Author Archives: Larry Phillips - Senior Partner

About Larry Phillips - Senior Partner

T +44 (0)20 7874 8804

Larry is a trusted business adviser to entrepreneurs and family businesses, both large and small. He has extensive experience in providing business and commercial support to a wide range of enterprises to help them achieve their objectives.

We continue to talk to clients and investigate the questions being raised.

Here are the headlines of what we know to date:

Job Retention Scheme

A government grant to cover 80% of salary of workers who would otherwise be laid off.
This is open to any employer in the country and covers the cost of wages backdated to 1 March 2020 including employees employed up to 28 February 2020.

HMRC will reimburse 80% of furloughed workers costs, capped at £2,500 a month.
Furloughed means “grant leave of absence to” consequently these workers cannot be doing any work and will need their work reallocated to other workers potentially with a handover.

The process will involve submitting information to HMRC, including earnings details, through a new HMRC portal being developed by HMRC. Further details to follow.
https://www.businesssupport.gov.uk/coronavirus-job-retention-scheme/

The link below to the ICAEW has good worked examples of the scheme:
https://www.icaew.com/insights/viewpoints-on-the-news/2020/mar-2020/coronavirus-job-retention-scheme-furlough-guidance

The Government’s Guidance for Employers and Businesses

This sets out the package of measures announced by the Chancellor including details regarding;
• Statutory Sick Pay – Support for businesses who are paying sick pay to employees
• a 12-month business rates holiday for all retail, hospitality and leisure businesses in England
• grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value between £15,000 and £51,000
https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses

“Coronavirus Business Interruption Loan Scheme’ (CBILS)”

CBILS provides cashflow support for up to 12 months (or possibly more) to cover disruption caused by Coronavirus.

The scheme provides for loans up to £5m for businesses with revenue up to £45m. No interest is payable for the first 12 months as this is settled by the government.

Any small business interested in CBILS should, in the first instance, approach one of the 40+ accredited lenders with their borrowing proposal. The government suggests that the application process should be simple. Here are some FAQs for SMEs. We are working through the details of many more questions.

You will need to give thought to what support you are seeking and the health of your business before the Coronavirus measures came into place.

The CBILS guarantees 80% of the loan and are to the lender. Security to cover the remaining 20% will be required, possibly in the form of Personal Guarantees. The borrower remains liable for 100% of the debt.

Coronavirus Business Interruption Loan Scheme (CBILS)

Covid Corporate Financing Facility (CCFF)

Bank of England can finance working capital by purchasing commercial paper from larger business ‘making a material contribution to the UK economy’.
Businesses do not need to have previously issued commercial paper in order to participate in the scheme. The scheme will operate for at least 12 months and provides a minimum facility of £1m.

https://www.bankofengland.co.uk/markets/market-notices/2020/ccff-market-notice-march-2020

Support for the self-employed

This new scheme has been introduced in order to make provision for self-employed individuals or a member of a partnership to claim a taxable grant worth 80% of your trading profits up to a maximum of £2,500 per month for the next 3 months. This may be extended if needed.

The scheme will be open to those with a trading profit of less than £50,000 in 2018-19 or an average trading profit of less than £50,000 from 2016-17, 2017-18 and 2018-19.

To qualify, more than half of their income in these periods must come from self-employment.
Importantly, if you have not submitted your Income Tax Self-Assessment tax return for the tax year 2018-19, you must do this by 23 April 2020.

The income support scheme, which is being designed by HMRC from scratch, will cover the three months to May. Grants will be paid in a single lump sum instalment covering all 3 months, and will start to be paid at the beginning of June.

Individuals should not contact HMRC now. HMRC will use existing information to check potential eligibility and invite applications once the scheme is operational. Amounts will be paid direct into individual’s bank accounts by HMRC.

https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme

Additionally as separate measure announced before the above support, all self-assessment income tax payments due 31 July 2020 have been automatically deferred to 31 January 2021.

Tax & VAT

VAT – It may be possible to spread the quarterly liability over the following three months to spread the cashflow and to roll that forward. You need to pre-agree that with HMRC who may now be prepared to give more given the government directives.

