of the 22
September sale date included 179 contracts that should have omitted.

In an affadavit uncovered by the Above the Law.com website, the junior associate who compiled
the list explained what happened.

On the evening of 18 September a colleague asked the clerk to help
reformat an Excel asset spreadsheet and convert it into a PDF.

"Some of the rows of the original Excel spreadsheet were spaced too
close together or too far apart, making it difficult to read when printed or
converted to PDF format. I therefore globally re-sized all the rows in the
document to make it easier to read when printed or converted to PDF format." The
clerk also removed several columns that were not needed in the final document.

The coverted document was subsequently handed into the court, but the
clerk was not aware that the original spreadsheet included hidden rows, nor that
there were 179 contracts designated with “N” in a column to indicate that they
should not be included in the sale.

"I also was not aware that these hidden rows were exposed when I
globally re-sized the rows in the spreadsheet or that, once exposed, they would
appear without the original designations," the unfortunate clerk testified.

The law firm says that a junior associate had reformatted an Excel
spreadsheet into a PDF document to post on the court's website.

Clearly Gottlieb filed a motion to asking for relief from the final
sale order due to "mistake or excusable neglect" toextricate its client from the
potentially disastrous commitments.

Above the Law noted that the work took place just after 11:30pm. "Who
knows how much sleep anybody at Cleary got between Lehman crashing on the 15th
and the 18th when the mistake happened? And, as we all know, they don't teach
"Excel" in law school and they really, really should," it commented.

A new dawn....

I have just finished watching the news, seeing the queues lining up to vote in the US election.

It has become the norm for the rest of us around the world to criticise everything about the US, but something about this campaign seems to have reminded everyone of the dream of freedom and democracy that was its foundation.

Every poll suggests that tomorrow morning we will wake up to the first black leader of the free world. At a time when the world is dropping into recession all eyes are turning to one man, desperately hoping that he will lead us to a bright new future. I can't help but wonder whether that is too much expectation for anyone - let's hope he's up to it!

UK Financial Investments Ltd - The new Banking Behemoth

Earlier today (3rd November 2008), Alistair Darling announced details of the new company that will hold the taxpayer's investments in the banking sector. This new organisation, publicly owned, but managed autonomously by Philip Hampton, Sainsbury's chairman and ex-Lloyds TSB Finance Director, is set to dominate the UK banking industry for the foreseeable future.

Full report from the BBC

The BBC's Robert Peston's take on the new company