Tag Archive | "Business"

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HOW TO SELL A BUSINESS


By Adam Bernstein

We’ve seen the sale of plenty of family businesses in the aftermarket over the last couple of years. It isn’t just down to the major buying groups stamping their feet either, for all, there comes a point when it’s time to ask whether the business should be sold. The question for most is, how?

According to David Emanuel, partner at law firm VWV and head of its Family Business team, the prime reasons for selling are retirement, the need for investment and no one else to take over.

Take the first – retirement. As Emanuel notes: “for many business owners, a large proportion of their personal wealth may be tied up in the business. Some are able to take profit out during their working life to buy homes and build up pensions. But many need to crystallise that value to fund their retirement.”

Next comes the need to grow the business. As time progresses, some owners ask whether they have it in them to take the business to the next level. Clearly, if a business is not the right size for the market it will not survive; looking for someone external (and usually bigger) to buy out the firm can be a solution which also allows the owner to realise the value in their business.

A variation on this means external investment, for instance private equity investors, who take a stake in the business with a view to exit within three to five years. From Emanuel’s perspective, “this offers the current owners the opportunity to build significantly higher value with external investment while postponing the exit.”

But what if there is no internal succession plan? Emanuel frequently sees family owned businesses wondering whether the next generation want to take the business on: “For many the family is a strength and a USP, and the thought of passing the business to the next generation is attractive. But in practice, successful transfers between generations are rare.”

But few last. A 2015 Economia report, How to maintain a family business, suggests that in the UK only 30 percent make it to the second generation and around 12 percent to the third.

Opportunity Knocks

Sometimes an offer comes in at the right moment so that selling becomes an option. What do you do?

Emanuel’s first response is to take advice.

“Many businesses will probably know who is likely to be interested in buying them, and in some cases informal contact, particularly where there are personal relationships with potential buyers, can sound out interest.”

But he offers a note of caution: “Do not underestimate the potential adverse reaction of staff, customers, and suppliers to rumours of a sale. Maintaining confidentiality for as long as possible is a key feature of a successful exit.”

The message is clear: Seek professional help from the moment you decide to sell. Accountants, solicitors, or specialist corporate finance advisers, can all help formulate a plan, including a strategy for confidentially marketing the business, advice on valuation, and preparing the business for sale.

Sale processes

The next stage is the actual sale which Emanuel says comprises four steps.

“The first,” he says, “is to market the business else no one will know that it’s up for sale.” He says that the firm’s accountants or specialist corporate finance advisers will help put together a sales memorandum and circulate this (on a no names basis initially) to potentially interested parties.” A Non-Disclosure Agreement should be part of the process.

Once a buyer has been chosen, the next stage will be to agree the outline commercial terms of the deal and timescale – “Heads of Terms”. Emanuel describes these as “non-binding in most respects but they provide a framework for the negotiation of the deal from which the parties should not normally stray other than in exceptional circumstances.”

And then there is due diligence – mentioned earlier. “This,” says Emanuel, “is the process by which the buyer seeks to find out about the business, its assets and liabilities, trading relationships and employees.” Experience has taught him that sellers often underestimate the amount of work this generates.

The penultimate stage is the sale agreement where the main contract for the sale will (normally) be drawn up by the buyer’s solicitors to be negotiated with the seller. In practical terms, Emanuel says that most of this will deal with risk apportionment – “who is liable, if for instance, there is a hidden tax liability, or any employee makes a claim after completion for something that happened whilst the seller was in charge?” These issues are, he says, dealt with through a process of warranties – in effect, guarantees.

And lastly comes completion where the documents are signed, the monies are paid, and the business transfers.

In the End

With any complex process the sale will usually take several months from its starting point and involves a huge effort. But as Emanuel has seen, the sale can mean that “owners often have mixed feelings about leaving behind the business they created and have run for years.” His suggestion is to think about what is coming next rather than what has been left behind.

 

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GDPR: WHAT’S THE FUSS?

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GDPR: WHAT’S THE FUSS?


Time is running out to get your ship in order for new data regulations

The act of putting one product in the carton of another is something that we all know happens throughout the aftermarket at all levels.

There’s one product in particular that we know is packed in the UK in a dozen or more brand images – and no doubt there are others.

There has been little in the news about the new General Data Protection Regulation (GDPR), which comes into effect on 25 May, so it is hardly surprising that there are many people that either have no idea about it or assume that it has anything to do with them. Put simply, GDPR will give teeth to existing legislation, the Data Protection Act (DPA) and according to consumer polls, over a third of Britons are already anticipating to exercise their rights in accordance with this legislation.

