At a time when government spending is being cut back but the demand for public services is inexorably increasing, it is important to extract the most from every pound of public money spent.
From the contractor building new homes and business premises to the printer who supplies the leaflets and flyers telling us all what a good job is being done, the decisions public bodies make about the people they do business with can have a huge knock-on effect in communities. Take the right decision and you can create apprenticeships and jobs and put extra money into the most disadvantaged neighbourhoods whilst supporting social enterprises.
For social value to be successfully specified, procured, delivered and measured, commissioners and purchasing managers need to understand their legal position, and have the guidelines and support they need to be effective. In addition, social enterprises and other social venture suppliers need to understand the frameworks within which commissioning and procurement managers act, and what social entrepreneurs need to do to be viable suppliers.
Developed by a unique and expert partnership consisting of Bates Wells and Braithwaite, Inspire2Enterprise, and the E3M network, the national launch of the Bold Procurement initiative will take place at the Growing Successful Social Enterprise conference being held in Kettering on Monday 4 March 2013.
In this special session participants will be guided by legal experts through the Social Value Act and UK and EU procurement law to examine the opportunities that public sector commissioners and procurement managers have to gain social value, as well as best value goods and services.
To find out more about the session, and to reserve your place, click here.
I look forward to meeting you there.
Head of Strategic Development
For many of you, the next few weeks will see you working harder than ever. But if you are closing for Christmas, make sure to read the Inspire2Enterprise team’s top tips before you leave:
- Send out invoices and chase up outstanding payments to ensure that any money you are owed is in your bank account before the break, otherwise you may not get paid until the middle of January – at the earliest.
- Make sure you inform your customers and suppliers of your shutdown period – set up an out-of-office on your emails, set a voicemail and update your website if possible.
- Your tax return for 2011/12 (year to 5th April 2012) must be filed online by 31st January 2013. Don’t leave it until the New Year. Make sure you have started gathering together all of your information and have registered for all of the codes required to file online. Login to HMRC here.
- Don’t forget your suppliers may be shutting down too – possibly for longer than you’d expect. Check opening hours and supply deadlines in advance to prevent possible delivery delays and ensure your supplies will cover you well into the New Year.
- Think about your IT and telecoms requirements over the Christmas period – make sure you have all of the information and contact details you need.
- Are you sending your customers or suppliers a Christmas card? Whether sending in the post or via email, make sure your customer database is up-to-date.
And finally – don’t forget the basics!
- Leave no cash on the premises and lock away everything you can.
- Shut down all computers and printers.
- Turn off the heating and lights.
- Cancel deliveries such as newspapers and milk.
- Close and lock all internal and external doors.
Whether you are working or not, the Inspire2Enterprise team would like to wish you a very Merry Christmas and a Happy New Year.
In part one I suggested you look again at your market strategy, in this section the theme is more defensive, concentrating on how to protect the contracts you’ve won and the sales and revenues that you’ve generated.
We’ve all heard numerous stories of seemingly successful enterprises running into serious financial trouble or going bust. The order book can be healthy, and the forecast for profitability good, but in the short-term the company runs out of cash; they find can’t pay the bills as they fall due….and then the trouble starts.
But how do they get into this position in the first place?
There are many reasons why, but more commonly:
- A major customer delays a large payment resulting in a fatal bad debt
- Poor debtor control
- Allowing credit without checking for credit worthiness
- Poor or no financial control
- Being under-capitalised increasing the risk of over-trading
- Accepting large sales orders without first forecasting the effects on working capital and, again, increasing the risk of over-trading
- Poor business (financial) security policies and procedures
- Ineffective or non-existent risk mitigation strategies
The list could go on, but there are two clear themes emerging that we should look at in more detail: a) the need for financial planning and b) the need for financial control.
