Tag Archive | "Business"

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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COULD YOU ENTER A FRANCHISE?

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COULD YOU ENTER A FRANCHISE?


‘Franchise’ is almost a dirty word in the aftermarket, but is there an opportunity that is being missed here? Mike Owen suggests not

Franchises come in all shapes and sizes from McDonalds to mopeds, a plethora of VMs and then the smaller offerings which, frankly, are little more than pyramid selling in disguise.

The first rule, and like Monty Pythons ‘Bruce’s sketch’ every other rule thereafter is check your chosen franchisor – it is not unknown for these companies to go down the tubes and, as with Rover, take many well-established franchisees with them to ‘Carey Street’ or at least leave you holding the baby.

Now, a good franchise relationship does two things, it gives an income stream to the franchisee and incremental sales to the franchisor – a relationship is born!

As with any relationship they need nurturing, can go wrong and often have a dominant partner.

There are two basic reasons for considering a franchise. The first is for volume; a recognised name that will bring customers to your door, the second, surprisingly, is business discipline – training and business systems aimed at making the franchisee more professional.

In our industry when we talk about ‘franchises’ the first thing to spring into anyone’s mind is a vehicle franchise and that involves crossing over to the dark side! Firstly, and contrary to opinion, are not generally available – it is well known that the old ‘territory’ system was overturned by the European Commission only to be reincarnated under ‘Areas of Influence’ which are not quite as rigid but come a pretty close second!

You will note that the old ‘family’ garage business has all but disappeared in favour of the ‘groups’ or Plc’s – this offers comfort to the franchisee that the company is correctly funded and under proper financial control – they are fed up with getting burned.

OPEN POINT
Now suppose you have the premises in the right area and it is an ‘open-point’ for a franchise worth having, you are prepared to build from the floor to meet the draconian ‘corporate identity’ standards and, having spent a couple of million and still have a few more millions to go, let’s talk turkey.

As you stand on the edge of the world and prepare to leap into the abyss of becoming a Dealer consider the Faustian degree of your decision – just how far are you getting into bed with the devil?

Before the ink is dry on the contract your life will change – do not expect to operate a franchise for profit; your life will become entirely dependent on ‘standards bonuses’. Back in the good-old days when you could expect 18-20% discount on your cars and up to 50% on parts, now you may squeak 5% on vehicles and 18-20% on parts – the problem is you will be expected to give it all away. Your purchase margin will be passed on to your customers.

Standards bonus cover all things from vehicle sales volumes to customer satisfaction indexes and from parts penetration to finance penetration – the number of cars you sell using the franchises finance offerings. Compulsory training will be charged for and your warranty account will be watched like a hawk. You will input your business information to be measured as part of the ‘Inter Firm Comparison’ and you will receive your data back compared with national, local, size related and upper quartile businesses across the country. Your franchise representatives, be they Sales, Aftersales or Business, will be in and out of your business like a fiddler’s elbow and your life will belong to them.

BONUS
But return to these standards bonuses – you will be told what they could (or should) be but at each inspection you will receive de-merits; how much they will be reduced by, this creates a very threatening relationship. The top brick on the chimney for the franchisors, in this case the manufacturers, book of measurements, has to be volume! I get this, they are dependent on volume of manufacture and long gone as are Red-Robo and the fields full of new vehicles covered in brambles of the 70s and 80s. For the franchisee – you, you will quickly find that operating on a zero-profit basis on the promise of standards bonus to turn your empire into a success you will do anything to hit volume; this is where self-registered vehicles come into your life.

Self-registration is where you take stock vehicles and register them just to hit bonus. The consequence is that you now have a registered new vehicle that is immediately depreciated and going steadily down each month – now trading for nothing becomes trading for a loss. Experience dictates that a phone call will happen at 16:00 on the last day of the month informing you to register 50 units! But, you shout, they’re not allowed to self- register; suffice it to say, there are ways and means…

Dealer management is not for the feint-hearted, more those with a degree in self-deception but please don’t think it can’t be done; it can and is. The art is in never stop negotiating with your franchise, never accept you’re on the best terms, deals are done all over and you’ll need to be cautious!

