Finance

Cutting costs without compromising quality

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When you’re a startup business, you need to turn your investments into revenue and profits quickly. Most believe that improving profits is about increasing sales. However, increasing sales will often mean more marketing and acquiring new customers is going to require more investment too.

Therefore, one of the best ways to improve new business profitability is often to look at costs. Here are some of the top ways you can cut costs without compromising on the high standard of customer service you offer.

1. Business insurance

You need business insurance, there’s no question of that. It helps protect you financially from any claims made against your business from accidents caused by your equipment or any mistakes made during your work. Not having insurance can ruin your business’ chances of survival if something does happen.

However, if you just bought insurance from an agent, then you might find that you’re spending too much on your business insurance. Instead, you need to speak to an insurance broker. Unlike sales agents at insurance firms, brokers are legally obliged to provide you with accurate information. They can find you a policy that matches your exact needs at a good price.

This can save you money in one of two ways. Firstly, you can save costs on your monthly outlay by paying only for what you need and nothing else. Secondly, it can save you from claims. A broker might find that you’re missing some protection and should a claim be made against you which isn’t covered in your existing policies, you’re liable and this could cost you significantly.

2. Services

Some services you’re probably going to be paying over the going rate for. This could include leases, IT services and more. These services could be scaled back and then you can recover the lost costs. A classic example of costs that are too high is with your website. A managed hosting package is not normally very expensive, but there are services that might offer you a better deal.

In addition, you might find some utility companies have better rates than others. According to a study by Ofgem, UK small businesses often pay 50% more than they need to for their electricity. So, speak to your supplier and see if you can get a better deal.

You might also want to talk to your landlord if you lease premises. Landlords don’t want to leave their buildings vacant, it makes no financial sense to them. So, if you’ve been paying the rent on time, then it might be a great time to ask for a reduction or look for new premises.

3. Bulk buying

This is a common one that can sometimes cause problems, but might be a good option. When you buy products, you can often find that buying more lowers the unit price. This allows you to make more profit per unit sold. This saving is either done based on the number bought, reducing the price per unit, or the shipping cost being split between more units.

The biggest problem with bulk buying is where to store all the products. This could cost your business more money, so you might need to conduct a cost-benefit analysis for this approach.

4. Recognise staff performance

Another thing that you can do is to create an employee recognition system. This might seem counter-productive, but giving staff a well-time reward for good behaviour can actually save on costs over the long term. 

Staffing costs are often the largest expense of any small business and recruitment is very expensive. If you need to replace a staff member, the cost of recruitment and lost productivity can be up to 150% of the employee’s annual wage. By improving job satisfaction, you reduce the number of people taking absences or leaving your company, saving you money in the long term. 

In addition, staff recognition is linked to higher performance levels. So, while this might be an initial cost, the actual benefit might be larger. 

5. Ditch some marketing expenditure

Another expense is marketing. However, not all marketing is created equal. Some marketing avenues like PPC and print adverts can be rather expensive. You have to be sure that the campaigns you’re running are having a positive effect. 

So, be sure to do an analysis to check that your marketing is having a positive impact on your profitability. If a strategy is too costly, perhaps you need to drop an option.

Conclusion

There are many ways that you can save money within your startup business. Everything from business insurance to staff recognition can be utilised to save on costs and improve your business’ profitability. How you do it is up to you, but an effort on numerous fronts is often the fastest way to improve your business’ performance.

Is there anything practical individuals can do to protect themselves?

A new concept to emerge from the Covid-19 lockdown has been ‘shielding’ – those who have been at very high risk of severe illness from coronavirus who have had to minimise all interaction with others and stay at home as much as possible.

This has led to unforeseen daily difficulties for individuals who have previously been able to lead completely normal lives. For example, what happens if you cannot leave your home, but you need to visit your bank to complete an urgent transaction?

Is there anything practical individuals can do to protect themselves?

In these instances, Lasting Powers of Attorney (‘LPAs’) provide a useful tool to help facilitate an individual’s needs should anything arise in future leading to similar lockdown requirements.

What is a Lasting Power of Attorney?

