To start this Business Finance Bulletin, we review a new report from the SME Finance Monitor team which looks at the economic impact of COVID in terms of current and future performance.

The Insolvency Service has released the latest corporate insolvency figures for July. Whilst the number of firms entering some form of insolvency has increased compared to June, when benchmarked against July 2019, the numbers are down. We look at why that is.

To wrap up, a positive message! A study undertaken by Allica Bank and the Centre of Economics and Business Research has revealed the six rules of business success. Which ones will you follow?

If you would prefer to listen to the podcast version you can click below or download to listen to later via our Soundcloud, Google, Spotify, Stitcher or itunes channel.

You can also ready the transcript of this Business Finance Bulletin edition.

Transcript of The Business Finance Bulletin Week of 17th August 2020

The COVID impact on businesses; corporate insolvencies starting to rise; and the six rules of business success. All of this and the latest Business Finance Bulletin.

Let’s start this Bulletin by taking a look at a topic that I can’t fail, but to cover; and that’s the economic impact of the Coronavirus.

COVID Economic Impact

A new report has come out by the SME Finance Monitor team, taking a look at this impact. The SME finance monitor team have been producing reports and surveys since 2011, typically on the mindset of small business owners, their financial performance, and looking at attitudes to raising finance, but the latest report for quarter two 2020 focuses on this economic impact for all the 4,000 small businesses that they spoke to.

Their quarter two 020 survey found that 87% of businesses say they have been negatively impacted by coronavirus; essentially the vast majority of businesses in the UK, which obviously doesn’t come as a surprise.

Where is this impact showing?

Well, 46% of them have said that they’ve seen a greater than 50% reduction in sales, and many of them don’t see an immediate recovery, if any sales at all, over the coming months. But the biggest impact is possible in an area that’s of most concern which is forward planning.
Looking at the numbers, 52% in 2019 said that they were planning for growth. That figure in 2020 has now changed to 24% planning for growth. So, we can see there’s a big reduction in business owners who are thinking positively.

In fact, 51% of those businesses surveyed said that the worst is yet to come; it hasn’t even started. Not really a good outlook in terms of mindset for many small businesses. So it’s a case of just keeping an eye on what the market is doing.

One area that small businesses are concerned about is repayment of debt. 29% of them have said they are concerned about their ability to pay the new debt that they have taken on. Obviously they’re referring there to CBILS and Bounce Back loans, and it’s coming back to a message that I’ve been giving out for a number of times over these Bulletins which is that in March to April and June next year, we’ll see the first few payments on these Bounce Back and CBILs will come into play. So you’ve really got to plan ahead for repaying those facilities. So, a pretty bleak outlook, but I’m sure as the months go by that positivity will start to return

Corporate Insolvency Statistics

Regretfully. I need to continue the negative theme in this section, by taking a look at figures from the Insolvency Service as regards to the number of firms that entered into some sort of insolvency arrangement in July, 2020. And the figures for July do show an increase.

The number of businesses that entered into some sort of insolvency arrangement increased by 29% compared to the numbers in June. So, we can see some stresses now starting to come out. But interestingly, you compare that figure to the number of businesses that went into insolvency in July 2019, and the figures drop by 34%.

Why this drop? Well, there’s three things at play here. Number one, during the lockdown period, the courts obviously were not transacting much, so there’s a big backlog of firms that are trying to go into insolvency. It will take some time to work its way through the system.

Secondly, up until the 30th of September 2020, nobody can issue a Statutory Demand or Winding Up petitions against firms where they’re owed money. The temporary ban means that once that 30th of September deadline goes, creditors can issue a Statutory Demand, and Winding Up petitions, then we’ll see numbers really coming through.

The third thing of course, is that many businesses have been thrown a temporary lifeline in terms of CBILs and Bounce Back loans. Perhaps they would have fallen over before now, but the temporary relief probably doesn’t really solve the underlying problem.

If you are a firm in financial problems, don’t forget that your first action is to seek professional advice. Speak with your accountant or ideally an Insolvency Practitioner. Those are the ones who will be able to give you good advice on what steps you can take to protect yourself and your business.

Six Rules of Business Success

I’d like to finish this Bulletin on a positive note by sharing a study carried out by Allica Bank and the Center for Economics and Business Research. This study has uncovered the six rules to business success.

So what are those rules?

Rule number one is to hold regular training.

Staff are our biggest asset and therefore we should be investing in training to make sure, for example, that they provide top quality customer service. Don’t forget, training is just that it’s an investment; it’s not a cost. So hold regular training

Rule number two is focus on innovation.

We’re living in a fast-changing world with new ways of delivering our products and our services, so make sure that you’re at the cutting edge of innovative new ideas. Just make sure that your competition don’t get there before you by focusing on innovation.

Rule number three is to have a vision.

Sit down and plan ahead. What do you want your business to look like in one year, three and five years? Having a vision, prompts you to take the actions on a day to day basis. So have a vision for your business.

Rule number four is to expand your reach.

What we’re talking about here is just to have a look at whether there new markets you can tap into. Are there new products and services that you can offer? Just take a look at how you can get your message out differently. Perhaps use different social media channels. There are ways that you can change the way you operate in order to expand your reach.

Rule number five is re-invest in your business.

What we’re talking about here is don’t sit on your cash. You really now got to start investing for the future, so look at how you can get the best return on the resources that you’ve got by continually reinvesting in your business.

Rule number six is to explore your network.

There are a plethora of opportunities out there. If you only spoke more to your clients, to your colleagues and even your business colleagues as well; just tap into the vast network that is out there in order to help you improve your business.
There are six tips on rules for business success. Sit down, go through them and seeing how you can implement them in your business.

Wrap Up

That’s it for another Business Finance Bulletin. I hope you enjoyed it and if you did, please give it a like and a share. I look forward to being with you again next time and in the meantime, have great, successful, safe and profitable week.