But what does it all mean and more importantly what does it have to do with fixing cars? It is easy to brush off this kind of change, assuming that it only applies to big companies like chain fast-fits and dealerships that obviously have some sort of ivory tower that churns out policies and small print in a factory like manner. They are used to being sued right? They have all the means to support all this bureaucratic nonsense and the small company that only employs a couple of people won’t have to worry about this kind of EU nonsense, plus Brexit and everything else…

Unfortunately this is not the case, this change has happened and it is coming in the next couple of months. On that day and every day after this new responsibility will be handed over to you regardless of your preparedness. A bit like becoming a parent really, only without the panting and sweating that you get to herald this kind of immediate change. So what exactly is it?

THE ACT
To break it down, The Data Protection Act (DPA) was introduced in 1998 to protect the rights of the individual with regards to their personal data and how it is processed. A lot has changed since then, particularly the quantity of data that is collected and the complexity of locations of where it is stored have changed dramatically.

Most of the legislation from DPA will remain the same, GPDR will enforce certain elements of it and although GDPR is an EU directive it will be incorporated into British law post Brexit.

Louder for the people at the back, whether we are in or out we are keeping this.

Before moving on, it is worth clearly defining what we mean when talking about processing data, especially in the context of General Data Protection Regulation.

At its most basic definition this refers to any operation performed using personal data, it does not matter if this is automated, handwritten or typed into a spreadsheet. This includes and is not restricted to collecting it, organising it, structuring it, storing it, retrieving it, sharing it and a whole lot else. The official definition can be found on the Information Commissioner’s Office website.

In short, it will now be considered a breach of data if information that is protected by this legislation is not securely stored. This is so serious that even if a breach of data has not occurred, poor management of this data will be treated in the same manner as if the breach has occurred. Dumb luck is not rewarded. If an organisation has been targeted for data theft or even if a suspicion that data has been potentially put at risk there is guidance on the ICO website on how to manage and report such an incidence, and the ICO are keen to push the ‘tell us everything and tell us quickly’ message in the same way you would speak to your insurance company and the police if someone had broke into your premises.

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RING LAUNCHES EUROPEAN OFFICES

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RING LAUNCHES EUROPEAN OFFICES


Lighting and accessories brand Ring Automotive has invested £200,000 in a Paris office which is now open for business.

The expansion is part of the firm’s product development plans, that has led to some new appointments within its international team.

Carlos Carrido, Stephan Schneider and Sebastien Richir have been appointed as Sales Managers to improve exports to customers in countries including Spain, Portugal as well as Germany, Austria and Switzerland. Richier will join Ring’s International Business Director Gonzalo Vargas-Zuniga Cruz at the EU office in Le Dome, part of the Roissypole complex of buildings at Roissy Charles de Gaulle International Airport, while the other recruits will work across the continent and have access to the HQ as and when required.

“Approximately a quarter of our sales can be attributed to exports giving some indication of the opportunity that extending our presence across Europe represents,” said Cruz. He concluded. “We know that our sales channels and performance across these markets has significantly improved over recent years and this investment will further reinforce our commitment as we build our portfolio of customers.”

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COMPANY DIRECTORS UNDER THREAT

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COMPANY DIRECTORS UNDER THREAT


Creditors must be taken care of as well as the business itself

Running a company and holding a directorship involves a number of duties and obligations. The law is very prescriptive about this, and for good reason. In exchange for limited liability and general immunity for company debts, directors must care for the success of the business and also, should insolvency loom, protect the position of creditors.

The authorities take a dim view of those that breach the law. Take the November 2017 case of Kieran Jon Fox, the sole director of Doncaster Auto Parts Limited. He was disqualified from being a company director for three years and six months for trading “to the detriment of HM Revenue and Customs” by failing to pay £94,999 in respect of PAYE, National Insurance and VAT – monies owed at the time of liquidation. HMRC’s analysis of Doncaster’s bank account showed that at least £505,877 was spent from the account between 7 June 2015 and 9 June 2016. Over the same period at least £95,687 was paid to him in respect of loans, wages and dividends and at least £373,537 was paid to other parties. Total liabilities to creditors at liquidation were £358,237.

DIRECTOR’S DUTIES
According to Peter Windatt, an accountant and licensed insolvency practitioner with BRI Business Recovery and
Insolvency, companies must have at least one director who is legally responsible for running the company and making sure its accounts and reports are properly prepared.

Directors must be at least 16 and not disqualified; while most have a director’s title, the law recognises what is termed a shadow director. “An individual in this situation,” says Windatt, “is without title but nevertheless acts as if they are a director. Consequently, the law assigns them the duties and obligations of a formally titled director. Avoiding the term ‘director’ doesn’t remove the duties and liabilities from an individual.”

There are a number of general statutory duties placed on directors by the law which Windatt outlines.