An LPA is a legal document which allows an individual to appoint one or more ‘Attorneys’ to help them make decisions or act on their behalf. You must be over 18 and have full mental capacity to make a legally valid LPA. Your Attorney(s) should be someone you trust to make decisions in your best interests – this could be a friend or relative or a professional person if you have no one close to you who you would like to assist you. A ’property and finance’ LPA will allow the Attorney(s) to sign documents on your behalf, discuss your accounts and investments and to transfer funds. If you do not want your Attorney(s) to have too much control, you can tailor the document to restrict what your Attorney(s) are allowed to be involved with.

Practical protection

Often, relatives and friends of elderly people take the step to draw up an LPA when their loved one becomes physically or mentally incapacitated. As we have seen during lockdown, an LPA can actually provide practical protection to a much wider group of people who are still very much in control of their own physical and mental capacity at the present time.

As long as your LPA does not contain a restriction that it will only come into effect if you loose mental incapacity, your Attorney(s) can use the document to act at your direction to do the things that you are unable to do – so with your consent your Attorneys would be able to move money around, do your shopping, pay bills for you, and manage your finances both due to shielding, or in hospital for any length of time or simply if you are due to go away on holiday.

It can be very sensible to get an LPA in place as a matter of course – perhaps if you are considering getting your will updated, you should arrange an LPA with your spouse, partner or trusted friend at the same time. You should also consider making a ‘Health and Welfare’ LPA which would allow your attorneys to make decisions about your day to day living, choice of medical treatment and where you should live – but only if you are unable to make these decisions yourself.

Hatch Brenner

NatWest Business Builder: Customer Discovery

When done well, customer service can help build a strong reputation and loyal customer base. Experts share their top tips on getting it right.

More than seven out of every 10 (71%) UK SMEs believe they deliver strong customer service, a survey by Close Brothers has found. Only 5% saw their customer service as poor, while the rest (24%) saw themselves as neither strong or poor.

While having confidence in your customer service is a good thing, a true marker of whether you are excelling is how valued customers feel. Ultimately, a customer who is valued is more likely to return and even spread the word, helping you to attract new customers and generate more business leads.

Here are a handful of practical ways to provide your customers with a service that makes them feel valued.

1. Speak to customers in their voice

“There’s no better way to show you understand your customers than through your tone of voice, branding and marketing,” says Lesley Bambridge, founder of marketing consultancy We Mean Business. Bambridge has experience working with household names such as Aquafresh, Lucozade and Ferrero Rocher.

Even the best customer service can be undermined by the wrong tone of voice. The words used or how they’re expressed can say a lot about how customers perceive your attitude.

“You need to make yourself a brand that they can rely on and relate to, so don’t speak to them as if you’re owed the business,” Bambridge says.

2. Reward them

Customer loyalty programmes have long been regarded as an effective retention tactic, and not just post-purchase.

Handbag brand Mia Tui gifts new customers 500 points upon signing up, which is worth £5 off their first purchase. They then receive five points for every £1 spent thereafter.

“A scheme like this helps customers to feel like they’re part of a club,” says Mia Tui’s director and founder, Charlotte Jamme.

3. Personalise the purchasing experience

A customer’s journey shouldn’t end once they’ve checked out.

“You should personalise wherever possible and make the purchasing journey specific to them,” says Bambridge. “Consider following up with offers and bespoke deals, based on their previous purchases.”

Of course, you need to ensure you’re being GDPR-compliant and that your customers have opted in to receive future correspondence and marketing emails in the first place.

Frozen Indian food supplier Nikasu Foods UK personalises its customers’ experience by encouraging them to share recipe ideas post-purchase, which are then reshared by the company online.

4. Thank your customers

Any business hopes that its customers will keep coming back for more, but, for companies just starting out, loyal customers can be hard to acquire.

““You need to make yourself a brand that they can rely on and relate to, so don’t speak to customers as if you’re owed the business”

Lesley Bambridge, founder, We Mean Business

“One thing that I’ve done since we started, and it seems to go down really well, is to include a handwritten note with each order, thanking them,” says Ruth Oldfield, co-founder of Bolton-based Coffee & Kin, which sells compostable coffee pods, coffee beans and tea, with her sister and their partners. It doesn’t matter how many times they’ve ordered before.

“I truly believe doing this helps customers feel more connected to our family,” she says.