Planning: A major customer, or for that matter a significant number of smaller customers, delaying payment or defaulting is a real risk in a tough trading climate, particularly when bank funding is tight. Nothing you can do about that, I hear you say! If your enterprise is overly exposed to one or two large or key customers you need to watch them carefully for signs that they’re in trouble – news (even gossip) and listening for tell-tale signals from your contacts in your customers business is a good place to start. Sounds like paranoia, but such events are rarely sudden, and it’s your money that’s at stake!
Reliance on one key customer is quite common, particularly among smaller enterprises, and in the longer-term such enterprises should develop a strategy to create a more balanced customer portfolio.
In any event you should plan for an increase in debtor days and bad debt, which means that you’ll need to find the working capital to cover this. Having a strategy which simply relies on you delaying paying your own creditors is not sustainable, nor is it morally fair.
Creating a simple cash budget will enable you to forecast the effect on your bank balance if, and when, customers slow down their payments to you. I suggest you forecast for a percentage of your debtors to default – for example, and depending of course on the type of customer, you might want to allow for 5% of debtors as a bad and doubtful debt contingency, but study your customers and their past records of payment because, in a higher risk customer portfolio, the contingency may need to be higher.
Having a forecast will also enable you to predict the effects on your cash balance when taking on that large exciting sales order….which of course you will have to fund until the customer pays.
Control: Don’t bury your head in the sand, check your bank balance regularly – I mean several times a week, not just when your statement arrives at the end of the month. Then update your cash forecast when you have new information, this really should be done weekly.
Have a column on your forecast, adjacent to your budget, for the actual cash-in and cash-out (as of the last day of the month) and compare the two; do this as soon as you can after the month-end and adjust the forecast for the next few months based on your current performance (and also your view of the immediate future), but most importantly take any necessary corrective action immediately.
Bank funding is very tight, but banks and other funding bodies are still open for business. If your forecast is telling you that your bank balance is at risk of dipping into the red or above the agreed overdraft limit then talk to your bank relationship manager as soon as possible. Bank lending is based on their assessment of risk. An enterprise that shows it has a robust planning and financial control process is more likely to get support than the proverbial ostrich. And also seek advice from an accountant, or speak to a qualified Inspire2Enterprise financial adviser.
Good day-to-day credit control is essential for survival:
- Credit checking new customers is cheaper than a crippling bad debt; you could:
- Buy a credit rating report
- Ask for trade references
- Ask for a bank reference
- Study historical accounts
- Look for press/internet reports on the company
- Ensure that your terms of trading are clear before the sale is agreed, issue these with every invoice and ensure you stick to them
- Consider asking new or risky customers for cash with order, or cash before shipment, or cash on delivery
- When net credit days are given, send the invoice with the goods so that the clock is ticking from the time of delivery
- Get on first name terms with people in your customer’s accounts department and phone the customer within 24 hours of their receipt of goods to ensure there are no problems with the order or the invoice. This helps avoid a common delaying tactic
- If terms are say 30 days, call the customer on day 31 from the invoice date (perhaps diarise this) to ask about progress of the payment
- Send a month-end statement of account to the customer as a matter of course
- If still no payment is forthcoming call every few days to chase it, but reinforce this with a more formal letter, at say day 37, to the accounts department (in the first instance) followed by a final letter to the MD or FD if there’s still no payment. Be courteous and succinct at all stages
- Ensure that the face of the invoice says that you are aware of your rights under the Late Payment of Commercial Debts (Interest) Act 1998: “We understand and will exercise our statutory right to claim interest and compensation for debt recovery costs under the late payment legislation if we are not paid according to agreed credit terms.”
- Consider stopping further supplies/services
- Arrange to meet the customer if the amount is significant and follow-up with meeting notes/agreed action and send this to the customer
- Consider retaining a collection agency
- A final recourse is that you could seek to wind up the customers company if the debt is £750 or more – your customer will probably know this so use it as leverage first before actually setting it in motion
- Use your judgement throughout the whole collection process to ensure you don’t risk a valuable customer, but at the same time protecting your own business
- You could consider invoice discounting or factoring – this can be a lower risk than overdraft, but is often more expensive and difficult to reverse
- You could also consider taking up debt insurance (often called credit insurance)
But I can’t afford the time to do all of that!