From 20 March 2020 until 30 June 2020 all VAT registered traders can defer VAT payments. This is an automatic offer from HMRC and no application is required.

For those with automatic direct debits already set up with HMRC you are advised to cancel any arrangements in place and then set them up again subsequently. VAT refunds and reclaims will be paid by the government as normal. Businesses will have until end of the 2020/21 tax year to settle the liabilities that have accumulated.

Businesses should continue to file their VAT returns by the due date.

PAYE – This is a monthly liability but HMRC may be flexible to paying each month in arrears. This would need HMRC agreement in advance.
It is not yet clear exactly how the Time to Pay policy will work but suggestions include;
• agreeing to pay by instalments
• suspending debt collection proceedings
• cancelling penalties and interest where you have administrative difficulties contacting or paying HMRC immediately

HMRC has changed the dedicated phone number for the coronavirus helpline targeted at businesses and the self employed to 0800 024 1222 to increase their capacity to deal with enquiries.

Insurance

Most businesses are unlikely to be covered, as standard business interruption insurance policies will exclude pandemics but do check the terms and conditions of your policy.
Businesses that have cover for both pandemics and government-ordered closure should be covered, as the government and insurance industry confirmed on 17 March 2020 that advice to avoid pubs, theatres etc pre the closure announcement is sufficient to make a claim.

Filing Deadlines

Businesses affected by the COVID-19 pandemic can now apply to Companies House to request an extension to file their accounts, reports and confirmation statements.
From 25 March, companies can apply for a three month extension for filing their accounts

https://www.gov.uk/government/news/companies-to-receive-3-month-extension-period-to-file-accounts-during-covid-19

Complete ban on evictions

No renter in either social or private accommodation will be forced out of their home during this difficult time.

https://www.gov.uk/government/news/complete-ban-on-evictions-and-additional-protection-for-renters

Commercial Tenants

Commercial tenants unable to pay rent because of coronavirus will be protected from eviction

https://www.gov.uk/government/news/extra-protection-for-businesses-with-ban-on-evictions-for-commercial-tenants-who-miss-rent-payments

Mortgage Holiday

This is available to all sectors and buy-to-let landlords but is merely a deferral of the repayments and consequently interest still accumulates on the outstanding loan.

Rent Holiday

Tenants can apply for a rent holiday although it is noted that this is just a deferral and not a waiver of the amounts due.

IR35 rules

These new rules have new been deferred for 12 months.

Time to talk

This is an extraordinary challenge we all face. If you would like to talk through the issues you are facing, please speak to your usual Goodman Jones contact or email info@goodmanjones.com

0
Comment on this...

We continue to talk to clients and investigate the questions being raised.

Here are the headlines of what we know to date:

Job Retention Scheme

A government grant to cover 80% of salary of workers who would otherwise be laid off.

This is open to any employer in the country and covers the cost of wages backdated to 1 March 2020 including employees employed up to 28 February 2020.

HMRC will reimburse 80% of furloughed workers costs, capped at £2,500 a month.

Furloughed means “grant leave of absence to” consequently these workers cannot be doing any work and will need their work reallocated to other workers potentially with a handover.

https://www.businesssupport.gov.uk/coronavirus-job-retention-scheme/

The Government’s Guidance for Employers and Businesses

This sets out the package of measures announced by the Chancellor including details regarding;

  • Statutory Sick Pay – Support for businesses who are paying sick pay to employees
  • a 12-month business rates holiday for all retail, hospitality and leisure businesses in England
  • grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value between £15,000 and £51,000

https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses

“Coronavirus Business Interruption Loan Scheme’ (CBILS)”

CBILS provides cashflow support for up to 12 months (or possibly more) to cover disruption caused by Coronavirus.

The scheme provides for loans up to £5m for businesses with revenue up to £45m. No interest is payable for the first 12 months as this is settled by the government.

Any small business interested in CBILS should, in the first instance, approach one of the 40+ accredited lenders with their borrowing proposal. The government suggests that the application process should be simple. Here are some FAQs for SMEs. We are working through the details of many more questions.

You will need to give thought to what support you are seeking and the health of your business before the Coronavirus measures came into place.

The CBILS guarantees 80% of the loan and are to the lender. Security to cover the remaining 20% will be required, possibly in the form of Personal Guarantees. The borrower remains liable for 100% of the debt.