5. Welcome feedback

No matter how strong you believe the customer service you’re delivering to be, there is likely to be room for improvement. And welcoming feedback is key to this.

“We acknowledge and respond to all feedback we receive [from our customers], whether it’s good or bad,” says Galyna Nitsetska, founder of Empress Mimi, a lingerie subscription box.

Nitsetska’s commitment to valuing her customers is partly down to the difficulties she faced fostering loyalty and engagement for her previous business – an e-commerce website selling luxury workwear for women. Many of the purchases made through the site were one-offs, she says.

6. Be open and honest

If you have the capacity and the resources, it’s worth considering replying to any feedback in person, rather than sending a generic response.

Too many SMEs try to replicate the approach of big corporates, which can often be scripted and lack empathy, rather than thinking about how they can deliver more emotive customer experiences, says Nitsetska. You need to be open and honest with your customers, which means admitting when things have gone wrong. Keeping your apologies fresh and sincere can help win them over and encourage them to stick around.

“Being able to scale is important, but if you’re at the beginning stages [of building a business], having a loyal customer base is far more crucial, until you get to a place where scaling and atomisation becomes unavoidable,” she says.

7. Don’t take yourself too seriously

While it’s important to deal with any issues promptly and professionally, your customer service shouldn’t be seen as a robotic process. It also helps to have a sense of humour now and again, says Bambridge.

“Life’s pretty unfunny at times, so if you can do anything to lighten or brighten a customer’s day, just do it,” she says. “It’ll build huge brand affinity and make you one of the ones that stand out.”

Further Reading

• Management strategies: staying solvent in the early years
• Top tips for would-be entrepreneurs

We have a thriving and diverse community of thousands of entrepreneurs from multiple sectors, backgrounds and skill sets helping you to connect with the right people at the right time. No matter whether you’re looking to upskill, get feedback, engage with new people or simply observe, there’s something for everyone.

‘Want to learn more? Register for NatWest Business Builder to view all of their business development tools. Click HERE‘

NatWest Business Builder: Understanding your mindset

Feeling like a fraud as founder can be crippling, so here’s how you can tackle the dreaded imposter syndrome.

According to a survey published last month, the Microbusiness Index, a third (33%) of female micro-business owners in Scotland doubt their achievements.

Across the whole of the UK, around two thirds of SMEs say they have suffered from imposter syndrome and a fear that they’re going to be exposed as a fraud, or so found a 2017 study carried out by AXA Direct. Furthermore, women are more likely to admit to feeling like an imposter – 74% compared with 58% of men – and 44% of business owners say the self-doubt they’re plagued by is intense enough to be called a daily companion.

Suffering from imposter syndrome is often exacerbated by the fact that business owners may not have anyone to speak to about their concerns. Here, SME owners share their experiences and advice.

1. Age is just a number

Rachael Dunseath is the founder of Myroo, a plant-based skincare brand for sensitive and allergic skin. She launched the company just over two years ago, having previously had a successful career in financial services marketing.

“I knew it was a great idea – my research showed that the market needed these products – but I was so unsure about taking the leap,” she says. “My imposter syndrome hit its peak when I landed a place on an accelerator programme. I was surrounded by younger, more dynamic entrepreneurs, who were taking risks, being brave and hustling.”

While Dunseath is in her early 40s, many of her fellow entrants on the programme were in their 20s. Over time, Dunseath has found that a coping strategy has been to forget about her age and focus on what she wants to achieve instead.

2. Remember: Rome wasn’t built in a day

A lack of skills particular to your business can seem daunting. For Nikki Hollier, owner of Border in a Box, a ready-made garden border template kit, it was her perceived lack of plant knowledge and general horticultural skills that she believed was holding her back.

“I worked in corporate IT for two decades and recently retrained as a garden designer, so I’m always concerned about not being good enough,” she says. “I’ve learnt to deal with it by reminding myself that Rome wasn’t built in a day.”

What this means in practice is focusing on improving the skills needed to make the business a success and, in time, you’ll find that people will start to take you seriously, explains Hollier.

3. Break down daunting tasks

“I always think of it [imposter sydrome] through the lens of the common mountain analogy,” says Callum Hemsley, co-founder and CEO of Eola, a platform and marketplace for adventure sports and outdoor activity centres.