“Firstly,” he says, “directors must act within their powers – that is, comply with the company’s constitution and exercise powers only for the reasons they were given.” Windatt explains that directors must critically act in a way they consider is most likely to promote the success of the company for the benefit of its members: “To do this they must have regard to all relevant matters, which the law specifically says involves ‘considering the likely consequences of any decision in the long term; the interests of the company’s employees; the need to foster the company’s business relationships with suppliers, customers and others, as well as the impact of the company’s operations on the community and the environment; and the desirability of the company maintaining a reputation for high standard business conduct; and the need to act fairly as between members of the company.’”

But there are other obligations to note: Directors must exercise independent judgment, that is, not be swayed by others, and must also exercise reasonable care, skill and diligence. This is key for Windatt – he says directors must be diligent, careful and well informed about the company’s affairs: “If a director has particular knowledge, skill or experience relevant to his function (for instance, they are a qualified accountant and act as a finance director), they will be judged accordingly.”

Another duty to note is the need to avoid conflicts between director’s interests and those of the company. This means not accepting benefits from third parties unless the company authorises acceptance, while declaring any interest in a proposed transaction or arrangement before it is entered into.

A final duty is close to Windatt’s own professional interests. Directors should consider or act in the interests of creditors (particularly if insolvency is a possibility) while maintaining confidentiality of the company’s affairs.

WHEN THINGS GO WRONG – DISQUALIFICATION

Of course, many businesses are well run and outlive their founders. However, when a business fails “the Insolvency Service will,” says Windatt, “examine the failure and if the director and his actions have been found wanting, can seek the disqualification of the director(s).”

He offers a note of advice to directors: “To protect their position and to comply with the law, directors should ensure their companies maintain and preserve proper accounting records and should submit them to the relevant authorities upon insolvency.” He frequently sees directors investigated by the Insolvency Service with a view to taking action against them, and says: “Any director that’s been disqualified will no longer be able to act as a director of a company; take part, directly or indirectly, in the promotion, formation or management of a company or limited liability partnership; or receive company’s property. For most, this is likely to have a significant impact on their future earnings, especially as they may be disqualified for up to 15 years.”

PENALTIES FOR BREACHING DISQUALIFICATION ORDERS
There will always be some who consider that they can ignore a disqualification order, but they risk severe punishment. In these circumstances, they face imprisonment for up to two years and/or a fine on conviction following indictment; or imprisonment for up to six months and/or a fine on summary conviction. And the threat isn’t idle – there have been convictions.

Interestingly, but not unsurprisingly, Windatt’s seen some directors who are disqualified, either under the CDDA or by virtue of being made bankrupt, have their spouse/partner or other close friend/relative “front” a business while they carry on running it from “behind the scenes”: “This frequent scenario unravels when the business fails. At this point the stooge quickly reveals what they were and who the real controller was.”

To conclude, companies can and do fail for any one of a number of reasons, most of which are unfortunate but not deliberate. But where a director has not acted in good faith or in accordance with their duties, they can expect their activities punished and their ability to earn a living curtailed.

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MAKING FAIR DISMISSALS

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MAKING FAIR DISMISSALS


Deciding who makes the cut and telling those who haven’t is never easy. Here are a few tips to smooth the process

No employer likes to make employees redundant. Unfortunately, as the recent decision for 100 planned redundancies at the AA illustrates, and the announced Andrew Page branch closures might mean, sometimes difficult decisions do need to be made.

For the process to work properly, it is important that redundancy dismissals are handled sensitively and in accordance with the law. Any employer that fails to comply with its legal obligations during a redundancy situation could face complaints from employees and claims for compensation for unfair dismissal as a result.

WHAT IS A REDUNDANCY SITUATION?
In an employment law context, redundancy has a very specific meaning. To summarise, the statutory definition of redundancy identifies three sets of circumstances that amount to redundancy situations – a business closure; workplace closure; or reduced requirements of the business for employees to do work of a particular kind.

There is no mandatory procedure laid down by legislation in England and Wales for fairly dismissing an employee for redundancy reasons. Instead, employers must follow a fair procedure involving individual consultation. Dismissal decisions must be fair and reasonable. Case law has determined various principles of fairness that an employer should follow in order to reduce the risk of employees pursuing claims for unfair dismissal.

Generally, these principles require an employer to give employees early warning of the risk of dismissal; consult with employees (and the union if required); identify an appropriate “at risk” pool for redundancy; draw up and apply fair selection criteria; and give consideration to alternative employment.

CONSULTATIONS

First, an employer looking to make a number of employees redundant must check whether the obligation to engage in collective consultation exists. Where there is a proposal to make 20 or more employees at one site redundant within a 90-day period, the employer must engage in collective consultation with a trade union. If no trade union is recognised for that particular employer, then an employee representative will need to be elected, with whom the employer will need to consult. The employer will also need to notify the secretary of state of the number of planned redundancies.

Employers should seek specific advice in circumstances where multiple redundancies are planned as there are a number of obligations.