Coronavirus Business Interruption Loan Scheme (CBILS)

Covid Corporate Financing Facility (CCFF)

Bank of England can finance working capital by purchasing commercial paper from larger business ‘making a material contribution to the UK economy’.

Businesses do not need to have previously issued commercial paper in order to participate in the scheme. The scheme will operate for at least 12 months and provides a minimum facility of £1m.

https://www.bankofengland.co.uk/markets/market-notices/2020/ccff-market-notice-march-2020

Tax & VAT

VAT – It may be possible to spread the quarterly liability over the following three months to spread the cashflow and to roll that forward. You need to pre-agree that with HMRC who may now be prepared to give more given the government directives.

From 20 March 2020 until 30 June 2020 all VAT registered traders can defer VAT payments. This is an automatic offer from HMRC and no application is required. Clarification on automatic direct debits already set up with HMRC is being sought so you may be advised to cancel any arrangements in place and then set them up again subsequently. VAT refunds and reclaims will be paid by the government as normal.

Businesses should continue to file their VAT returns by the due date.

PAYE – This is a monthly liability but HMRC may be flexible to paying each month in arrears. This would need HMRC agreement in advance.

It is not yet clear exactly how the Time to Pay policy will work but suggestions include;

  • agreeing to pay by instalments
  • suspending debt collection proceedings
  • cancelling penalties and interest where you have administrative difficulties contacting or paying HMRC immediately

The HMRC Coronavirus helpline is 0800 0159 559.

Insurance

Most businesses are unlikely to be covered, as standard business interruption insurance policies will exclude pandemics but do check the terms and conditions of your policy.

Businesses that have cover for both pandemics and government-ordered closure should be covered, as the government and insurance industry confirmed on 17 March 2020 that advice to avoid pubs, theatres etc pre the closure announcement is sufficient to make a claim.

Filing Deadlines

Businesses affected by the COVID-19 pandemic can now apply to Companies House to request an extension to file their accounts, reports and confirmation statements.

The maximum extension is three months, but stringent conditions apply, the most important being that any appeal must be lodged before a company’s filing deadline.

Updated government advice states that all appeals are treated on a case-by-case basis, and the COVID-19 appeals process will follow the existing criteria based on those for unforeseen poor health.

Complete ban on evictions

No renter in either social or private accommodation will be forced out of their home during this difficult time.

https://www.gov.uk/government/news/complete-ban-on-evictions-and-additional-protection-for-renters

Commercial Tenants

Commercial tenants unable to pay rent because of coronavirus will be protected from eviction

https://www.gov.uk/government/news/extra-protection-for-businesses-with-ban-on-evictions-for-commercial-tenants-who-miss-rent-payments

Mortgage Holiday

This is available to all sectors and buy-to-let landlords but is merely a deferral of the repayments and consequently interest still accumulates on the outstanding loan.

Rent Holiday

Tenants can apply for a rent holiday although it is noted that this is just a deferral and not a waiver of the amounts due.

Time to talk

This is an extraordinary challenge we all face. If you would like to talk through the issues you are facing, please speak to your usual Goodman Jones contact or email info@goodmanjones.com

0
Comment on this...

We are having lots of conversations with business owners about the support available to help get their organisations through the impact of Coronavirus.

The situation is constantly changing but here are the current headline issues to be aware of:

The Government’s Guidance for Employers and Businesses

This sets out the package of measures announced by the Chancellor including details regarding;
• Statutory Sick Pay – Support for businesses who are paying sick pay to employees
• a 12-month business rates holiday for all retail, hospitality and leisure businesses in England
• grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value between £15,000 and £51,000

https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses

“Coronavirus Business Interruption Loan Scheme’ (CBILS)”.

CBILS provides cashflow support for up to 12 months (or possibly more) to cover disruption caused by Coronavirus. It is expected to come into play on 23rd March.

Any small business interested in CBILS should, in the first instance, approach one of the 40+ accredited lenders with their borrowing proposal. The government suggests that the application process should be simple. We await more information on this.

You will need to give thought to what support you are seeking and the health of your business before the Coronavirus measures came into place.