In the analogy, the mountain is a big task that needs to be navigated and overcome to reach a destination or end goal. Hemsley says that if a particular task is too daunting and is heightening your imposter syndrome, then it’s helpful to break the task down into manageable chunks.

“Doing this reduces the feeling that the whole cannot be accomplished and makes your targets seem within your capabilities,” he says.

4. Enter awards

Dunseath and Hollier are in agreement that entering awards can not only help your business to gain recognition, but also give you confirmation that you’re doing a great job.

““The company had won awards before, but I’d managed to explain those away. This was a huge, national win, though. Even I couldn’t take the shine off that”

Rachael Dunseath, founder, Myroo

“I won Micro Business Entrepreneur of the Year at the 2016 Great British Entrepreneur Awards,” says Dunseath. “The company had won awards before, but I’d managed to explain those away by telling people that not many others had entered. This was a huge, high-profile national win, though. Even I couldn’t fully take the shine off that.”

While losing out on an award might feel demoralising, it shouldn’t be seen as a setback. Instead, you should use it as an opportunity to enter more awards – to seek the recognition you believe your business deserves, argues Hollier.

5. Don’t be afraid to market your business

Helen Campbell, a business mentor and PR coach to SMEs, says that one thing is clear from her experience of dealing with clients: many business owners and founders tend to be reluctant to promote themselves.

“A lot of them are in a loop where they feel awkward about self-promotion, but if they don’t market themselves they bring in little-to-no work, which then worsens the imposter syndrome,” says Campbell. “In some cases, this lack of promotion will lead to the business failing. It’s important to remember that marketing your business is not boasting. Not showing off your skills and expertise, however, can stop you from reaching your potential.”

Campbell’s advice is to find your own authentic style and a way of promoting yourself that feels right for you, amplifies your talent and aligns with your company’s values.

6. There will always be doubters

Regardless of success, there will likely always be those who’ll doubt you.

“It’s best to avoid these people, as they can bring your confidence down quickly,” says Hollier. “But while some are very mean-spirited, equally, there are some who are absolutely wonderful, so make sure you surround yourself with them.”

7. Ask yourself: what’s the worst that could happen?

In the two years it’s been running, Myroo has grown its team and its products are stocked up and down the country, including in stores of fashion chain Anthropologie. Myroo is also about to announce a significant international account.

“I do still battle the imposter demons, but I’m getting better at knowing how to handle it,” says Dunseath. “And I now realise that failure can be a good thing as long as you learn from it. My mantra is: ‘What’s the worst that could happen?’ The reality is usually not as bad as you think.”

We have a thriving and diverse community of thousands of entrepreneurs from multiple sectors, backgrounds and skill sets helping you to connect with the right people at the right time. No matter whether you’re looking to upskill, get feedback, engage with new people or simply observe, there’s something for everyone.

‘Want to learn more? Register for NatWest Business Builder to view all of their business development tools. Click HERE‘

Chris Cliffe FCIPS MIoD Procurement Consultant

CJC Procurement Ltd was founded by Chris Cliffe. Chris studied Psychology and Management at Aston University’s highly rated Aston Business School and is now an experienced Procurement Professional who takes a proactive stance towards elevating the role of the Procurement Profession as well as passionately delivering excellent outcomes for his clients. 

Chris is an active member of the Chartered Institute of Procurement and Supply (CIPS). He gained MCIPS status in 2008 following completion of the CIPS Graduate Diploma. In December 2016, and in recognition of his “professional standing and contribution to the procurement and supply profession”, Chris was awarded a ‘Fellowship’ from CIPS. In June 2017, Chris was elected a full Member of the Institute of Directors (IoD). Most recently, Chris achieved ‘Chartered Procurement & Supply Professional’ status and in June 2018 was awarded ‘Highly Commended’ in the ‘New Director’ category of the IoD East of England, Director of the Year Awards!

Chris has 17 years experience across the UK Public Sector, from Cabinet Office to Housing Sector and from £6bn OJEU processes to £600 purchases! Chris has worked across all Categories of spend, but has deep expertise in the IT & Technology category.