Ok, but it’s your enterprise that’s at risk, so can you really afford not to?
Whatever the near future holds, this is not just a good time, it’s an essential time to review your enterprise!
Head of Enterprise Support Services
We may be technically out of the recession, but that doesn’t mean things are getting any easier for businesses, with rising costs, and for many, falling sales. That said, it’s also worth noting that others have experienced a lift in sales as less well-managed competitors fail.
This is not the first economic slowdown and it won’t be the last. However it’s certainly possible for a good enterprise to survive, thrive and emerge stronger from difficult trading times - many have proved it in the past. So what’s the secret? Well let’s look at some of the basics.
Seeing it from the customer’s point of view!
Start with your existing customers; find out what they like about your enterprise, its product or service, the customer service you provide and any other contact points they have with your company. What benefits do they get and what makes them buy from you? What would they change? What might they buy if only you sold or delivered it; what might they buy more of if you changed it in some way?
Some leading and potentially tricky questions there, so be careful how you ask them. I would avoid questionnaires and speak to customers direct. It might even inspire them to do the same. But do think very carefully about the information you want and therefore the questions you ask, as well as the way you ask them. For instance, should you reel off a list of questions or should you structure them within a conversation?
It’s also important when you meet potential customers, either formally in order to sell or when networking, to find out as much as you can about what they need and the triggers for the buying process/decision. When you meet existing or potential customers spend less time bombarding them with what you do and more time finding out what they do and what they want.
This might also be a good time to contact lapsed customers as well!
Once you’ve obtained the information from each of the customer segments (above) you’ll need to analyse the answers in a way that enables you to start to build a picture of what changes you may need to make to beat the competition and gain competitive advantage.
So what about the competition?
Any intelligence you can gather on the competition should prove invaluable as you look for ways to win new opportunities. You’re very unlikely to get any information out of them of course, but find out about their reputation. What do your contacts know about them? Read their promotional material, keep a close watch on their websites and also the local press or industry publications. Your aim is to gain an advantage over them and identify areas where you are, or could be, stronger, more competitive and unique.
So now answer the questions: what do my customers really need and want compared to what I’m offering them? How can I be better than the competition?
But have we got what it takes?
Now is also the time to look internally to see if you can compete effectively; does your enterprise have the skills, resources, knowledge and processes to meet the needs of an increasingly competitive market place?
It can be very difficult to be objective. Where you have staff (or even family), get them involved in any internal review. Inspire2Enterprise advisers can also help and guide you – business diagnostics are part of what we do!
Fail to plan….plan to fail!
No I haven’t swallowed the dictionary of clichés! But there is no point discovering what you need to do to change and improve the business in order to survive (and even thrive) in a recession, unless you actually plan to do something about it.
Providing you’ve asked the right questions, and interpret the answers correctly, the things that you need to change should now be starting to emerge. The detail of what to do; who will do it; by when; how and at what cost, are all components of your action plan.
Some things to consider will include: what can we do immediately or soon i.e. quick wins? What are the longer-term changes that need to be made? When and how should we implement them? This is not about making expensive changes, this is about identifying improvements within your current resources and budget.
Head of Enterprise Support Services
Social businesses that anticipate where help will be needed can play a significant role in easing Britain’s social problems
Last summer’s riots in British cities led the prime minister to refer to “broken Britain”. On 15 August 2011, David Cameron was cited in the Guardian saying that his personal priority was to ‘mend our broken society’. He continued, “our security fightback must be matched by a social fightback”.
