SME Blog

Giant company blues

And now for something a bit different.  This one goes out to Dennis Howlett and David Terrar and provides a disturbing insight into the mindset of a giant company.

For those not in the know there is something of a battle going on in the software industry.  salesforce.com has seen spectacular growth with its totally web browser based software.  It's has gained an impressive client list including AOL, Cisco, Nokia and Merrill Lynch.  This has not gone unnoticed by the giant company Oracle.  Oracle have a history of buying rivals (Peoplesoft, Siebel etc).  However, according to a recent BBC article salesforce.com will not be the target of takeover.  The reason as the president of Oracle explains is:

"In this case, I think it would be more fun to crush them"

Oracle is a $11,000m+ company and the official message from the top is it's fun to crush our rivals.  I find that very poor and disappointing.  Large corporations should act responsibly, not sound like the school bully.  These large corporations have a massive impact on our lives both locally and globally.  I believe it's going to be vital for the future that these companies are forced to behave both ethically and environmentally.  What kind of message is being sent out to Oracle's employees?

I wish salesforce.com well in their David and Goliath battle.

Philip Woodgate

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KPI's Part 3

Now we all know what KPI's are ( if not see Part 1 & Part 2 ), let us actually use one. A good place to start is to see how we are performing on credit control. 

If on average an SME takes 60 days to pay it's bills and a large company 80 days ( see Getting paid ), then are we getting paid quicker or slower than average?

The way to find out is by using the average collection period KPI as follows:

Average Collection Days =

Average trade debtors (exc VAT sales tax) x 365, divided by annual sales

For example, if our average trade debtors (exc VAT) are 100,000 and our annual sales 1,000,000 then our average collection period is 36.5 days.  A good result and one most SME's would be more than satisfied with. 

It could be that our debtors were 200,000 instead of 100,000 then our average collection period would be 73 days.  In this case we could look at improving credit control to get paid quicker and help with cashflow.

By monitoring the KPI we can spot potential trends in advance.  For example, when the average collection days lengthen it could be the result of economic factors, such as a recession.  It could be that a particular industry sector is hardening with the result cashflow and margins are tighter for all companies involved. 

Monitoring average collection is also a great way of monitor credit control performance; if you stop chasing the debts for a month then you can expect the average collection days to increase.  For start-ups it is all about cashflow and not paper profits and average collection days helps put credit control into focus rather than it being a blur.

Background information & detail

Annual sales

Ideally, this should be credit sales only e.g strip out any cash sales. The sales figure needs to be annual so ensure that you take a 12 month peiod.

Average trade debtors

It is usually adequate and easier to take the period end figure.  However, if there are very large seasonal variations in the year it is better to take an average figure. The true average is the average of 12 monthly debtors figures. 

To compare directly with published credit control statistics ( see Getting paid ), VAT sales tax needs to be excluded from trade debtors figure.  However, to monitor changing performance for the business it's adequate and easier to use trade debtors including VAT sales tax.

Philip Woodgate

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Love my business more than you

An article in Business Money tells us that one in ten small business owners and directors are more passionate about their business than their relationship with their partner.  Makes you wonder doesn't it?

If you are in a relationship with a small business owner over 30 then there is good news.  The majority of small business owners over 30 said their primary motive was freedom and flexibility at work.  Sounds to me like they want to spend more time with you.

Philip Woodgate

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Getting paid

Forget your invoice terms, on average an SME will pay your bills in 60 days.  A large company is usually far worse, taking an average of 80 days to pay your bills.  If your invoice terms are 30 days that's 50 days extra credit.  Good for the large company cashflow, but terrible for yours.

Cashflow is the oxygen in which the small business breathes.  It's therefore vital that small businesses invest time in credit control.  Late payment and bad debts can and do kill otherwise good small businesses.

The source information comes from a survey of over 366,000 UK small businesses by Experian the credit reference agency.

Philip Woodgate

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Online Tools

Business Link, the advice organisation backed by the UK Department of Trade and Industry, has launched a wide selection of free online tools. 

The aim of the online tools is to help SME's deal with the complications of UK government requirements.  The tools ask you questions and filter the end information dependent on your needs.  In theory, it should make the task of getting relevant information much easier.

It's particularly useful if you are starting up a small business for the first time.  The tools are free, easy to use and are great to gather information.  Tools include:

Business start up organiser

Do you need to register for VAT?