So there you are, and all that just to have a new car five or six times a year and be taxed on it by HMRC – are you mad?

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DON’T GET CAUGHT OUT – MAKE VAT MORE SIMPLE

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DON’T GET CAUGHT OUT – MAKE VAT MORE SIMPLE


For once the taxman is listening to your ideas on how to make tax transparent, writes Adam Bernstein.

VAT is a tax that, from the government’s point of view, is very successful. It raised some £117bn last year – 22% of government revenues. And it’s cheap to collect – the VAT-registered trader does most of the work and HMRC just polices it.

But despite HMRC’s efforts, there are some that take advantage of the system for fraudulent purposes. Take the August 2016 case of Ian John Coleman whose Top Gear Transmissions Ltd charged VAT to customers but then pocketed £300,000 of that money. He was jailed for 32 months. He denied any wrongdoing, but offered no explanation for failing to submit accurate VAT returns, saying that he was “no accountant”.

The problem is that VAT is an admin burden, complex and even with help from accounting systems, creates lots of worries and builds in fraud risk. Could it all be simpler? Could that burden be reduced while protecting government revenue? The government is thinking VAT can be simplified and through a review being undertaken by an independent department, you have a chance to contribute.

BACKGROUND
As Paul Morton, Tax Director at the Office of Tax Simplification (OTS), the department running the review, points out, the UK when it joined the Common Market in 1973. With the UK planning to leave the EU, VAT is going to be affected by Brexit.

VAT’S ENOUGH
Those old enough may remember that when VAT was coming in, the then Chancellor, Anthony Barber MP, declared that “VAT will be a simple tax”. But it’s not and lots of areas cause difficulties for the trader, often in deciding whether to charge VAT on something or not.”
The OTS has identified eight areas that are particularly complex and so offer scope for simplification. They are discussed in Progress report and call for evidence it published on its website. Four are particularly interesting to the OTS:

The VAT registration threshold:
This is when a business has to sign up for VAT and start charging it. Morton points out that the UK’s level is £83,000; most others countries are around £20,000: “This can encourage traders to stay below the current £83,000 annual level. We’re told that distorts competition with someone who can stay below the VAT limit gaining a price advantage compared with the VAT-registered trader.”

Morton poses questions – would it be better to raise the UK’s registration level further, which would cut out more businesses, but costs the government money? Or should it be lowered – perhaps to the £20,000 average? But as Morton points out – “that would level the playing field somewhat but means more small businesses have to deal with it – how would they cope?”

Rates of VAT:
Changing tax rates is outside the OTS’s remit but what it’s interested in are boundary issues that cause problems in practice. Where is it difficult to decide what rate to apply? Is that down to product development where VAT hasn’t kept up?

There are of course some famous examples here says Morton. “Some may recall the case over whether a Jaffa Cake was a chocolate-covered biscuit (that would be subject to VAT) or a cake (zero-rated and so it carried no VAT). In the end, the case was decided by a VAT tribunal as it being a cake – they start soft and go hard with age whereas biscuits are the reverse.”

Partial exemption:
Morton says this is a more technical issue, but it’s not the obscure area it once was. The idea is that a trader claims back VAT they have paid on goods and services purchased. The catch is that the purchases have to be linked to supplies they make that are subject to VAT, at the 20%, 5% or 0% rate. If the purchase links to a supply that is exempt or just isn’t a supply at all (that can affect charities) then the VAT can’t be reclaimed.

Morton says “these circumstances are ‘partial exemption’ and seem to catch far more businesses than it used to. A classic example: the farmer who now rents out surplus buildings.”