The CBILS guarantees 80% of the loan and are to the lender. Security to cover the remaining 20% will be required, possibly in the form of Personal Guarantees.

There is also support for larger firms through the COVID-19 Corporate Financing Facility.

Coronavirus Business Interruption Loan Scheme (CBILS)

 

Tax & VAT

VAT – It may be possible to spread the quarterly liability over the following three months to spread the cashflow and to roll that forward. You need to pre-agree that with HMRC who may now be prepared to give more given the government directives.

PAYE – This is a monthly liability but HMRC may be flexible to paying each month in arrears. This would need HMRC agreement in advance.

It is not yet clear exactly how the Time to Pay policy will work but suggestions include;

• agreeing to pay by instalments
• suspending debt collection proceedings
• cancelling penalties and interest where you have administrative difficulties contacting or paying HMRC immediately

The HMRC Coronavirus helpline is 0800 0159 559.

Insurance

Most businesses are unlikely to be covered, as standard business interruption insurance policies will exclude pandemics but do check the terms and conditions of your policy.

Businesses that have cover for both pandemics and government-ordered closure should be covered, as the government and insurance industry confirmed on 17 March 2020 that advice to avoid pubs, theatres etc is sufficient to make a claim.

Time to talk

This is an extraordinary challenge we all face. If you would like to talk through the issues you are facing, please email info@goodmanjones.com

0
Comment on this...

Setting the right foundation for your property deals

As a developer, a large proportion of your business will consist of buying land, building properties and selling land and property assets. The way these deals are arranged will make a big difference to your tax liabilities, access to finance and commercial flexibility.

For developers, buying property often involves the formation of special purpose vehicles (SPVs): companies created for a single, specific purpose. That purpose is usually to acquire an asset or assets, such as land, property or other companies.

Here we take a look at the potential benefits of SPVs; their implications for corporate structure; and how they can affect the eventual sale of the asset.

Special purpose vehicles

Using an SPV may help when it comes to funding property deals (a perennial challenge for developers, as discussed in a previous blog).

Banks will rarely fund deals where other banks are already lending to the same company. SPVs overcome this barrier, allowing multiple projects to be funded by different lenders.

Corporate ownership

If you opt to use SPVs, you’ll need to think about their ownership structure.

Placing them within a corporate group – instead of owning them personally– allows you to move them around the group.

This flexibility can have tax benefits. Losses in one SPV can be offset against profits elsewhere in the group, legitimately reducing the group’s overall corporation tax liability.

Selling on

When divesting property, selling the SPV that owns it – rather than the asset itself – can also have significant commercial and tax advantages.

Within a group structure, your tax liability on the profit from the sale of an SPV can be reduced to zero by a relief called Substantial Shareholding Exemption. If the SPV is owned personally by the directors, then the profit on the sale of the shares in the SPV can qualify for Entrepreneurs’ Relief, and attract personal tax at 10%.

For the purchaser, meanwhile, buying the SPV means paying Stamp Duty at just 0.5%, rather than SDLT at a much higher rate – which should make the asset being acquired all the more attractive.

These various tax savings can benefit both the seller and the purchaser, and they can be reflected in the sale price of the asset. The ins and outs of this will of course need to be negotiated between the two parties.

There can be downsides to selling an SPV, however. It may limit the number of potential buyers, as not all purchasers will consider buying a company.

Case by case

These are just some of the many issues developers should consider. Getting the structure of a property deal right can have a range of commercial and tax benefits.

However it’s worth remembering that no two deals or development companies are the same; and that tax wouldn’t normally be the sole reason behind your structuring decisions. Commercial factors including funding and strategic objectives should always drive your decisions.

Each case must therefore be looked at on its own merits. This will require expert advice to help you find the best structure for every asset you purchase, own and sell.

You’ll need to talk to someone who knows not just the technicalities involved, but also the risks inherent in using these mechanisms. And, of course, someone who understands the unique nature of your property business.

Get in touch if you’d like to discuss your property transactions and ownership structures.

0
Comment on this...

But for all your careful thought and preparation, things don’t always go as intended.

In our long experience of helping family businesses with succession, there are two situations that can go awry. You may decide that only some of your offspring should be involved in running the business – or potentially, none at all.

