Some amusement for a Friday!
November 4, 2011
Had a little ironic chuckle about this cartoon today.
"We can save on our heating bills by burning money"
Enough said I think!
Diligently run, well planned, financially sound SME businesses failing to get bank funding.
November 1, 2011
Whatever! No, of course that headline isn’t true. The usual headline we see (like this one from The Guardian yesterday “Small businesses failing to get loans as banks blamed for credit squeeze”) is deliberately written to make us all believe that the evil banks out there are failing to support the lifeblood of this country, small and medium sized businesses, and that there are hundreds of viable companies out there being refused funding vital to their growth. Rubbish!
Now I ought to declare something here. I’m an ex-bank manager. Don’t hold it against me; I’m actually quite normal and quite nice (honest)! I did 20 years service with a major high street bank, culminating in 7 years in the corporate banking division. I’m now on the other side of the fence and am running my own business. Why do I mention this? Because I want you to understand that in writing this blog I see both sides of the argument.
As Lord Sugar has recently ranted – most business propositions he sees he wouldn’t lend money to either! The businesses are badly run, over-stretched, have no business or financial planning and have high risk elements to them. Harsh? Yes. True? Also yes.
Banks need to lend money – it is how they make money – I know from my banking days that Business Managers, in whichever bank they are employed, will be targeted to lend money. So, if that’s the case, why do we keep seeing these headlines in the media? Because they give rise to some great excuses that SME’s can use as to why their business isn’t as successful as it might be.
Excuse one – banks aren’t meeting their lending targets because they’re being too cautious. WRONG! The reason banks aren’t meeting lending targets is because the appetite isn’t there at the moment. Many good businesses just simply aren’t borrowing money. In fact they are retrenching and building up surpluses of cash to get them through the recession. So when you see stats telling you that net lending has reduced that’s one of the reasons, it’s not because banks don’t want to lend. And anyway, whilst we’re on the subject, didn’t we all get our knickers in a twist a few years ago with banks and their ‘irresponsible lending’. We can hardly complain when they start lending responsibly – can we?
Excuse two – the bank is telling me to use my own money first. CORRECT! Why wouldn’t you do this? It’s YOUR business, YOUR responsibility so why shouldn’t you use YOUR money first. Not only is it the responsible thing to do it’s also the cheapest! In his autobiography “Anyone Can Do It” Duncan Bannatyne admits that anyone who comes to him for investment who hasn’t invested every single penny of their own cash first doesn’t believe in their business and therefore neither does he – they won’t be seeing a penny of his hard earned cash as a result.
Excuse three – the bank won’t lend to me without some security i.e. a personal guarantee. PARTIALLY CORRECT! All the business plans I have seen, in connection with lending, talk with absolute certainty about the amazing proposition and guaranteed success (profits) the business will deliver. The bank would be ludicrous not to lend to this company. If that’s the case why would you have a problem offering some security then? I mean, if this loan is guaranteed to be repaid then it is also guaranteed that your security will never ever be called upon………. And, ssshhh, don’t tell anyone, but banks do lend on an unsecured basis from time to time IF the proposal is good enough.
Excuse four – the interest rates and fees payable are extortionate. WRONG! Let’s be honest here, I admit that some of the rates and fees quoted for bank lending do cause a sharp intake of breath. However, don’t look at the cost of the funding look at the revenue you could be generating once you’ve invested those funds to grow your business. If the reason you want to borrow the funds won’t ultimately be generating you significantly more income than the amount the loan is costing you what the hell are you borrowing money for in the first place! You are destined to fail.
“But I’ll bet you’ve not had to apply for a loan” I hear you cry. Well that’s where you’re wrong. I applied for a loan this week. It was the quickest, simplest process and I had my ‘yes’ decision within minutes. Did I have to give security – you betcha. Did I wince at the interest rate – ‘fraid so. But did it put me off – not likely. I’ve got big plans to generate big revenue so the interest rate was sort of irrelevant (although don’t tell the bank that)!
“Well you got it agreed with inside information or contacts because you’re an ex-bank manager then”. Wrong again. The person I dealt with had no idea I was an ex-bank manager and the information I supplied was no different to what any good business person, who knows their business well, would be able to produce.
No, the reason I was successful in securing my bank loan is because my business is diligently run, well planned and financially sound and therefore the bank was very happy to lend to me. But that won’t make many headlines will it?
IP Telephony Systems – Really Worth The Switch?
November 1, 2011
In the last twelve months, increasing numbers of independent schools are switching from their traditional telephone systems to more future-proof and innovative solutions, such as IP telephony systems. But is it really worth the switch?
Thankfully, the days of consumer-grade IP telephony and associations with ‘Skype’ are in the past, having paved the way for business-grade quality to operate at the professional level. IP telephony today does everything a traditional system will do while bringing a wealth of features and benefits without compromising on the quality of calls.