Special accounting schemes:

There are a range of schemes which were designed to simplify VAT accounting. Morton lists as including flat rate schemes, annual accounting, and retail schemes. The OTS wants to know if they are still working properly and Morton asks: “Do they still simplify – do they need amending? Are some no longer needed?”

There are other areas listed in its report that the OTS will be examining – VAT administration, penalties and appeals; Capital Goods scheme; Option to Tax; a rulings system; and whether particular business sectors need to be taken into account. “But as well as what we have set out, people will no doubt have their own issues that cause complexity.”

THE OTS NEEDS YOUR HELP

The OTS gathers evidence from those who deal with the tax system – businesses, advisers – anyone with an interest. “We’ll do some of our own analysis,” says Morton, “but we need people – especially small businesses – to tell us what causes difficulties in practice and so what would make life simpler.” Email ots@ots.gsi.gov.uk if you have any ideas.

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KEEPING SECURITY CONTROL

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KEEPING SECURITY CONTROL


Ransomware is affecting the motor trade on an epic scale. We speak to an expert on how to kerb it.

Cyber expert William Taaffe

Security is a big deal in this day and age. You’ll know that the NHS is still reeling after the WannaCry virus hit a number of machines on its network last month, as happened to government and corporate networks around the world. In case you are not familiar, the so-called ‘ransomware’ encrypts the files on an infected computer and in this case, threatened to delete them unless a ransom, paid in Bitcoin is received. Even then, it is unlikely that you’ll get you files back as it will take someone, somewhere to manually authorise it… which they have no interest in doing after they have both you money and your files.

What you might not know is that this type of software has been affecting the motor trade possibly more than most industries over the past few years. It has mostly been targeted at dealerships, but wherever there is a mixture of weak security and sensitive data, hackers will pounce. To find out what can be done, we spoke to an expert in cyber security in the motor trade. William Taffe was the Cyber Security Business Manager (he has very recently switched companies) at RDS Global, a firm that started as the IT department of one of the main dealer groups in the 1990s, but has since become an IT support and consultancy brand of its own, following an MBO in 2013.

Our first question is why is the motor trade particularly vulnerable? Taaffe explained that the industry is a sitting duck for wrongdoers. “Turnover is what people are looking for. One reason is because the vehicles and stock are of a high value” he said. “The other reason is there is huge amounts of data that is collected, that data is stored in different systems. That data is a
big vulnerability”.

Another draw for criminals is that the consequences of cyber crime are less than street vice. “I saw a story on the BBC website where a frontline fraudster who was dealing in data was asked ‘why are you doing this?’. He said: ‘because I make more in a single day doing this than in a month selling cocaine.’ I thought it was a great quote – it just shows the power of modern criminality, and it revolves around identity fraud” said Taaffe.

So, what steps can be taken to secure your network? Taaffe recommends that each company should have a ‘cyber audit’, which in the case of very large chains could take several days. “One of the first things we do is look at the physical security” Taaffe explained, “I don’t just mean on the network, I mean who can physically walk into a site”.

There are a lot of quick and easy measures that can be taken to prevent random people from wandering into your main server cupboard, such as a lock on the door at the most basic level, rising to more sophisticated access control cards that can log people in and out of parts of your building (and for these, Taaffe recommends a firm called Paxton Access). However, the most sophisticated lock in the world is no use if it is left open. “Processes are one of the most important things you can do” Taaffe said. “It’s about accountability, such as who’s job is it to flag things up if there is a breech and is it mentioned in management meetings?” These ‘cyber essentials’ as Taaffe refers to them are obvious, but he explains how common it is to find firms that don’t even have a policy in place for the staff
to follow.

CHANGING LAW
This brings us on to another point that firms might not be aware of. By 2018, every company with more than five people will have to implement a cyber security policy, or it will be breaking the law itself.