Some in, some out

If some of your children are to take over, and others aren’t, how do you make sure they all benefit from the family wealth? And how do you find an arrangement that everyone is satisfied with?

This demands some delicate management. The key is to understand what works for each family member – and of course for the business.

To state the obvious, it generally goes one of two ways: dispute, or agreement (invariably with a degree of compromise).

Dispute

Problems can arise when owners singlehandedly decide to divide the business up between all of their children. It’s quite common to discover that those not involved in the firm aren’t interested in share ownership.

Though well intentioned, share ownership doesn’t always suit those who won’t be involved in the firm. They may prefer to ‘cash out’ straight away.

This can lead to disputes over the value of the shares they’re being given. The result may be a protracted and costly litigation, which requires the new owner(s) to raise funds and buy their siblings out.

It sounds drastic, but we’ve seen this happen when due care and attention aren’t given to the succession process. Such cases can be distressing, as they put severe pressure on family relationships.

Having a skilled family business adviser can help with the stresses and strains of what is undoubtedly a difficult process. We can not only help firms to raise and structure funding; we’ll also act as a personal mentor, and an impartial mediator between family stakeholders, to help reach an agreement everyone’s comfortable with.

Agreement

If not everybody wants share ownership, the answer may be to give this to those who take over; and bequeath other assets – your house, for example – to their siblings.
Once an arrangement has been found, you’ll need an expert to take you through the business valuation process; and the statutory process of transferring share ownership. You should also seek advice on the capital gains , inheritance and other tax implications for all concerned.

All out

The result of your succession planning may be that none of your children are capable of, or interested in, taking over the business.

In this case, there are two routes open to you: sell the company, or retain ownership and make an external appointment.

Sale

Selling the firm may involve a management buyout (MBO) or an external third party.

If external, there may be scope for some or all of the management team to stay on, for the short term or permanently.

Whatever the arrangement, think about whether you want to remain in the business for a transition period. Some buyers may prefer this arrangement.

Selling will mean getting a valuation of the business, and appointing an agent to find a buyer. We can run the sales process for you and optimise your post-sale tax position. You might also need a bit of moral support: seeing the business leave the family can be an emotional time.

Appointment

Retiring from the business won’t necessarily mean giving up ownership. You could appoint someone from outside of the family to run it for you.

Again, this can prove an emotional wrench. It can be difficult for family business owners to give up control of something they’ve spent years building, and which may have been in the family for several generations.

Then there’s the performance risk that comes with somebody running the firm who doesn’t know it like you do (and lacks the same emotional investment). You might want to incentivise external appointees with a percentage of the proceeds from a future sale. Again, this needs careful implementation and specialist tax advice.

Be objective

Succession is partly a business decision. But it’s also a people decision: a decision about not just abilities, but also ambitions and personal relationships.

Crucially, it must be an objective decision. Yet taking an impartial view of your children’s capabilities and drive won’t be easy. At the same time, you mustn’t encourage someone to take over without the vision to ensure your business thrives under their leadership. And you mustn’t assume that all of your sons and daughters will want ownership.

Whatever your succession strategy, the need to start the process early can’t be overstated. It takes time to groom the next generation, or to find external appointees who are right for your business.

Getting succession right is vital for the future of your business and your family. Don’t put yourself under pressure to make decisions in a hurry, or leave yourself with no option but to sell under duress.

To discuss how Goodman Jones can help you to plan for succession at your family business, contact Larry Phillips.

This is part three of a series of blogs on family business succession. You can read the first two instalments here.

0
Comment on this...

Young happy employee talking with his boss

Succession is arguably the most important decision you’ll face as a family business owner. Getting it right will help ensure your firm’s longevity; getting it wrong could put it all at risk.

In our first blog in this series, we considered how to decide which of your sons or daughters is capable of running your business. And we looked at the importance of preparing them to do so.

So come the time for transition, how do you go about handing over the keys to the kingdom?

In an ideal world

You’ve made a clear choice about which of your offspring are best placed to carry on the family business.

Your transition plan has seen them work in the business for some time, experience every part of its operations, and take on senior positions when ready. You may even have started to step back, and let them begin to take control.