Even where a collective redundancy situation does not arise, consulting with the employee(s) at risk of redundancy is absolutely vital and will be central to the fairness (or otherwise) of the decision to dismiss. Consultation should be genuine and take place at a time when the employer can properly consider the employees views and suggestions – that is, before the final decision is made.

THE “AT RISK” POOL
Before selecting an employee or employees for redundancy, an employer must consider what the appropriate pool of employees for redundancy selection should be. Otherwise the dismissal is likely to be unfair.

There are no fixed rules about how the pool should be defined and, unless there is a collectively agreed or customary selection pool, an employer has a wide measure of flexibility here.

The question of how the pool should be defined is primarily a matter for the employer to determine and, provided an employer genuinely applies its mind to the choice of a pool, it will be difficult for an employee (or a tribunal) to challenge the choice.

Factors that are likely to be relevant to identifying a pool are the type of work is ceasing or diminishing; the extent to which employees are doing similar work (possibly even those at other locations); and the extent to which employees’ jobs are interchangeable within the workforce.

SELECTION CRITERIA AND SCORING
Once an employer has identified the employees in the at risk pool, it will need to apply selection criteria to determine those at risk of redundancy. To do this, employers will need to develop appropriate selection criteria. The criteria, which of course must be objective and fair, might want to look at things like disciplinary record, length of service and performance. Criteria which relate to protected characteristics such as age, disability, religion or sex must be ignored.

The employer will need to mark each of the potentially redundant employees according to the finalised selection criteria.

Different weighting can be given to different criteria. It can also be useful to ask different managers to independently score employees in the at risk pool in order to ensure objectivity.

ALTERNATIVES TO REDUNDANCY
In many cases, consultation between employer and an employee who is at risk of redundancy will be focused on finding an alternative to dismissal on redundancy grounds. Employers should be prepared to discuss the steps that it has taken, or has considered taking, to reduce the risk of (or number of) redundancies. This might include things like a recruitment freeze and terminating the engagements of agency workers before embarking on the redundancy process.

Equally, employers should provide details of any vacancies to employees who are at risk of redundancy in order to minimise the number of dismissals that might need to be made.

STATUTORY PAY
Lastly, when making redundancies, employers should bear in mind that employees are entitled to an SRP payment where they are dismissed by reason of redundancy and have at least two years continuous employment at the date of the dismissal. The calculation for this can found at: gov.uk/calculate-your-redundancy-pay

Managing a redundancy process to ensure fairness can be difficult. It is crucial that an employer carefully plans the process at its beginning and critically before consultation with employees begins. Getting it wrong can have a big impact – in addition to potentially facing unfair dismissal claims, a poorly planned redundancy process may end up alienating the workforce at a time when the employer requires everyone to be particularly focused on the job at hand and morale is low.

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EXERCISING CAUTION WHEN HANDLING COMPLAINTS

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EXERCISING CAUTION WHEN HANDLING COMPLAINTS


No matter what industry you work in, there will come a time when you receive a complaint based upon the services or goods you have provided.

Unfortunately, the automotive industry is no exception, and it can be easy to see such complaints as an unjustified attack on your company’s good reputation. In the heat of the moment, aggrieved business owners can jump to the defence of their company, engaging in a war of words with the complainant.

According to Gemma Carson, Head of Dispute Resolution at law firm Wright Hassall, they could do more harm than good: “Naturally, business owners can feel like they have a duty to protect their employees, and without thinking, fire back with an angrily worded email, expressing their displeasure with the original complaint.

“When emotions are running high, it is easy to get involved in a heated debate about the rights and wrongs, mistakes and failures, or actions and inactions of one party or another. It is at this point that things can escalate quickly and easily get out of control.

“The most serious issues can occur when promises or threats are made without due consideration given to any existing contractual agreements between the two parties.

“To reduce the risk of worsening the situation, there is plenty that can be done and it should start with a careful consideration of the content of the complaint. The pressure may be on, but take your time and ensure you make no commitments and no threats.

“Allow yourself time to properly cool down before sending a response, as emails sent while emotions are still running high have a nasty habit of biting back later down the line. “Instead, begin by drafting your email and save it to your ‘virtual mantelpiece’. This will give you time to review the situation and think carefully about what you want to say, instead of hitting back with a knee-jerk reaction.

“It is also important to check whether a service agreement and/or a contract exists between the parties. You should read any agreements carefully and check what they actually contain.“With an agreement in place, you may be able to respond to the complaint by highlighting any relevant contractual terms that may help you manage the situation.

DON’T IGNORE
“When dealing with a complaint, it is important to be proactive. By acting quickly, you can help diffuse the situation without the need for any legal involvement.

“Personal, face-to-face meetings will often help resolve issues before they can escalate. It is best to either raise the matter directly or if you suspect it to be more serious, to seek legal advice before you make contact.