What will this social fightback look like? Is it up to government to lead, or can social enterprises seize the initiative? I suggest that evidence indicates early-intervention schemes led by social entrepreneurs can make a difference. Whether we call it “mending broken Britain” or “social inclusion”, taking action early is critically important. Excitingly, one early-intervention scheme (EIS) is about to take the ambitious step of going national.
In 2008 the ‘Early Interviention: Great Parents, Great Kids, Better Citizens Report’ was published, championing the use of EIS. This report, introduced by Iain Duncan Smith MP and Graham Allen MP, was published through the Centre for Social Justice and The Smith Institute. It pointed out how illogical it was that government interventions, designed to alleviate social exclusion among young people, did not kick in until children had reached adolescence or early adulthood.
It stated that the government needed to try and identify families at risk of social exclusion and to intervene with these families at a much earlier stage. The idea of EIS operating from birth, or even conception, to assist children at risk of social exclusion was put forward, built on evidence from a variety of prior academic and medical studies
One such social enterprise EIS is the Parent Infant Project (PIP), which has been piloted in Oxfordshire and Northamptonshire and has ambitions to go national. It aims to prevent future social exclusion and familial and societal problems by working with families at risk from the ante-natal stages of a child’s life through to the age of two. PIPs aim to support mums (and sometimes dads) who have problems such as post-natal depression, drug and alcohol issues, as well as those that have been victims of abusive relationships. PIPs provide therapies that promote attachment between parents and the baby, and to reduce stress and anxiety in the infant.
The problems associated with poor parent-infant attachment include severely dysfunctional behaviour, inter-generational parenting problems, inability to sustain relationships, increased risk of criminality and poorer life chances. A PIP intervention offers the opportunity to break the generational cycle of social exclusion at a relatively low cost to the tax payer.
At a sell-out conference to be held in Northamptonshire on 18 May, Andrea Leadsom MP, one of the drivers of the PIP in Northamptonshire, will be announcing an initiative to roll out a national network of PIPs structured on social enterprise models. More than 500 experts in early attachment therapies from throughout the UK and Europe will be listening. Earlier, the audience will have heard from speakers Iain Duncan Smith MP and Baroness Susan Greenfield of the University of Oxford, who will stress the importance of effective EIS programmes.
The national network of PIPs will have to trade, to win contracts and operate in a customer-driven environment. They will be supported by Inspire2Enterprise, a new national social enterprise support service developed by the University of Northampton. They have the support of MPs from all parties, the endorsement of the Prime Minister and a solid experiential and research base on which to build. Where there is a need and (crucially) a demand, local social entrepreneurial therapists will be supported to become part of the national PIP network. I am not underestimating the scale and complexity of the challenge that a PIP network will face. However, I am impressed by the ambition, drive and planning that has gone into the initiative to date.
Will social enterprising PIPs mend broken Britain? Perhaps this is too simplistic a question. Will socially enterprising PIPs make a real, positive, life-changing difference to the youngest in our society? My guess is that they will. Social enterprise can and will help lead the social fightback – because they must.
Professor Simon Denny is social enterprise development director at the Univeristy of Northampton
Would you embark on an unfamiliar journey in your car without planning the route? It would be foolish and could be very costly if you did. Well, the journey of your enterprise is no different… more »
Have you got an idea? Perhaps there’s something in society you don’t like or that it could be done in a different way. A missed opportunity, or maybe something your local community really could do with but has gone without. Perhaps you might address this by setting up a Social Enterprise.
Social Enterprises come in all sizes, from small community cafes, performing arts groups and local transport schemes to really large organizations such as the Big Issue and Eden Project. They’re usually started by a person or group with a particular passion and a real sense of social purpose but can often emerge as businesses from groups that didn’t start out to create a business at all.
Hi, I’m Wendy Gibbs, an Enterprise Adviser working for the new Inspire2Enterprise support service that has been set up by the University of Northampton and powered by Exemplas.
I’m part of a team that is passionate about Social Enterprise and keen to let social entrepreneurs know about the free-of-charge support we offer.