However, the problem of the day is not with people physically messing with the computers, but perpetrators in unknown countries infecting computers with malicious software, or ‘malware’ as Taaffe calls it. “It takes different forms, but what you are we’ve been seeing is ‘multi-faced’ malware” Taaffe explained. “It doesn’t have one specific line of coding, it has a group of different coding. It will sit on your network very efficiently and it won’t run any applications. You might have heard the phrase ‘zero data tag’ which means something that hasn’t been seen before, so it bypasses the anti virus software. It can get into your system and work out where the vulnerabilities are – and then work out what face to put on. Sometimes, with the right conditions it can lock your network up and ask you for Bitcoin to unlock it”.

Once the computer is infected, there isn’t much you can do. “The police will always advise you not to pay, but the reality of the situation is that it is not black and white: said Taaffe. “The cost to the company for being ‘down’ was £100,000 per day. Sometimes it is better to pay the ransom and then rebuild the network, rather than keep it offline for days and days”.

Taaffe recalls a recent experience where a hacker had exploited a vulnerability in a network to extort a ransom. “In this case, they had a process, but it just wasn’t followed. There’s no point in sending out a memo once a year it has to be followed up regularly” he said.

Another old tactic that has seen resurgence is phishing. This is where the user is duped into handing over data by someone pretending to be something they are not – and this has moved on a lot from the days of apparent Nigerian princes asking politely for your credit card number. “Modern phishing attempts are more advanced” said Taaffe. “Some will learn individual employee’s diaries and will pretend to be them at certain times of the day, asking for certain amounts of cash to purchase vehicles or whatever. You’d be surprised by the number of people that get taken in by them.”

As with so may things, training, vigilance and enforcing policy are the best guard against criminals. “There are two misconceptions in the market and the first is that you can solve security problems by throwing technology at it: You can’t. The second is that they go away if you install anti virus software, that just won’t cut it anymore” concludes Taaffe.

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LONDON ULEZ TROUBLES SMALL BUSINESSES

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LONDON ULEZ TROUBLES SMALL BUSINESSES


London’s Ultra Low Emission Zone will start in 2019 is troubling news for small businesses and specialist hauliers serving London, says the Freight Transport Association (FTA).

“We need to continue the improvement in London’s air quality which is happening anyway, but this regulation taking effect in 2019 will severely disadvantage small businesses working in the capital’s centre,” says Natalie Chapman, FTA’s Head of Policy for London and the South East. “The impact will be especially hard for van users, as by 2019 there will only be two and a half years’ worth of compliant vehicles in the fleet – and no second hand compliant vehicles available for purchase at all.”

It is now planned that the Zone will extend in 2020 to Greater London for HGVs and to Inner London for vans in 2021. Ms Chapman commented, “It is encouraging that this is not happening in 2019 as had been suggested: this shows the Mayor has listened to some of the concerns that had been raised. But the expansions of the Zone will still increase the burden on business exponentially. We are calling for businesses based in the affected area to have access to a sunset clause, such as has been offered to private residents, allowing them greater time to comply with the change required without the need for unnecessary and potentially crippling additional charges for new vehicles.

“Previously, the Mayor has called on the Government to fund a scrappage scheme aimed at owners of older diesel cars and vans: we fully support him in that call and believe it is the place of national Government to help prevent the cost burden to implement these measures falling on local authorities, businesses and residents. If such a scrappage scheme were created, it would give the Mayor the necessary room to introduce more flexibility to the London ULEZ, helping operators to avoid some of this unwieldy and unexpected burden on small businesses.

“At a time when London’s businesses face an increasingly challenging trading environment, the Mayor should be taking every possible step to help the capital’s small businesses, and we will urge through this consultation for more consideration to be given to those affected by the introduction of these new measures” concluded Chapman.

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CHOOSING THE BEST TIME TO EXPAND

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CHOOSING THE BEST TIME TO EXPAND


Going up in size can be daunting, but there are a number of options to be considered while doing it.