“If it does feel serious, you should ensure you retain all of the relevant information relating to the complaint, including documents, correspondence and any products or specimen products from the same batch. It can help if you carry out and document any inspections of equipment or machinery.

GET HELP
“Seeking legal advice early on does not necessarily mean a serious legal dispute has arisen.

“Dispute resolution advice is very effective when delivered soon after the complaint is received, but your lawyers do not need to take an active role in the issue. They can offer strategic legal guidance focused on resolving complaint situations and diffusing potential disputes, whilst preserving the commercial position for the future.

“The most important legal factor to remember is that making a rash statement or taking a knee- jerk decision to stop providing your services or products, by sending that angry e-mail draft without first putting it on the virtual mantelpiece, may cause a serious breach of contract.

“If nothing else you risk a serious argument and potentially a threat of injunctive proceedings. In simple terms, a breach of contract can entitle the party affected by it to terminate the contract and then bring legal proceedings against you for damages.

“For this reason, sending that inflammatory e-mail without firstconsideringthe consequences could be a huge mistake that ends up costing time and money, both of which could be better spent managing or growing the business.

“Finally, where parties have become so embroiled that legal proceedings are not only threatened, but seem the only option, choose to work with experienced lawyers who understand commercial disputes and demonstrate a commitment to reaching an early, commercial and cost- effective resolution” concluded Carson.

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AN INSIDE JOB

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AN INSIDE JOB


 It can leave a bad taste when an employee commits fraud, but it must be dealt with, writes Adam Bernstein.

It’s bad enough losing out to theft committed by customers and third-party criminals, but it can leave a particularly nasty taste in the mouth when those most trusted – staff – commit criminal acts against the business that employs them.

According to Action Fraud, one in five small businesses will have been defrauded at some point in their trading history – sometimes to the point of bringing the business to its knees.

In March 2010, The Journal reported that a 21-year-old garage – Knights of Newcastle – was put out of business after a trusted employee, Colin Prudham, used the company computer to print off 419 fake MOT test certificates. The fraud only earned Prudham £12,500. In February 2011, a former employee in the accounts department was convicted for stealing over £50,000 from Lanehouse Service Station in Weymouth over a six-year period. The managing director, Peter Amery, described Joyce Britnell’s actions as a “major betrayal.”

And in February 2013, a bookkeeper stole £210,000 from a family business involved in motorcycle publishing run by her friends. Amanda Stevens took the money for, among things, hair and clothes leaving the company – Redcat – to pick up the pieces. The fraud committed over a number of years was only discovered when the VAT couldn’t be paid.

TAKING ACTION
While fraud is an ever-present risk, and a destructive one at that, employers can take preventative measures.

Background
The first step is to proactively check on everyone that is employed by the business, especially where they have access to sensitive systems or the company bank account. Quite simply, firms need to know exactly who they are employing. References should be sought and followed up with calls; the matter shouldn’t be dropped until satisfactory answers are received. Everyone from the cleaner to the members of the board, as well as contractors, should be subject to background checks. At the very minimum, it’s important to confirm an employee’s identity, date of birth, residential address, qualifications, employment history, criminal history and financial background. The process can be undertaken as part of the statutory obligation to ensure that an employee has the legal right to work in the UK.

Another option is to ask for a recent bank or utility statement, as well as details to check on qualifications, or a marriage certificate if a married woman has changed her name. You can also ask for past P45 or P60s, as well as data from Disclosure and Barring Service. Credit agency Experian offer background checks for those in the automotive sector to enable employers to check on, for example, qualifications and experience. At the same time, by signing up with one of the credit reference agencies – Experian, Equifax or Callcredit – employers will be able to monitor if employee (or third party) activity has changed the financial status of the business.

Policies
Another large step that a business can take to protect its position is to engender the ethos that fraud is not tolerated within the business. This starts at the top with everyone being able to see that the management plays by the same rules that employees have to follow. Policies and procedures need to be written, but they also need ‘buy-in’ from employees which requires consultation. On joining, every employee should be given, among things, an anti-fraud policy. If a fraud should occur and the employee concerned is dismissed, the event and the consequences should be widely communicated to all staff as a deterrent.

Control access
As harsh as it sounds, firms need to strictly control access to their premises and systems. As soon as an employee leaves the company their access to systems should be terminated immediately. Passwords should be changed, passes revoked and possession should be regained of company laptops and mobiles. (It doesn’t hurt to regularly change passwords held and used by all employees).

Take action
If a faked history or worse, criminality, is suspected, it’s important to take good legal advice with a view to with- drawing any employment offer made (or dismissing the employee). The situation should be reported to the police or, in the case of illegal working, to the UK Border Agency, as well as to the recruitment agency if appropriate. Ignoring the issue will only shuffle the problem to another employer; it could also leave the firm open to claims from future employers who weren’t warned about the ‘rogue’ employee.