Chris regularly contributes to procurement thought leadership and is a regular attendee at the Procurious Big Ideas Summits reserved for the “top procurement influencers across the globe” and hosted the London 2019 event. He frequently writes articles for a variety of publications both online and print and has been interviewed for podcasts and delivers webinars for the Institute of Directors.

CJC Procurement Ltd

Please feel free to get in contact. 

Charles Stanley Wealth Managers

At Charles Stanley Wealth Managers we help clients secure their financial future. In today’s world though just having the right investments and tax wrappers is not enough. As everything moves increasingly online this presents new challenges.

John Harrison ACSI, head of information and cyber security at Charles Stanley, outlines some important security measures we can all adopt to help prevent and prepare for cyber-attacks.

Email

An email account is an attractive target. Hacking it allows criminals to reset other online account passwords, impersonate you, amend emails and phish your contacts. Use ‘Two Factor Authentication’ for your email accounts and change each account password to something unique, long, and strong. Never reuse an email or cloud password; criminals have tools that automatically try one compromised password with other popular online accounts.

Insecure email and secure portals

The global internet is a public network. Standard email sent across the internet is insecure: it can be read or intercepted. Email accounts belonging to individuals are increasingly being hacked. Charles Stanley’s ‘MyCS’ service is a secure website (known as a ‘secure portal’) that offers a safe messaging service for our clients and Investment Managers. As the messages stay inside Charles Stanley’s network, and are not sent across the public internet, the risk of a message being intercepted or tampered with is greatly reduced.

Password hygiene

Starting with your email account, make the password long (over 15 characters) and strong (containing numbers, letters and symbols). You can try using three random words that you can remember easily but mean nothing to anyone else. Then replace some of the letters with numbers and symbols.

Push payment fraud

This is when cyber criminals trick you into sending a payment to their bank account. Try to use a secure payment service like PayPal, or pay by credit card, instead of sending a bank transfer.

Two Factor Authentication (2FA)

2FA uses two pieces of information to prove your identity. Your password, ‘something you know’ is the first factor. The second factor will typically be ‘something you have’, like your mobile phone. After entering your username and password, a code is required before the account can be accessed. This might be sent as a text message or within an app on your mobile phone. An unexpected 2FA code also indicates a cybercriminal has your password, so you can immediately change it.

Zero trust

Protect yourself by adopting a zero-trust mindset, when emails, text messages or phone calls are not believed until proven genuine. Independently verify the sender by contacting them using details obtained from a search engine or official web site.

For more tips on staying safe online, contact a member of our Norwich team for your free guide to cyber security.

01603 856 932

[email protected]

Past performance is not a reliable guide to future returns. The value of investments, and any income derived from them, can fall as well as rise. Investors may get back less than originally invested. Charles Stanley & Co. Limited is authorised and regulated by the Financial Conduct Authority.

24 Fingers

Never let it be said we don’t appreciate the value of choice here at 24 fingers (just ask Emma about shoes) but – and we can barely believe we’re about to say this – there are times when having too many options is bad, especially when it comes to using social media platforms for marketing your brand.  

When it comes to advertising your business, it pays to be precise. There are lots of platforms that entrepreneurs can use to showcase their wares or services. However, like butter scraped over too much bread, trying to hit them all can be exhausting and do your bottom line no favours. Instead, try the following: 

Where are your people?https://giphy.com/embed/331KYDEYvSGNW

Any small business needs a marketing strategy and underpinning every single part of it is a deep knowledge of your customer. As well as their needs and pain points, you must also know which social media platform they spend their time on. 

If your market is Gen Z, then you should be hitting Instagram with both marketing barrels, because that’s where 73% of them hang out. On the other hand, 78% of baby boomers prefer Facebook. Target your marketing accordingly and you’ll save time, money and reap the sales rewards. 

How’s that content coming along then?https://giphy.com/embed/3rgXBHcd5Lis0J3dp6

It’s all very well knowing where your ideal customers are if you don’t know what content they’re consuming. Do your younger audience members on Instagram want to wade through a blog post about the latest news in your sector, or will your older, Facebook-loving clients be keen on a funky video backed by a hard house soundtrack?