This is the point at which you should be reviewing the operational and ownership structure of your company.

How are your firm’s operations organized? Who will run which divisions? Who should own how much of the share capital – and how much will you retain? An external perspective is helpful when making these important – and tricky – judgements.

Succession derailers

The above scenario is, of course, the ideal one. And with a bit of considered advice along the way, plenty of family businesses manage their transition in this way.

But given the unique challenges of running a family firm, there are many potential barriers to a smooth succession.

Firstly, despite all your hopes and plans, your offspring may lack the ability, or the inclination, to take over the business. This can be dispiriting, but if it happens, there are other options open to you, which we’ll deal with in our next blog .

Then there is the issue of control. It can be difficult for founder generations to hand over their ‘baby’ – especially if the next generation intends significant changes. As the owner, you need to be mentally prepared to let go.

Finally, time can be the enemy. Putting succession planning on the backburner for too long can place the business at risk. You need to know who will take over the business some years ahead. This will give you time to put a development programme in place to fully equip your successor for the job.

Fair treatment

Another crucial consideration is what to do if not all your sons and daughters will be involved in the business. If not properly handled, this could lead to tensions and power struggles – we’ve even seen cases of sabotage.

So how do you ensure a fair distribution of the family wealth?

Every family is different, of course, so there’s no one-size-fits-all solution to this situation. But in most cases, communication and compromise are the key.

The family stakeholders of a business generally fall into three groups: those who work in the business; those who don’t; and at the centre of it all, the owners.

It’s not uncommon for the needs and aspirations of these groups to conflict. But talking openly and honestly to each individual will help you to understand what they want, and to find a solution that’s acceptable to all.

It will also help avoid some common pitfalls. Parents often give shares to their children, thinking that they’re doing the right thing, when a different approach is needed.

Tax planning

Handing over a business obviously has major tax implications. And while it’s vital to have the right tax strategy in place before transition, don’t be tempted to let the tail wag the dog. Your business decisions should always be based on commercial merit, not on how much tax you can save.

That said, there are some important fiscal issues to keep in mind.

It can often be tax-efficient to gift a proportion of the company ownership to your successor(s). Of course, you may want to retain a proportion yourself, so that you can continue to receive an income from the firm you’ve spent so much time building.

Many business owners assume that they’ll benefit from 100% inheritance and capital gains tax relief when relinquishing the business. But that’s not always the case. You need to check your tax position very carefully, and take advice on what to do.

Think forward

When it comes to succession, the most important advice anyone can give a family business owner is: plan. Plan early, and plan ahead. Review your plans and keep them up to date. And seek expert advice where necessary. Remember – the unexpected could strike at any time. Transition is something you need to be ready for.

To discuss how Goodman Jones can help you to plan for succession at your family business, contact Larry Phillips

This is part of a series of blogs on family business succession. If you’d like to know when future instalments go live, please sign up for updates.

Guardar

0
Comment on this...

Running a family business isn’t only about making money. The owners of course want to maintain and grow the family wealth; but they often want to build a business that can be passed on to future generations. Portrait of multigenerational winery owner family standing at wine cellar. Senior winemaker and young sommelier standing at background and holding in hands a glass of red wine while middle age businesswoman looking at camera and smiling. Small business.

This can be easier said than done, however. According to the Family Firm Institute, less than a third of family businesses survive into the second generation. Just 12% make it to the third, and just 3% reach the fourth generation or beyond.

As the saying goes, ‘the first generation builds the business, the second makes it a success, and the third wrecks it’.

Succession planning

Effective succession planning is crucial to the longevity of a family business. But it can also be one of the most highly charged issues for owners to deal with.

And the impact can be devastating when it goes wrong. There’s the potential for litigation, huge legal bills, and critically, a breakdown in family relationships.

At Goodman Jones, we’ve supported many family businesses through the succession process, and know what works – and what doesn’t.

Making the hard decisions

Which of your sons and daughters are capable of taking over the business – all of them, one in particular, or none at all? It’s one of the most difficult questions a family business owner can face.

It takes strength and focus, but you must base your succession strategy solely on appointing the best person (or people) for the job. Whatever your decision, it must be right for the business.