Check further
Processes need to be put in place so that no one person has sole control over payment systems, chequebooks or the ability to singly authorise purchases over a given (low) value. Invoices should be checked to ensure that they are from genuine suppliers; unexpected requests to change bank accounts should verified – every time; and suppliers should be informed in writing each time a payment is made.

It’s important to also prevent premium rate and international numbers from being dialled out on company phones. Premium rate fraud – also known as PBX or dial-through fraud) involved out of hours calls being made to particularly expensive numbers. Similarly, phone logs should be regularly checked for increased use or unusual call activity.

Lastly, firms should take steps to destroy any documents with sensitive information that may allow a fraudster to misuse the corporate identity for criminal gain.

For paper, this means acquiring a fine cut cross shredder, while for data, firms should securely wipe computers (physically destroying hard drives and USB sticks) while factory resetting mobile devices. At the same time, time spent signing up on Companies House and other agencies websites seeking out their online protections is worthwhile. Companies House, for example, offers the PROOF scheme in relation to the changing of official corporate details; it helps prevent the hijacking of a company.

Fraud is an unpleasant fact of life. However, those firms that make it harder for employees who are criminally minded will be much better off. By removing the opportunity they’ll remove the temptation.

WHAT TO BE AWARE OF

There are countless different ways that an employee can abuse trust. However, the main forms that firms should be on the watch for are:
Procurement fraud: Fraud relating to company purchases of goods, services or works commissioned. Goods are invoiced but not delivered, or are subject to inflated prices.

Travel and subsistence fraud: Where employees claim for, say, food and mileage not incurred or which is higher than receipts can show.

Personnel management: Staff on sick leave but moonlighting elsewhere, misuse of company equipment and time for private purposes, or the use of false references and qualifications.

Exploitation of assets and information: The passing of internal company information for personal gain.

Payment fraud: The creation of fake accounts and invoices, the redirection of cheques and other payments, or the processing payments to the fraudulent individual.

Receipt fraud: The theft of inbound monies or where records for monies owed are altered.

False accounting: Changing records and accounts to misrepresent their true value, to enhance or alter their appearance, to gain funds from a bank, report overly high profits or to hide losses.

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RECON WITH RISK AND MANAGE YOUR PREMIUM

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RECON WITH RISK AND MANAGE YOUR PREMIUM


Insurance premiums might seem like they only go one way but manage your risks and you could get a reduction.

Joe Howard
Aftermarket Lead Broker, Hugh J Boswell

Maximising efficiencies and controlling costs are the buzzwords of the aftermarket right now. You can add to that getting the right insurance policy is critical otherwise insurance costs can soon become unsustainable, or worse your policy fails to adequately cover any losses incurred in the event of a claim being made. A large number of the factors insurance companies review, such as those above, are essential to your business, thus limiting your ability to alter them for the same insurance premiums. So, what factors are there in your control?

CLAIMS FREQUENCY
It sounds obvious to say, but reduce your claims, and your premiums will be lower. The most effective way to manage your claims frequency is to develop a company culture that works towards eliminating or reducing incidents.

A motor factor’s van f leet is most likely to be affected by a high claims frequency. So, how are policy holders protecting themselves?

For example, if motor claims are an issue for your business, start there. Employing drivers who aren’t as careful driving your vehicles as they are driving their own can result in claims. One potential solution? Making them responsible for paying the excess in the event of an accident encourages them to be more circumspect in your vehicles. Plus, incentivising them with a bonus if they avoid any fault accidents after, say three years, can add additional positive motivation as well.

To lower your insurer’s exposure to risk and therefore lower your premiums, purchasing vehicles with modern safety kit such as autonomous emergency braking is another way to minimise road traffic incidents. Insurance companies are now starting to build these into their pricing.

Of course, claims can’t always be avoided, and damage limitation sometimes needs to apply. When it comes to motor accidents, capturing information at the time, including photographs, or/and dash cam footage can help avoid fraudulent claims and make for a speedier resolution. An essential, but often overlooked element in managing claims costs is the early notification of your claim to your broker or insurer. Amongst other benefits, this helps manage (often expensive) third party claims management costs.

The most significant aspect here is age. Drivers under 21 pose the largest risk and are looked at very unfavourably by insurance companies. With motor policies running at loss for many insurance companies, the market has seen further tightening, with under 25’s and any drivers with less than 2 years’ experience often in the firing line. Restricting drivers to specific types of vehicle use and driver training are just some of the ways you can help alleviate costs here.

KEEP SAFE
Away from the roads, other ‘claims hotspots’ in the aftermarket business often revolve around health and safety. So being thorough with plant and equipment maintenance can reduce the number of claims resulting from accidents. Equally, protecting your staff well (e.g. steel toe-capped boots) strengthens a health and safety culture that reduces accidents.