Alternatively, you can ask for feedback: 

• Look at your metrics to see who is consuming which content and on what platform
• Poll your customers and social media visitors to find out what they want to see/read
• Talk to your customers as they interact with you – direct questions work

Pick your platform carefullyhttps://giphy.com/embed/d6QleegehJOalRN3PJ

So, you’ve established your ideal customer and found out what they want. Now all you have to do is match it to the appropriate platform – simples. 

One of the best starting points is a social media site you’re either familiar with or have had a positive experience with in the past. Use it as a test bed to try new ideas, then use your customer feedback to see how well this content performs on other outlets. 

A Facebook video could work well on YouTube and Instagram, for example, while a link to a blog post could engage on Linkedin and Twitter. Play around and see what happens. 

Act on your resultshttps://giphy.com/embed/69D4FSNqihhKpFcc1a

The great thing about social media is, even if you’re only operating on one or two platforms, they come with insightful analysis so you can see for yourself what’s happening with your content. 

Use those figures to more accurately target your audiences with content you know they’ll lap up and enjoy, and planning your next ad campaign will be a breeze, because you’ll know exactly where you need to be. 

If you’re still feeling more scattergun than surgical tool, drop us a line and we’ll help sharpen up that focus. 

We’re 24 fingers, a digital marketing agency and a proud member of the 42 Club, Brentwood Chamber of Commerce, Excel Business Networking Group, the Trusted Business Community, the Organisation for Responsible Businesses and the Rotary Club of Brentwood à Becket. We help companies who are all fingers and thumbs with their social media grow their business and brand. Book your free strategy call here.

NatWest Business Builder

Late payments have a huge impact on SMEs’ ability to grow. Here’s how to combat late payments to ensure your business isn’t compromised.

© Getty Images

The Federation of Small Businesses (FSB) has found that 84% of small businesses have been paid late for a product or service, while Siemens Financial Services reports that late payments cause UK SMEs to miss out on £250bn of liquid cash flow that they need in order to grow their business.

There are 5.7m SMEs in the UK, making up more than 99% of all businesses and 47% of all private sector turnover, so late payments are harming the UK economy overall and SME growth is being undermined. The Siemens report said 23% of SMEs found late payments had put them at risk of closure.

Meanwhile, figures from Bacs Payment Schemes, suggest the total amount owed to SMEs last year was £14bn, with more than a third of UK SMEs stating they’d been forced to wait much later than agreed terms before receiving payment.

What is the impact of late payments?

In the Bacs survey, 20% of SMEs said that being owed between £20,000 and £50,000 would be enough to drive them into bankruptcy.

“We have clients who’ve been unable to pitch for new business as they’ve been unable to purchase components or pay staff,” said Rachel Craft, marketing manager at financial consultancy Regency Factors.

And being paid late means SMEs are forced to pay their own suppliers late.

“Late payments are usually due to a payment chain,” says Jana Dowling, founder of social enterprise the 888 Collective. “We work with people who are reliant on larger companies to pay them. Without them being paid on time, ours can’t come through.”

Why are payments late?

SMEs suffer from late payments disproportionately to larger companies because they’re towards the end of the supply chain. Siemens found SMEs with an annual turnover of less than £1m wait 72 days on average for payment, which is 50% longer than large businesses, which have an average waiting time of 31 days.

The biggest reason for late payments is the tactic of larger companies, which often demand 90-day payment terms from their smaller suppliers.

“Some late payments are due to system errors, supply chain issues or a company crisis,” says Stephen Paynter, finance director at online accounting software firm Crunch Accounting. “Regardless, the money is owed, and should be paid within the agreed terms.”

However, Paynter points out SMEs have the same rights as larger firms when it comes to receiving what they’re owed.

“They can issue the same penalties for overdue invoices in line with their contracts or the protection provided under the Late Payment of Commercial Debts (Interest) Act 1998,” he says.

How to tackle late payments

Following clear guidelines for invoicing and collecting payments helps. Make your credit control function a way of taking back control of your cash flow by applying the right techniques to get paid quicker.

Undertake a rigorous credit check on new customers to limit future risks before then agreeing payment terms. “Be firm from the outset about payment terms and undertake due diligence before agreeing to the job,” advises Craft.

