Will Small Businesses now be paid their grants on time?

It’s potentially refreshing to hear among the flurry of announcements made by the new Government, that Sajid Javid has said he’s committed to making sure that government contracts and the whole of their supply chains now pay out monies due to businesses on time. In a speech at Bristol he claimed to have “brought in measures requiring all public sector contracts to pay out within 30 days”. But has this been happening in practice? Well, no.

Although we do already have a set of little-used regulations that should have ensured timely payment practices, delays by some government contractors, sub-contractors, Local Authorities and private companies are commonplace. I have personally seen many examples where operators of government-funded schemes withhold payments to companies who have been awarded grants long after the 30 days those companies had planned into their cashflow forecasts. You might expect this in unusual circumstances or as the result of occasional forgivable errors, but no- I see it as a matter of planned, routine practice. Some even get away with applying a MINIMUM time rather than a MAXIMUM time by which they will pay up- I can’t think of a more overt way of flying in the face of the late payment regulations than that!

Bearing in mind that almost all grants are paid as partial reimbursements against costs a business has already been encouraged to pay out, it is quite obvious that this practice causes financial hardship. This is exacerbated in the case of growth companies, where working capital is under pressure as a typical consequence of funding growth- the very objective that many government supported schemes are charged with delivering. Suppliers too (including myself) regularly experience government-funded companies as a matter of policy withholding payment well beyond 30 days.

So, will Javid’s new-found enthusiasm to eliminate this hypocrisy have any practical effect? Will the operators of government-funded business support schemes make it their target to pay out to small growing businesses as quickly as possible rather than as slowly as possible? Let’s see- I for one will certainly be keeping close tabs on how this pans out.

Missing Out on R&D Tax Credits?

Many small firms don’t claim R&D Tax Credits. Many haven’t heard of it. Last year only 7,500 SMEs claimed, averaging £43,000 per claim. But there’s millions more going unclaimed. Many business owners aren’t aware they can reduce their tax bill or get a cash payment through this HMRC Scheme.

If you carry out “R&D activity”, chances are you can claim back more than your actual costs against your Coproration Tax. How much more? More than double! In fact, those nice people allow us to claim 225% (200% last year) of the costs of staff, materials, test/ trial expenses, even software you buy to use in development, against tax. That’s pretty attractive isn’t it?

To be eligible, your R&D activity needs to fit this criteria- it should be incurred on project(s) which seek to overcome technical or scientific uncertainty. There has to be an element of risk- in other words there was no guarantee you would be successful. This usually translates into new product development, or improving existing products or services.

Even on a small scale it’s worth having. For instance, if in June and July 2012 you incurred costs of £10,000 developing a new product, you could reduce your taxable income for this year by £22,500 and boost your profits after tax by up to £6,300. So why wouldn’t you? You can even revise your last 2 years tax returns if you’ve missed a trick.

So if you think you can demonstrate R&D investment, talk to your accountant. Details are at this HMRC webpage, or have a chat with me. There’s more information about funding and subsidies for small firms on PHMC website

Are You Getting Paid On Time?

I’m finding that payments are being received more promptly this year than previously. Certainly that’s my own experience, and many clients tell me the same story. In part this is due to us being more proactive as suppliers in reminding customers of the agreed payment terms (do this BEFORE payment becomes overdue of course!).

I’ve registered for free with the Pay On Time service, and follow their good advice, printing their inoffensive logo on my invoices. This works as a discreet reminder that I’ll enforce rights and charge interest on late payment, without spoiling customer relationships. As part of that commitment, I’m also scrupulous in making sure I pay by own bills within terms- and usually set up an e-payment as soon as I accept an invoice so it’ll arrive in my customers’ account a little earlier than required.

One sector dragging heels seems to be in government contracting. I still regularly hear that sub-contractors are not being paid within terms by some prime contractors. And more often than not, subbies are so dependant upon this low-margin work that they daren’t rock the boat. Well. that’s understandable. So here’s another way of safely blowing the whistle and getting the government to intervene indirectly on your behalf through their “Mystery Shopper” programme. This is operated by the Cabinet Office, headed by Francis Maude, and is one of the ways government are policing the distribution of government contract payments. Tell him (he wants to know!) if you’re being paid late by a prime contractor, and he can arrange a Mystery Shopper exercise to be instigated- this often has the effect of getting prime contractors to honour their commitments. You can contact him by email at psfrancismaude@cabinet-office.gsi.gov.uk

Mind the Gap!

CIPD publish a curious survey that has – deep inside- some eyebrow-raising data about the effectiveness of managers- or rather, managers’ perception of their own performance. If you’re a business leader or professional manager it should prompt the question “who’s kidding … Continue reading

Government Continues to Run Scared of Training Fraud

Well, despite plentiful opportunities for DWP to get a grip on run-away rumours, we see again how politics takes priority over transparency and honesty, and fuels speculation of a cover-up.