MISCONCEPTION
There is a misconception that insurance companies offer f lat rate discounts for some practices, products or behaviours, which in most cases is simply untrue. A typical example of this is the installation of vehicle trackers. However, don’t let that deter you. A good insurance broker should be using such information, along with their knowledge of your business, to present a portfolio of evidence to insurance companies that your business is a desirable risk.

In some higher risk areas, insurers may have minimum security requirements to cover your business premises, such as red care police response alarm. Generally though, the better security measures you have installed, the more discounts the insurer can apply. The same also applies to vehicles, but in addition to your postcode, insurers also look at the vehicle type and its attractiveness to thieves.

If you would like to discuss anything raised in this article, please contact Boswell Aftermarket on 01603 626155.

TYPES OF COVER

The product range required to protect a modern business is vast but typically, most aftermarket businesses will be protected by at least one, or maybe all of the following products:

  • Commercial combined;

Covering all the commercial elements of a business – from employers,public and product liability,to buildings and stock,as well as business interruption,loss of revenue, etc.

  • Motorfleet;

Insuring your vehicles.

  • Motortrade; effectively garages, covering mechanics in customers’ vehicles, property, defective workmanship, accidents, etc.

When an insurer is calculating the weight of risk your business carries, there is a multitude of factors they consider, including;

  • Location (likelihood of theft and flood)
  • Value of stock and tools
  • Number&value of your vehicles
  • Property rebuild value Business function,e.gtrading in safety critical parts will carry higher premiums than car accessory retail.

If you would like to discuss anything raised in this article, please contact Boswell Aftermarket on 01603 626155.

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A NEW DEBT COLLECTION PROCESS

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A NEW DEBT COLLECTION PROCESS


Changing rules mean more hassle in getting your hands on money owed

A customer will not pay their bill. Despite your requests followed by demands, you find yourself in a position where you’re getting nowhere and the debt remains outstanding. Your thoughts turn to the law, but what steps do you need to take before you can “see them in court?” Well, as it turns out, more than you may have thought.

Business creditors dealing with a debt claim involving an individual, as opposed to a business, currently have to follow a simple set of rules. However, from 1 October 2017, the new Debt Claims Protocol will apply and businesses will need to ensure that they have complied with it when trying to collect debts owed. The Protocol will be used alongside any other regulatory regime to which the creditor may also be subject.

Sarah Carlton, an associate at Fox Williams LLP, says it’s important to note that the new rules only applies to businesses (including sole traders) claiming payment of a debt from an individual which also includes someone in business as a ‘sole trader’ – “the Debt Claims Protocol will not apply to debts from a business owed to another business (except where a sole trader is involved), and nor will it apply to claims issued by HMRC.”

REGIMES
The current position for debt claims is that a business creditor, or its legal adviser, will issue a Letter Before Claim to the debtor, in order to give them a chance for the matter to be settled before court proceedings. The new rules seek to formalise the process even before a Letter Before Claim is issued. Carlton says that in practice, “this will likely mean more work will need to be undertaken before even a simple debt claim is issued, the intention being that the parties try to settle the matter without the need for court proceedings while protecting debtors facing prospective legal proceedings from creditors.” Where a firm, or its legal adviser, intends to send a Letter Before Claim over an unpaid debt, the Debt Claims Protocol aims to encourage early communication between the creditor and debtor without having to involve court proceedings.

In terms of process, the debtor will have 30 days to respond to the Letter Before Claim once it’s been sent. If the debtor fails to pay the claimed debt, another letter must be issued from the creditor giving a further 14 days for them to respond, and in theory the person with the debt should use a new special form.

Carlton sums up the thrust of the process: “Creditors should seek to take ‘pro-active’ steps to engage with debtors whatever their response to a Letter Before Claim, even if the Reply Form has only been partially completed”. She adds: “The creditor should make attempts to contact the debtor and obtain any further information that is required to appreciate the position of the debtor.”

Of course, the parties may not be able to reach an agreement or resolve the debt repayment, in which case both should take steps to resolve the dispute without starting court proceedings. Here Carlton says that they should consider other forms of Alternative Dispute Resolution (ADR), for example ‘a without prejudice meeting’ or mediation. “Again,” she explains, “the obligation remains on creditors to consider the cost against the benefits when deciding whether to proceed with ADR – it may be the case that the amount of debt claimed does not justify such a process.”

Unfortunately, if the parties do reach an agreement and the debtor later defaults, the whole process must be restarted and a new Letter Before Claim will need to be sent to the debtor.

Carlton says that only time will tell whether individuals will use the new rules to frustrate collection actions against creditors, and whether the front-loading of costs onto the creditor pre-hearing may prevent creditors from pursuing all of their debt actions – “creditors who regularly have claim money from individual debtors will have to consider whether the preparation work now required makes the claim worth pursuing” she concludes.