For example, schools with multiple sites and a receptionist at each are freeing up staff to be more productive elsewhere by enabling all calls to arrive at one location, regardless of the geographical code that’s dialled. Systems like this enable calls to be transferred all over the country, at no cost, by using a simple extension number. And the caller has no idea their call is being delivered initially to a central location.
Furthermore, staff can ‘log in’ to any phone within the school and even work from home with ease by leaving a handset there for those days when you can’t come into school.
And this turns dead time into work time, still allowing your extension number to be used so it’s just like you’re in the school.
Dave Parker, IT Manager at Newland House School is using an IP telephony system. He explained why this is beneficial to him. “When the bad weather hits and I’m stuck at home, it’s good to know the school can still contact me. Just because the children aren’t in it doesn’t mean my work stops. It’s very important for me to stay in contact with those I work with.”
While the world of IP telephony may seem daunting to some independent schools, others are seeing it as a huge opportunity to demonstrate innovation.
Are You Getting Best Value From Your Facilities Maintenance Contracts?
November 1, 2011
We have recently been carrying out Facilities Health Checks for a number of schools. We have found some common areas where schools could make savings to their bottom line, improve the effectiveness of their facilities maintenance contracts and, most importantly, comply with current legislation. Here are a few examples.
- Fire. A Fire Risk Assessment should be carried out at least every two years. Records need to be kept of any follow-up action taken on the recommendations. Best practice is to vary the contractor every few years so the site and its’ issues are viewed with fresh eyes.
- Water. A Water Risk assessment should be carried out and reviewed at least every two years. The risk assessor should be able to demonstrate independence, impartiality and integrity so best practice is to use a different contractor to the one doing the water temperature checks and annual chlorination work.
- Asbestos. Most schools have an asbestos register but is it kept up to date and reviewed annually? Using the same contractor has practical advantages as they know the building and its particular problems. It usually reduces the annual cost because they are only updating the original register, not doing a full review, but make sure you market test the price at the outset.
Many contracts roll on year after year even though the initial term has expired. Complacency can set in. Look at retendering every 2-3 years to ensure the contracts remain relevant and cost effective. Even if you keep the same contractor, you will have the confidence of knowing that you are getting best value for money.
Significant proposals for employment law reforms announced
November 1, 2011
The announcement at the recent Conservative Party Conference by Business Secretary Vince Cable and Chancellor George Osborne that the qualification period for the right to claim unfair dismissal is to be extended from one to two years and the introduction of fees for bringing Employment Tribunal claims has certainly generated a great deal of media interest. The reaction to the announcement has been mixed though. The CBI welcome the increase in the qualifying period as ‘a very positive step’ but many organisations are not convinced that the change in the qualifying period will reduce the number of Employment Tribunal claims or act as an incentive to recruit new staff and boost economic growth.
Changes to the unfair dismissal rules follow the ‘Resolving Workplace Disputes’ consultation published in January this year which also proposed measures to encourage early resolution of disputes, the speeding up of the Employment Tribunal process and measures to tackle weak and vexatious claims.
The new legislation regarding the increase in the qualifying period will come into force on 6 April 2012. The proposals are expected to save British business nearly £6 million a year and should see the number of unfair dismissal claims drop by around 2,000 a year. Interestingly, in the consultation paper, the government stated that extending the qualifying period for unfair dismissal would reduce the number of claims by between 3,700 to 4,700 claims a year so there has already been a significant adjustment by the government in the expected impact of the proposal. With 218,100 Employment Tribunal claims made in the period 1 April 2010 to 31 March 2011 the anticipated reduction in 2,000 claims a year is not particularly significant taking into account the total number of claims that are brought. Don’t forget that there are a number of ‘day 1′ rights for which no qualifying period is necessary and there may well be in increase in the number of discrimination claims brought instead as our experience is that employees who are unable to bring claims of unfair dismissal because they don’t meet the qualifying period often bring other claims such as discrimination. These can often be more complex and costly to deal with.
The qualifying period for bringing an unfair dismissal claim has varied over the years from just six months continuous employment which was then increased to one year, then to two years and reduced back to one year in 1997. These changes have had, in our view, relatively little impact in reducing the number of claims.
The introduction of fees from April 2013 is a potentially more significant development and likely to have a far greater impact on the number of claims that are brought than the increase in the qualifying period. Details regarding the fee structure are awaited but from initial information, it appears there will be an upfront fee of £250 to be paid when the claim is first lodged and a further fee of £1,000 payable by the claimant when the hearing is listed. These fees will be refunded if the claimant wins and forfeited if they lose. However, the government has stated that ‘poor claimants’ will not have to pay and it is possible that somebody unemployed and in receipt of benefits will be exempt from paying the fees. The details of this exemption are awaited with interest. It may be the case that many employees will fall within this exemption given that their employment will have ended and they may have no income coming in.