That may sound impersonal, but remember: what’s best for the company will also be best for your family in the long term.

So how do you go about choosing the most suitable successor(s)? In our experience, it pays to keep the following in mind:

• Look forward. What skills and aptitudes are required to run your business – and what will be needed in the future?
• Think about soft skills. As well the ability to run and develop the business, your successor must have the appetite to do so. Look for vision, passion and work ethic.

• Be impartial. Having identified the necessary capabilities, draw up a job spec, and evaluate your ‘candidates’ objectively. Get an external perspective to help with this.

• Have realistic expectations: Does your chosen successor have all of the skills for the job? If not, can they be developed?

If you conclude that one or more family members shouldn’t take over the business, there are other ways to support the next generation. Our next blog will look at this in more detail.

Preparing for succession

Being in charge of the business may be second nature to you, but it will be new to your successor. There will be much to learn. So it’s vital that you begin planning the transition some years in advance.

With enough time, you can create a structured training and mentoring programme, to help the next generation acquire the skills to make the business a success.

This should involve exposing them to all aspects of the firms’ operations, in order to instil an in-depth understanding of the business before they take the reins.

At the same time, however, restricting their business experience to the family firm alone can be limiting – unless it’s a larger company, with several senior managers to learn from. Stints working at other firms will provide a different perspective on managing a business, and may prompt fresh ideas that may help strengthen your own operation.

The success of your transition planning will play a huge part in determining whether your sons or daughters will maintain the success of the business you’ve worked so hard to build – and pass the legacy on to your grandchildren.
If these issues sound familiar, and you’d like to discuss succession planning for your family business, please contact Larry Phillips.

This is the first in a series of blogs on family business succession. If you’d like to know when future instalments go live, please sign up for updates.

Guardar

0
Comment on this...

Attractive mid adult businesswoman with long blonde hair talking to mature colleague with short grey hair in office.

Key to every successful medium-sized and large business is a successful finance team. They go together. The idea that you can have a successful business that grows and thrives without having a good finance team is nonsense.

And that comes down to people.

In the finance team, the value that your people can bring goes far beyond the production of the numbers.

Getting the right structure and skill set is important, but often the most crucial support is delivered through training and mentoring of key people. We see this as part of our commitment to helping improve our clients’ businesses for the long term.

Modelling the way

To give you a recent example, we have been providing in-depth mentoring support to an accountant who heads the finance team of a large business. It is a complex business, with various subsidiaries operating across different disciplines.

The accountant, who we’ll call Adam, had much of the required knowledge and an understanding of the tools, but he needed guidance on the practical application of these. This is a situation we see quite often.

With the support and commitment of the management team, we mentored Adam over a 12-month period. We helped him develop a much improved management reporting system and much better processes. It also involved helping him to work with the management team.

He is now a key member of that team.

Reaping the rewards

As a result, everyone in the business is now getting greatly improved information and value from the work Adam does. Likewise, Adam has achieved performance levels and career progression that he was not previously on track to do.

The client is delighted, not least because the previous solution mooted was that they needed a senior level FD. Whilst in some cases this is appropriate, it was a significantly more expensive option that has been proved unnecessary in this situation. In short, we have all seen the rewards of helping Adam fulfil his potential.

Tailored to your team

Whilst this is a surprisingly common situation, there is no single approach. It has to be tailored to the needs of your business, and to the talents – and weaknesses – of the individuals concerned. The level of support varies and the impact of the mentoring programme is greater with some clients than with others.

Our work with clients begins by listening, talking and asking the right questions. Many of the businesses we work with agree that the real value comes from sitting down with people.

The Chairman of one group of companies sums it up as follows:

“I wanted to say how pleased and thoroughly impressed I was with what you guys have achieved in a relatively short space of time. It’s excellent work and if I am honest, it exceeded my expectations. You are providing us with some invaluable coaching and at the same time providing us with the requisite tools to ensure we are close to the movements in the businesses. I know we will now begin to excel in all parts of the group to ensure we achieve or improve our already ambitious future.”
For advice on how to improve  finance team performance, contact Larry Phillips larry.phillips@goodmanjones.com

0
Comment on this...

Dark cockpit detail of an Airbus A330 - 200 commercial airliner while crossing the Atlantic at 35000 feet. This is an actual inflight situation photographed from the co-pilot's position, with colorful blue on black screens giving information about engine parameters, navigation, flight parameters and communication. Flood lights on the instrument panels reveal switches and gauges. XL

All businesses need to be well loved from a financial point of view, or they won’t succeed. They might have a strong growth curve and good profits, perhaps many hundreds of thousands a year, but without a good finance team when they hit a problem – and all businesses face challenges – the problem can turn into a crisis.