Mike Owen

Recently, we’ve been approached by several businesses looking to expand, most of them asking about what criteria to use to be in the best position post expansion/acquisition – the answer is simple, follow your entrepreneurial nose! The real question is, has your current business got enough strength to support such an acquisition?

All businesses follow a basic maxim and that is of generating a return on investment. If a company generates sales of a million pounds and a profit of £100K then this is a return of 10% – simple. If you look at that same company and say that the investment in premises, stock, working capital is £250k then the return on investment is 40%; the invested money has rotated four times and generated 10% each lap – ‘circulation of funds employed’ multiplied by ‘return on sales’ equals ‘return on investment’. This is not supposed to be a lesson in accountancy but a yard stick that can be used to evaluate a business’s readiness to expand.

Using the above company again and extrapolating the figures forward some strange things start to occur. The £100K profits this year, after dividends, tax and a myriad of other distributions, is reduced to perhaps £30K and this amount is held within the company then the investment is increased to £280K, circulation drops to (£1m / £280K = 3.6) and the return reduced to 36% and so on – all the time profits are replacing borrowed funds the investment remains the same; once the profits (or reserves) are building up inside the company then the investment increases – time to expand.

LEAN AND FAT
Rule number one – Fat companies become complacent! Lean companies fight for survival, stay alert to every opportunity and cost increases. In general terms the worst thing to have in a business is money; money should be invested in stock and ‘turned’ but overstocking is the ultimate in stupidity. Businesses that ‘take offers’ that exceed their immediate stock requirements can adversely affect the equilibrium of their returns.

Once a company becomes fat then it needs investment to keep the speed of circulation up and maintain the returns so here is a basic requirement that needs to be satisfied in considering further expansion. Another is the ‘gearing ratio’, the amount of borrowed funds to equity; equity equating to the company’s own funds. We look at this a little differently to most and believe that, particularly now, the ability to repay the interest on, together with the pay-down of the principal amount, of any borrowings is the ‘grail’ rather than the amount borrowed. We considered it good practice to keep repayments below 25% of cash profits – exceeding this may throw you under the bus if rates increase or the cost of stock goes stratospheric post-Brexit.

But of course business expansion looks good on paper – that’s why we do it; reality generally removes the rose-tinted glasses very quickly. Experience dictates that a business planning for expansion rarely gives consideration to the detriment that will happen to the existing business. Most accountants and finance directors will suggest that it brings ‘economies of scale’; basically, if you are taking over another company you will take out the acquired management in favour of current management overseeing both businesses, this rarely works. Surprisingly we often overlook the ‘involvement’ of management in day-to-day operation and how unavailability due to being ‘elsewhere’ will frustrate staff and customers alike.

The most important aspect of business expansion is policy transfer – ask yourself ‘how many times a day do staff ask me…?’ Each of these questions state, in big letter, there is no policy for this item so staff either ask you, don’t want to be held accountable (due to insufficient delegation) or are too lazy to take a decision; before you start expanding getting this right simplifies life post purchase. Instilling missing policies and procedures in the new business will tax your tolerances, putting it into two (or more) is the absolute stuff of nightmares.

DIRTY TALK
Now we must really talk dirty – Health and Safety! If your current business is not squeaky clean then it damn well should be! You owe every member of staff the right to be safe at work and return home alive. H&S does little more than this and whilst it would test the patience of a saint, it is a necessity – No business owner can abdicate responsibility by delegation even to an HR officer so, post purchase, you will have your head on two blocks. Two options present themselves; employ an external specialist company or get your own ‘Gestapo’ but have monthly meetings with them, minute the decisions and make it happen; the Health and Safety Executive, should they swoop, will expect these to be available together with actions taken.

We test readiness of companies both financially and structurally prior to undertaking their expansion programmes and it is an ongoing source of amazement at how much within some companies is left to assumption – assuming that staff know what is expected of them leading to incredulity when they don’t.