The recent announcement coincided with the next stage of the government’s Red Tape Challenge which was launched by the government in April 2011.
For three weeks in October 2011 the Challenge focused on employment related law; the purpose being to seek views on how employment related regulations can be improved and simplified. There were four categories being considered:
- Compliance and enforcement
- Letting people go
- Managing staff
- Taking people on
Examples of the legislation on which the government has sought views include the rules on collective redundancies, employment agencies, immigration checks, the national minimum wage and statutory sick pay:
www.redtapechallenge.cabinetoffice.gov.uk/themehome/employment-related-law/
This article is © Morgan Cole and may not be reproduced without our express permission. Recipients may forward this article and view, print and download the contents for personal use only. The contents must not be used for any commercial purposes and the material in this article or any part of it is not to be incorporated or distributed in any work or in any publication in any form without the prior written consent of Morgan Cole LLP. Professional advice should always be sought where you require assistance in specific areas of the law. No responsibility can be accepted for any action based on this article
Heating Oil Procurement – “Better the devil you know…..?”
November 1, 2011
By Lorraine Ashover, Director, Minerva Procurement Consultancy Services Limited, cost reduction and procurement consultancy services exclusively for the independent school sector.
There is one area of procurement spend that many schools are extremely wary of – heating oil. It’s hardly surprising bearing in mind the complex and volatile nature of pricing. Supplier pricing models include Platts* daily lagged, Platts weekly lagged, spot, open book and so it goes on. As a result ensuring you are comparing “like for like” is a challenge in itself and one which many School Business Managers, Bursars and Estate Managers simply don’t have the time to do. It’s also important to note that in the UK now many of the oil companies are owned by the same parent company (GB Oils). This is not always apparent when you are phoning for prices and it is causing some disquiet in the industry with calls for an inquiry by the Monopolies & Mergers commission. This is another reason why it’s hard to be certain you are getting genuine comparable prices. In addition to this, security of supply is of paramount importance to schools and, in respect of oil purchases, it seems the practice of “better the devil you know” is adopted by most. As a result an area which is often a significant spend (sometimes second only to wages) tends to get overlooked.
Minerva has recently completed a project for a consortium of schools which has resulted in an average saving of 12%. Even large schools that have spent significant time monitoring the market were still able to realise savings. The main reason savings are not more significant is down to the fact that the bulk of the price is not determined by the wholesaler or the distributor but by the oil producers. As a result the only part of the price which can be ‘negotiated’ is the supplier profit margin and load premia**. As wholesalers and distributors work on a high volume/low margin business model there really isn’t that much left for discussion! That said, several schools made many £000′s in savings as a result of the project and it’s still an area which should be actively reviewed especially where it’s a significant annual spend. It’s most definitely a category of spend which benefits from having a number of customers buy together.
For those of you watching the markets you will have noticed that prices have dropped slightly of late and there is a strong feeling in the market that the price is artificially high at the moment. However, the dropping prices are unlikely to be sustained as we enter the winter period. Experts predict we are in for a bumpy period with OPEC estimating that world oil markets will require 30.5m barrels per day in Q4 2011. With supply being limited to 28.8m barrels per day this means a 1.6-1.7m barrels per day shortfall.
If heating oil is a commodity you need to purchase for your school please get in touch with us to discuss how we can help you to ensure you’re getting best value for this essential supply.
*Platts is a provider of energy and metals information and a source of benchmark price assessments in the physical energy markets. Platts was founded in Cleveland, Ohio in 1909 by Warren C. Platt (1883-1963) to provide “reliable market-based price information” on the oil industry. It is widely used today as the baseline for industry pricing
**Load premia is added to the ‘pence per litre’ charge dependent on the size of the order being delivered; the smaller the volume the greater the load premia applicable.
- Yay! I've just won a pair of CB40 cricket tickets for the #rosebowl thanks to @thewowcompany They're at #BizSouth tomorrow, go see them!
- School Procurement News Weekly is out! http://t.co/YmsYN2aC
- A successful man is one who can lay a firm foundation with the bricks others have thrown at him ~David Brinkley <like this one. Very apt!
- Office wall starting to resemble a shrine to @nigelbotterill Thanx @ReallyFlyBiz for my new poster! http://t.co/yvkGJWWS
- "@thewowcompany: To celebrate #BizSouth at #rosebowl, we're giving away 5 pairs of CB40 tickets to watch @hantscricket. RT to enter"
- My #ff this week is @BravoBCoT for his great work in the education sector and for maintaining his sense of humour during our Twitter debate!