It is surprising how many businesses, even successful ones, tolerate financial management reporting systems that could be much better. Lots of medium-sized SMEs – those with a turnover that exceeds £5m – have financial management systems that can be improved, yet owners and managers may accept them as they are because the businesses are profitable.

Part of the problem is that decision-makers often do not know what really good financial management reporting looks like, or understand the commercial benefits it can bring to the business. Our experience shows there is a clear correlation ¬– as management reporting improves, so profits will improve. Better financial information allows better decision making, which generates better results.

The commercial benefits of getting your management reporting right

Improved decision-making

Management accounts can help business owners/leaders identify trends much more quickly and hence take decisions at the right time. This will often give them a significant competitive advantage. Of course, the ability to respond more quickly than your competitors is even more important in situations of dramatic change and uncertainty. We saw this during the fallout from the 2008 financial crisis and will no doubt see it again as we navigate through the repercussions of the Brexit vote from the EU. And remember, if your competitors are doing it and you are not, it is they who have the advantage.

Once you’ve seen the impact that good quality management accounts can make, it’s disheartening to see businesses that are still expending management time and making decisions based on out-of-date financial information that falls below the standard required to run a profitable and successful business. Reporting regularly (daily, monthly or quarterly) ensures that management can identify trends, are better informed and take action accordingly.

The forecasting element of management accounts – and the discipline it demands ¬– creates an additional benefit. It will focus your attention so that any variation from the expected can be easily identified.

In short, businesses that only see their accounts as retrospective reporting aren’t looking where they’re going. Forecasting should be a priority for all businesses trying to make the right decisions in any environment.

Communicating accurately to key stakeholders

We have seen businesses, such as those in the construction sector, face real funding threats when, for example, the reports produced haven’t accounted for timing issues surrounding costs on large development projects. By applying project accounting we have helped those businesses allay unnecessary fears from their banks by evidencing key information such as the profit-per-contract figures.

It’s not just the construction sector though – all businesses need to be on top of their margins, inventories and staff costs, and all relevant KPIs.  They need to be on top of their business and developing the right reporting pack is a key part of that.

Foundations for growth

We love working with growing businesses but resources aren’t the only thing that need to be scaled up to ensure that your success continues as you grow.

It’s also important to look at the more complex reporting requirements your organisation may need in the next stage of its growth. Our clients that have grown the most smoothly and successfully are those that have reporting that is fit-for-purpose.

Tailored for your needs

Every business has its own challenges and objectives. Solutions must be tailored to the specific needs of the business, the owner and the management. This includes ensuring that technology meets your needs but it’s also about looking at the processes and skills within the finance team.

The Fundamentals

So, what does good financial reporting look like?

• Identifying the KPIs that are critical to your business and
• regular reporting on actual performance versus forecasts.

There’s no one-size-fits-all solution.  It all comes down to understanding your business.

The big question

The question every business owner should be asking is, does our current management reporting give us the financial data we need, when we need it, and can we trust in that information to  help us run our business profitably and successfully?

If not, please talk to us.

For a review of your reporting, contact Larry Phillips lphillips@goodmanjones.com

0
Comment on this...

 

Congratulations to Graeme Bursack who has been appointed to the Management Committee of the international board of GMN International.  Goodman Jones are the UK representatives of  the international association of accounting firms.

GMN International was formed in the 1970s and is an association of carefully selected professional accounting firms established and respected in their own countries around the world. Each firm is a separate and independent legal entity.  The relationships between our firms, positions us to access international information and support rapidly and with a shared commitment to service expectations.

Graeme’s new appointment is in addition to his existing role as president of the European region and is a reflection of our commitment to the association and supporting clients internationally.

0
Comment on this...