MODERN CURIOSITY

Now for the up-side. This is a good time to invest and to expand your business. The day of ‘the old curiosity shop’ business is over – this is the time of the professional; at every level. The days of holistic growth is gone, as is the premise of just opening a new depot in the hope that customers will come in just because you are there; it was former New York City Mayor, Rudy Giuliani, who stated “‘change’ is not a destination, just as ‘hope’ is not a strategy! Ensure that any intended change is not based on hope? Create a plan and test the it with as many ‘what ifs’ that you can imagine – one of them is bound to happen! Any expansion must then be measured against that plan and progress and performance religiously monitored; any shortfall or deviation is costing you money.

Acquisition is often the lesser evil as, whilst you will acquire some problems, you start with a going concern. Don’t miss out on performing your ‘due diligence’, don’t just delegate this to accountants; bean-counters can check the finances but you know about the business – use your expertise and be sure you are buying an asset rather than a liability.

Expansion is the land of the bold not the silly; of course you should look to grow but rather like buying at auction it’s no use asking those around you if you’ve done the right thing – if they thought it was right they’d have done it first! ‘Tener cojones’ and self belief is your starter pack everything else follows!

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WHERE EMPLOYERS GO WRONG

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WHERE EMPLOYERS GO WRONG


Human capital is more than just a resource, it is your strongest asset – so look after it writes Adam Bernstein

Employees are a firm’s greatest asset and they’re probably the most expensive too. So why is it that some employers and managers seem hell bent on treating their staff so poorly? Why do they create ‘them and us’ divisions without a care?

Having a unified and happy work force is critical to success. Employees can make or break an organisation. Staff don’t have to go the extra mile, they can upset a customer base, and they will leave for other opportunities taking both knowledge and customers
with them.

Any manager worth their salt knows that recruitment of replacements is both expensive and disruptive.

FIVE CAUSES FOR CONCERN
Lee Ashwood, a Senior Associate in the employment department of law firm Eversheds, reckons that there are a number of common causes of employee malcontent.

In his experience, and in no particular order, there are five key areas of concern.“The first”, says Ashwood, “is company sick pay being withheld in situations where the employer has a discretion over the payment.” From his point of view, those genuinely unwell consider the withholding of monies as an arbitrary penalty.

Next he sees real and sometimes bitter disputes over pay “in relation to hours worked, what constitutes overtime and, of course, simply not being paid enough in their opinion”. The issue at hand is that the web has made salary and pay more transparent and staff consider it their right to be paid the market rate. A number of cases on this have been brought and won by employees.

Thirdly, and this is a big problem for Ashwood, is inconsistency in treatment: “I’ve seen on many occasions situations where an employee feels that they are always given the worst tasks to complete, have not been allowed time off at short notice when others have in the past, or have not had the perks that others have been given in similar circumstances.”

Fourth on the list, and one that many can attest to, is an employee thinking that their workload is too much or that work has not been distributed evenly. This disparity is a real cause of employee stress that can lead to an employer either paying for employee sickness and lost production or finding themselves in a tribunal.

The last cause for concern for Ashwood fits under the heading of bullying by managers and colleagues. Indeed, a recent report by the arbitration service ACAS has found that workplace bullying may actually be on the rise, with ACAS receiving around 20,000 calls relating to bullying each year, more than ever before.thinkstockphotos-627390700

STAFF RETENTION
Points raised about staff retention are true in to all businesses, but it is perhaps factors that rely most on having bright and committed individuals on their teams. However, it is exactly because these people are both bright and an asset, that rival firms will try and poach them… and if the employee thinks they are getting a raw deal at their current employer they will move. Interestingly, research shows that this rarely has much to do with money – more often than not it is to do with how they perceive themselves to be valued by the company. Consider the number of Unipart Automotive employees who ‘defected’ to other companies well before the firm went bust in 2014. If employees think there is a lack of opportunity then there will likely be a high turnover rate.