The tools are process driven so do double check the results and get advice.  It's not easy to replace judgement and experience with a computer.

Philip Woodgate

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Why bother?

I keep getting asked why I’m so interested in blogs and the web.  The answer is simple – it’s a goldmine of information for SME’s.  It’s so up-to-date with new ideas it hurts (Accmanpro, Business Two Zero).  It can give you detailed insights into other peoples businesses and how they are coping (The Soap Blog).  It’s cross continent (Small and medium thoughts).  The detail, relevance and diversity are truly amazing.

Contrast this with my daily newspaper - one page out of sixteen in the business section on SME’s.  Even better it’s on the old chestnut factoring!

Blogs and the web have really made me think about the future of SME’s and in particular changing business models.  If you think that the last 7 years have seen some big changes with email and computers then brace yourself for the next 7.  We are going to see geographical restrictions being removed and the automation of processes in ways we never thought possible.

Philip Woodgate

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Start ups

You can find some interesting things on the web.  Guy Kawasaki's name crops up often and with good reason. He's an entertaining read and his enthusiasm shines through.  In Management Consulting News there is a short article on business start ups.  It's aimed at consultants although I think it could be applied to most business services companies.

He advocates services that differentiate you from you competitors and services that are valued highly by your clients.  Nothing new here, but Guy uses a very helpful and simple method to visualise how your business is currently performing and where it needs to get to.

I did like his tips on pitching and presentations, especially about giving background information on your business. I'm now down to one slide on the background information, but I've learnt the hard way.

And finally can't argue what he wants to be remembered for.

Philip Woodgate

Technorati Tags: small business  medium sized business  sme  smb  blogging accountants

Small businesses are a big deal

Take a look at the UK's Small Business Service evidence report and you'll soon see why small businesses are a big deal. 

At the last measure (in 2002) businesses with less than 250 employees account for:

• over 99% of the UK’s 3.8 million businesses
• 56% of employment (12.6 million people)
• 52% of total UK business turnover (£1,100 billion)

That's a big percentage of the business market and it's a similar story in other countries.  It's easy to forget with large company promotions, branding and advertising, but SME's have a huge impact to the economy and our lives.

Philip Woodgate

Technorati Tags: small business  medium sized business  sme  smb  blogging accountants

Just what is a SME?

If you ask different people the same question you can get different answers.  It's the same with the definition of a small and medium-sized enterprise (SME). 

Ask the European Commission and you will get a definition based on number of employees, annual turnover, annual balance sheet total and level of autonomy. 

Ask the UK Government's Small Business Service and it defines a small business as a business with fewer than 50 employees and a medium size businesses as those with 50 to 249 employees. 

In the US the United States Small Business Administration takes into account industry type and recognises a firm of a given size could be small in relation to one sector, but large in another.  For example, a small manufacturing business is one with less than 500 employees and a small wholesale trade business is one with less than 100 employees.

All the above the businesses may be a sole proprietorship, partnership, corporation, or any other legal form.  Significantly, in the UK at least, the majority of businesses are not incorporated companies, but are owned and managed by self-employed people either on their own or in partnership.

Overall, a SME tends to be an independent, managed by its owner or part-owners and has a small market share.

Philip Woodgate

Technorati Tags: small business  medium sized business  sme  smb  blogging accountants

Top Blog Tips

Today I was late for my train and I had a few minutes to spare.  In common with many people at Victoria station I headed for the magazines.  Web Designer had an article on blogging that gave their top tips.  You can't find them on their website only the magazine (does anyone else find that funny - okay forget the commercial reasons all you accountants).  Anyway here they are:

Don't waffle

Get to the point as visitors don't have time to read long posts.  Also, use simple language that does not confuse readers.

Write good titles

Develop that art of headline writing.  Just as with newspapers readers first scan the title before reading the article.

Comments

Try to respond to comments.  Interaction helps keep the blog interesting.

Be yourself

Blogs are all about the personal touch and the human voice.  Avoid third person corporate speak and develop a personal voice that is true to yourself.

Sounds easy enough, only problem is that Mark Frauenfelder of BoingBoing adds:

"There is only one requirement - you have to be interesting.  Everything else is secondary."

And if all else fails make sure you have a good picture....

Philip Woodgate