The new Debt Claims Protocol process

The Debt Claims Protocol requires that a standardised Letter Before Claim be sent to a debtor and that it contains particular information:

  • The amount of the debt, any interest and/or other charges claimed by the creditor
  • The date of the agreement following which the money is owed and the parties to it (whether made by written or oral agreement)
  • Where the debt has been transferred to a different creditor (i.e. ‘assigned’) details of the original debt and creditor and details of the assignment
  • If the debtor has offered to pay, an explanation of why the offer or payments from the debtor are not acceptable to the creditor and why a court claim is still being considered
  • Details of how the debt can be paid and details of how to proceed if the debtor wishes to discuss payment options with the creditor
  • An up to date Statement of Account for the debt (including charges and interest claimed), an Information Sheet, a Reply Form and a Financial Statement Form (as annexed to the Debt Claims Protocol)
  • The address to which the Reply Form should be sent

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A POINT OF GARAGE DIFFERENCE

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A POINT OF GARAGE DIFFERENCE


Sometimes it’s good to take a bit of time out to think through why a customer should choose you, as opposed to any other garage in the area.

Thinking about your business from your customers’ perspective is an exercise worth taking. After all, we can be so immersed in what we do that we lose track and take things for granted.

Personally, I think I can safely vouch for your typical customer and tell you that most find it very difficult to differentiate between one garage and another. Many independent garages unfortunately do appear the same. They all say they do brakes, clutches, servicing; some offer air conditioning services and other’s MOTs, but there never seems to be a lot of difference between them.

This makes it very difficult for customers to make informed decisions on which garage to use. They have very little to go by. They may have driven past your premises, seen your signage, again reiterating that you do what everyone else does.

Some premises will be big and others small; in these cases, price will probably go through the customer’s mind, big = expensive (but perhaps they have more capabilities); small = cheaper (but can they work on new cars?).

LOYALTY
This could be a reason why some customers don’t stay loyal and change garages from year to year. Or, worse still, you lose out on a major repair because the customer wasn’t aware that you could do it and went elsewhere.

Very often customers are left to read the ‘signals’ that independent garages put out and to decipher for themselves who to use.

But this means for those who do reach out to their customers, who are prepared to communicate and engage with them, there are great opportunities to win them over. Customers do need more information to help them with their decisions. It’s not all about price and where you are.

To the majority, the mechanics of cars are a mystery. Most never lift their bonnet from year-to-year and as technology rapidly advances, people understand less and less. This only increases their difficulty with decisions. Who is really up to the job – can that small garage down the road really handle my particular car?

DIFFERENCE
So how can you make yourself more appealing to customers? You need to differentiate yourself from the crowd. You need to help customers with their decision making so they gravitate to you.

In an industry where this is rarely done (outside of the dealerships), there are opportunities for those prepared to put in the effort. And this is what marketing is about – it’s not necessarily about hard-sell offers and saying how great you are. It’s about helping customers, informing them and going that extra mile. It does take time and effort but it can pay off.

If you take a leaf out of other industries it might help you understand what I mean by ‘differentiation’. Take the airlines; you’ve got Easyjet, Virgin and British Airways, all fly planes and take passengers fromAtoB–butallare distinctly different and spend a lot of money communicating how different they are and evolving services to back this up. Customers know pretty much what to expect.

Then there’s the supermarkets, who do you choose Waitrose or Lidl? Extreme cases I know, but with one you know the products have been chosen with a more discerning approach, plus you can pick up a nice lifestyle magazine with hints, tips and interesting stories. Whereas the other has a more, no frills, pile ‘em high, sell ‘em cheap approach – both are clearly different.

It has been said that those that are too ‘middle-ground’ or too general are the businesses that are struggling. You’ve only got to look at some big high street names that have gone to the wall. In most cases, it was because they lost their way and,
in the eyes of the customer, weren’t different enough.

So how can you differentiate your garage? As I’ve already said, in most towns there are great opportunities for those who are just bothered to communicate; to actually do something like sending out regular mailings. This is because most don’t do anything.

But the key here is ‘communicating’, after all, it’s no good being good at something, or offering something different if you don’t tell anyone.

For those bookish types out there, I recommend reading any book by Jack Trout the author of ‘Repositioning’ (an updated version of his earlier book ‘Positioning: The battle for your mind’, or ‘Differentiate or Die’. These books will give you greater insight into differentiation techniques.

MAKING A DIFFERENCE

  • Becoming the local expert
  • Offering guarantees
  • Providing a unique approach to serving customers
  • Specialising in types of vehicles
  • Providing more customer endorsements
  • Providing additional products and services that others don’t n Doing charitable work
  • A long track record or unique story

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