STAFF APPRECIATION
So with the scene set, why do employers make mistakes? Do they misunderstand the law? Do they deliberately ignore the process? Or are they simply failing to appreciate the value and views of their staff?

With his lawyer’s hat on, Ashwood thinks that “making mistakes in not following what the law requires is understandable as it is often complex” and not well-known. “However,” he adds, “if you treat staff with empathy and respect, you rarely give them a reason to check to see if you are treating them in accordance with the law. It is not appreciating this point that leads to very common mistakes which in turn lead to disgruntled staff, grievances being raised or, worse, Employment Tribunal claims”.

CLAIMS ARE STILL BEING MADE
July 2013 saw the introduction of tribunal fees paid by claimants and although the number of claims has fallen from 50,000 in the first quarter of 2013 to just over 17,000 in the fourth quarter of 2015, an employee claim is not something that employers should welcome. Indeed, in a March 2015 report in the Daily Mail, The British Chambers of Commerce estimated (then) that the average cost to a business of defending itself at tribunal was £8,500 while the average cost of agreeing a settlement was £5,400.

BRING ME SOLUTIONS
The most obvious solution to counter discontent is for employers to take time to consider the impact of a decision on the employee in question; explain the reasons for the decision; and listen to any objection the employee may have about the decision. Following this course of action would make a number of employment lawyers very and distinctly unemployed.

Moving on, the better employer understands the importance of employee motivation, something that Richard Branson is well known for. In an April 2015 blog, How to keep your best staff, Branson underscores one of his key principles…that staff matter: “Making money or moving up the corporate ladder is no longer considered the be all and end all of career success. Today, one of the biggest indicators of success is purpose. And, in a world where purpose reigns supreme, it’s only natural for people to want to be heard and have their opinions valued.”

This logic is noted by Ashwood who understands that every staff member is likely to have different reasons and motivations for coming to work: “Just because you are solely focused on making your business as profitable as possible and would be prepared to work all hours to do this, does not mean others are or should be judged negatively because they are not. This means you should not take staff for granted and should try to tap into what motivates them in order to improve their performance.”

MOTIVATION
So let’s look at motivation. In simple terms, people work because they are either extrinsically or intrinsically motivated. The former is the poorer relation. In essence, it uses bribes to get staff to work harder – pay, holiday or some other reward. The problem is that the efficacy of an extrinsic motivator wanes given time and once the employee becomes disgruntled with the amount of tax charged to the ‘bribe’. Alternatively, and more preferable, is the pursuit of intrinsic motivation where staff do something because they want to do it. It’s the very reason why someone will willingly work through their lunch hour or will go beyond the call of duty to help a customer.

To be a successful manager that can instil intrinsic motivation within employees requires an ability to understand what an employee can do and also what they like to do. These goals can be matched in a number of ways.

Firstly, managers should help staff to develop themselves so that they maintain their market potential. Ignore this and they’ll leave for a firm that will. Next consider that staff now want a good work-life balance because after all, there’s no point being the richest man in the cemetery. Not everyone works for money – it’s the ‘eat to live’ rather than the ‘live to eat’ perspective.

Of course, businesses are not democracies, but nevertheless, staff like to feel that they have some level of input to decisions that affect them. The web has clearly exacerbated the importance of this point and firms that keep employees in the dark will eventually lose out to rumour and gossip.

Firms that don’t treat staff like automatons and who instead offer interesting tasks will keep employees more firmly engaged. It’s a sad function of modern life that people nowadays have shorter attention spans, something that can be squarely blamed on smartphones.

And lastly, staff bask in the glow of recognition for their efforts. Positive feedback and constructive criticism will do wonders for keeping an individual within a firm with velvet handcuffs.

To sum up the mantra for managers must be to look beyond the balance sheet and to those that are the backbone of the business. Get it right and employers will be on to a winner. Get it wrong and it’ll surely be the death knell of the firm.

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