Everyone with an interest in government funding and welfare-to-work programmes especially will be well aware of long-standing concerns over fraud allegations at major government contractor A4e.  I’m one of those who sees attempts to suppress and sweep such concerns under the carpet as massively damaging to the industry (see my earlier blog ). Much of my work comes from supporting companies in this sector, so I declare a vested interest not in hushing it up, but in getting it out!

As predicted, the government yesterday put their political interests above the need for honesty when their Select Committee decided to keep new whistleblowers evidence private.

This is after A4e had already claimed they had been “cleared of fraud” by DWP and SFA, and despite DWP yesterday confirming that 11 separate investigations were continuing. And Newsnight got their hands on a leaked A4e internal audit, and  police investigations into allegations of fraud at A4e continues with at least seven arrests made… and … what else?

Come on!  This really does not need sweeping under the carpet.

When Your Organisation Overtakes it’s Staff

A new client of mine told me about a blog he’d read which had made him recognise a potential issue that lies ahead. It struck a nerve and had a very positive effect on my client by getting him to anticipate and begin thinking about handling this scenario. However, there are some important considerations the blog didn’t highlight. This is the blog he referred to- http://bhorowitz.com/2012/04/24/demoting-a-loyal-friend/.

This is all about how to deal with the scenario that during high growth, the competence required by the organisation may be above and beyond the capability of your current team- and more to the point, this can include co-founders, best friends or family members. There’s an obvious dilemma here- do you appoint the right person for the role, or allow someone who isn’t up to the requirement to continue?

The blog told of one business owner’s experience, when he’d realised that he needed to appoint someone else above his loyal friend. He had come to the conclusion that he needed to consider everyone in the organisation when to role had to grow, and decided on promoting someone else above his friend; the focus of the blog was on how to manage the transition and maintain the friend’s loyalty.

But, there are other things that should be considered here. First, you’d do better to widen your options beyond other employees- if there’s a job that needs doing, the right person might be already employed, but if the role is critical to growth, then you need to consider external recruitment too.

Next, one important strategy for handling the potential kickback from the loyal friend and other staff seems to have been overlooked. It’s essential  to communicate clearly the context of organisational development to all staff. To me, this seems better handled as developing the organisation rather than “demoting a loyal friend”. If the business owner considers it to be demotion, he’s missing the bigger picture. As well as creating new roles now, set and share a vision of how an enlarged structure may develop long-term, so that you and employees and your loyal friend can see what progression opportunities may lie ahead. Couple this with a commitment to support personal development too, and for some the reality that they need to play catch-up in the context of an exciting, fast-growing organisation can be highly motivational- they’ll step up to the mark given time, but can’t change overnight. If people don’t get excited by stretching and growing themselves, you have to answer the question “are they right for the organisation?”

Finally, the way a business owner decides to progress will depend on emotion. Does the ambition for growth outweigh sensitivity to other people’s embarrassment or feelings or betrayal? Only he can decide.

I’m looking forward to helping my client deal with these challenges and more as we begin a growth coaching project.

A Style for all Occasions- Revisited

A couple of months ago I posted here about my new client John, who I’d helped identify the missing link in his application of leadership theory. He was going to try out the idea of situational leadership… so here’s how he got on.

John had tried to be more assertive and dominant in “telling” people what he wanted from them, and his own staff had been telling him that was what they wanted to see from him. He didn’t delegate enough. But he was perplexed when in practice he found resistance to his new, robust approach. What was missing was that John needed to CHANGE his leadership style according to the situation.

So, he’s now had a couple of months to adjust his style- and of course we’ve had a few more coaching sessions too. Bingo! After his initial worries about appearing to be inconsistent, feedback from staff and John himself is positive. Sure, not everyone is now getting an easy ride (why should they!), but respect for John as the business leader is at an all time high. What does this mean in practice- as we know, feelings can’t be measured as profits… or can they?

This is what John identifies as measurable outcomes of applying situational leadership:

1. Management meetings are on average shorter, now accounting for 6 hours a month compared to 10 hours

2. He gets far fewer interruptions from managers and other staff- he estimates now he’ll only have to spend time on 2 or 3 occasions a week with staff one-to-one on an unplanned basis (previously was three times that)

3. He spends much less time (about 1 hr a week down from 8hrs) chasing people up for results or feedback. He delegates well (always has been good, just didn’t delegate enough), and this hour is now all he spends hearing from his managers what they’ve done in response to delegated targets or issues.

4. His managers (there are only 3) now deal with almost all day-to-day stuff. They have weekly meetings with their staff, and he doesn’t even get invited- great! Result is, the teams he created now function as teams, and staff don’t bypass their managers by seeking out John as the soft touch.

5. John takes a day a week off- and enjoys it. Well, I say “off”, but it’s actually working from home.

6. The “killer” statistic? He’s had time to find, research and bid for 6 tenders (3 a month), and the company has heard they’ve won 2 (with 3 still undecided). Now that’s a result- or will be when he gets his managers to deliver on the contracts!