“Honesty is best practice. Your customers value you and have engaged you to provide your service. You’ll be surprised how many people will look after you when you’re honest with them”

Jana Dowling, founder, the 888 Collective

Set out invoices clearly and accurately. An error provides creditors with a reason not to pay and extends the payment collection process. Invoices should include your terms of business, due date, how to pay and details of the service, including order numbers, invoice number, date, addresses and amounts, including VAT if applicable.

Raise and send invoices promptly. Phone a few days later to check it’s been received and accurate and confirm the contact who signs it off for payment because they’ll be the one to resolve any problems.

A week before the invoice is due, contact the customer to confirm payment is on the next payment run. If there are problems, find out what these are and try to resolve them.

“It’s always awkward chasing for payment, and for SMEs it wastes time, so use payment reminder systems,” suggests Paynter.

If a customer is persistently late paying, you could put them on ‘credit stop’, denying them products or services until they’ve paid. But bear in mind this risks jeopardising sensitive business relationships – they might be waiting on late payments, too.

Dowling says: “Honesty is best practice. Your customers value you and have engaged you to provide your service. You’ll be surprised how many people will look after you when you’re honest with them.”

Other potential solutions

Running a sales ledger and credit control function that incorporates best practice with experienced staff is an option, but if you’re a very small business, outsourcing to a specialist frees up your time to build the business.

Invoice discounting is another possibility. This involves using your unpaid accounts receivable as collateral for funds advanced by a finance company before invoices are paid. Typically, you receive around 80% of the value in advance and the rest after the invoice has been paid. It can unlock funding for a growing company, but there are obviously fees incurred.

Factoring is another fee-based option. It’s a type of debtor finance in which a business can sell its accounts receivable balance to a third party at a discount, leaving the third party to get payments in.

Alternatively, you could offer a small discount or incentive for payment of invoices within seven days.

“Late payers could be willing to pay you faster if it’s a requirement for service,” said Alan Laing, MD at accounting and payment systems provider Sage UK & Ireland. “Automating the process through e-invoicing makes it easier for customers to pay and eliminate obstacles to getting paid on time.

What benefits does incorporating best practice provide?

“I always assume payments will be late,” says Dowling. “SMEs should build a late payment system into their cash flow. Then late payments have less impact on growth.”

By running your sales ledger and credit control departments effectively, you can reduce problems caused by late payments.

Delegating credit control, even for a small business with low overheads, can help, says Lindsey Fish, founder and CEO at events management business Mums Enterprise. “I hire a VA [virtual assistant] to help manage credit control duties. They can act quicker and be firmer when chasing,” she says.

Tackling late payments: a checklist

1. Conduct a full credit check on new customers to enable you to make sensible decisions on credit agreements.
2. Set out clear terms and conditions in sales contracts to clarify how your payment terms operate.
3. Set a credit limit that’s right for your business, not necessarily the maximum it suggests on a credit report. The credit limit can start low and rise once the customer has shown themselves to be reliable.
4. Outsource or employ the right staff for invoicing, even on a part-time basis if you are a low-turnover SME.
5. Pre-empt problems – check invoices are sent to the right person to be approved for payment before they become due. When it comes to chasing payments, your system needs to run like clockwork.
6. Consider stopping credit – chase late payers diligently and watch out for part-payments as this could indicate financial difficulties.

Download the Financial Management Workbook here

‘Want to learn more? Register for NatWest Business Builder to view all of their business development tools. Click HERE‘

NatWest Business Builder

Successful entrepreneurs often say that every penny went back into their business during the first few years – but on what? We ask SME owners and experts to share their thoughts.

Sally Fielding, founder of holiday lettings company Sally’s Cottages.

Ed Challinor, CEO and co-founder of cosmetic dental practice Smileworks Liverpool, knows exactly how much it costs for a shiny new Audi R8. He also knows what it costs to buy a specialist scanner that identifies nerves and blood vessels and helps to reduce failures in implants and restorative work. Each costs around £100,000, and while Challinor might have liked to invest in a luxurious German car, he chose the scanner.

“Your small business is not your cash cow,” he says. “If you want to grow, then all of your available profit should be reinvested into marketing, sales, customer acquisition, redesigning your processes and bringing in new income streams.”

Smileworks is doing well, having gone from a single couch offering facial aesthetics at the end of 2013 to nine treatment rooms and a staff of 21 today. Challinor says that, some months, revenues can top £170,000, with monthly net profits ranging from £25,000 – £90,000, and yet he insists that he and his co-founder, MJ Rowland-Warmann, take salaries of less than £2,000 a month.

Like many a successful entrepreneur before them – including American billionaire Warren Buffett, who reinvested profits from a pinball hire business into buying more machines when he was just 17 – the Smileworks founders are dedicated to growing their business and say that investments totalling £200,000 have led to a hike in margins from around 5% to 60% during busy months. Proof, it could be argued, that an owner would be mad not to pump money back into a business when it’s working.

Successful scaleable model

“If you can recruit customers and keep them, then you have a successful business model,” says Parry Jones, chief operating officer of growth experts The Specialist Works. “You know you have a successful model that you can scale.”

Every business’s initial challenge, he says, is attracting its first few customers – but once you’ve got some momentum, attracting the next set of customers is usually easier. “However, in order to scale, you have to reinvest your profits,” he says.

It’s a concept not lost on Rune Sovndahl, co-founder and CEO of domestic service providers Fantastic Services, who says that he and his co-founder made a pact when they started the company in 2009 to always reinvest 80% of their profit on growth. It seems to be paying off, as the business now turns over more than £32m and has expanded to 500 employees.

Parry Jones, COO, The Specialist Works

Bryony Thomas, founder of consultancy Watertight Marketing, likens reinvesting in your business to “delayed gratification” and says that she has chosen to reinvest all of her profits – and even an inheritance – into her company to create something scaleable. “If I let the money I could earn today (as a marketing consultant) distract me from bigger money tomorrow, I would never go beyond my current earning potential,” she says.

Big businesses reinvest their revenues, too, especially in the early years. “Look at Silicon Valley,” says Jones. “It’s almost as if a lot of the companies are purposely trying to avoid making a profit because everything is going back into growth.”

Crossroads led to reinvestment

At a slightly less stratospheric level, Sally Fielding, founder of holiday lettings company Sally’s Cottages, found herself at a crossroads about five years into her business journey when she and her husband (and co-director) Robert were each making around £15,000 a year. They had reached the point where they needed to decide whether to continue with this “fairly easy” life or to grow the business – but doing so would require a £20,000 investment on a computer system. “We decided to go for it and everything we had went into that computer system,” says Fielding. “It was a massive deal for us because we didn’t know if it would work out.”

“Your small business is not your cash cow. If you want to grow, then all of your available profit should be reinvested”

Ed Challinor, CEO and co-founder, Smileworks Liverpool

Being able to offer a live-booking system back in 2008 put the young company ahead of the curve, and it flourished as a result. Back then it had 30 cottages on its books; today it has more than 450.

Fielding’s desire to keep reinvesting in her company hasn’t faltered. “We could pay ourselves a big dividend, but I’d rather keep it in the business,” she says, explaining that the growth created by their computer system in 2008 enabled them to hire their first employee, which in turn meant that Fielding could find more cottages. Growth from that funded a second employee, freeing up Fielding to concentrate on marketing. And so it continued: today the business has a team of 23, and has just spent a hefty £250,000 on replacing the once state-of-the-art computer system that was so instrumental to its success.

For small business owners who still aren’t sure where their profits would be best spent, Fielding says there is one very obvious area to begin: “Invest in people,” she says. “I would put those first profits into hiring staff, because when you do that, you suddenly have time to expand your mind.” And, she says, you will start seeing other areas of your business that you can focus on which will lead to even more growth.

Five (almost) fail-safe areas to reinvest in

Parry Jones, COO of The Specialist Works, shares his thoughts:

1. Customer acquisition: “If you can recruit customers, profitably, you have a scaleable business.”
2. Customer retention: “Existing customers are your lifeblood, and maximising lifetime value is key to your long-term success.”
3. Launch a customer-get-customer programme: “There is no better way to grow your business than when customers do it for you.”
4. Data and insight: “Understand exactly what is driving your business, scale what works, stop what doesn’t.”
5. Talent: “Don’t skimp on staff. The best talent pay for themselves many times over.”

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