February 22, 2012

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Should a small business trading in one country hedge currencies?

February 13, 2012 By

If you run a small business in the UK and have no dealings with anyone or any company from anywhere overseas, do you even need to think about currency hedging strategies?

 

The short answer is probably not – unless you can foresee a time in the not too distant future when that could change.

 

Let’s say, for example, you’re running any kind of business that necessitates buying goods or services from other companies of any kind at all – and that there is the potential at some point in the future for you to source those goods or services from a foreign country. On the other hand, there may be the potential at some point for you to export your goods and services.

 

If this is the case, then you probably have an idea of what those markets are – whether they’re in China, Euro-land, the USA or any country retaining an unpegged individual currency.

 

If this is the situation you find yourself in – it may well be worth considering some form of Forex strategy, now, to iron out future exchange rate fluctuations. And if you think this is an exaggerated risk – consider that the £1 shifted from the ability to buy you around €1.60 to being roughly around parity with the euro over a couple of years. Imagine what such a shift does to margins.

 

The way around this is to think what future shift would be the worst one for your business and to hedge forward, locking in a fixed exchange rate.

 

Of course, you may decide that such a strategy isn’t relevant for your business, but is relevant for you in your personal life as you own a home overseas, or take regular holidays in Europe or the US etc., and simply want to take the headache out of things. At the time of writing, for example, £1 will buy you less than $1.60. But it isn’t too long ago that that figure was well above $2. Trading Forex to plan ahead may well give you ease of mind.

 

Written by David, a keen financial blogger that enjoys writing about anything related to money, from Sunbird currency trading to debt problems.

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Does DIY accounting work for small businesses?

January 13, 2012 By

Should small businesses do their own accountancy work to save money?

Having run a very small business for over a decade now, my own experience can be split into roughly two halves. For the first half of my business’s existence, I did all my own accounting, but for the last five or six years, I employed the services of an accountant to do this work for me.

And in my opinion, there is simply no contest between the two; the latter is far and away preferable to the former. But this isn’t born out of any kind of laziness; it’s simply a matter of the bottom line. From day one the accountant saved me real money. I use the word “real” here to be quite clear about the difference – because the accountant has also saved me a great deal of “invisible” time and money. But it was the real stuff I was most concerned about.

I was always happy enough doing my own accounting. No one really enjoys the process, but if you have no fear of numbers, then it’s relatively easy to do your own small accounts and tax return etc. But accountancy is like any other specialized discipline. There are things you simply don’t know about unless you really have your finger on the accountancy industry’s pulse. And if you do, but you aren’t an accountant – then why is that?

So a good accountant should be able to save you real money from day one (unless your business is really tiny). But more to the point, he or she should also be able to save you real time – allowing you either more leisure time or the ability to concentrate on the stuff of doing whatever your business is; rather than worrying about accounts records etc.

After all, this is what you’re in business for. For me anyway, it’s been something of a “no-brainer”.

This article was written by financial blogger David. He pretty much covers every topic in his writing, from Payday Loans from Wonga.com to student loan repayments, helping everyone understand their finances better!

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Are accountancy firms good contrarian investments?

December 15, 2011 By

You don’t need me to tell you that these are very tough times to be an accountant.

According to a recent David Lichtenstein interview, they’re still tough times in the real estate business, but we may be close to the peak of the trough, to mix metaphors, and there are some good contrarian and deep value shrewd buying opportunities around.

Maybe the first in really are the first out, and if real estate starts to do well again, accountancy will follow suit?

Who really knows? But even some of the biggest and the best accountancy firms are really struggling to survive out there.

So are we just about at the bottom of the black accountancy hole right now when it comes to investing? And are any of the listed accountancy or related area firms good contrarian investments at this moment in time?

I would say that there are some good buying opportunities, but you have to be prepared to take a high risk-reward gamble.

For example, RSM Tenon’s share price has been absolutely trashed this year and the firm has recently warned on profits, saying it isn’t in breach of its banking covenants – which though good news on the surface level, can also intimate that such is a possibility in the future.

The warning had investors spooked and the shares – which were already on their knees – dipped further again. The same is true of Begbies Traynor. Now at 25p, Begbies stands at a healthy discount to its net asset value and in the last full year, made a pre-tax profit from continuing operations of £5.2m, yet is currently valued at around just £25m.

Begbies’ shares suffered when fellow accountancy firm Vantis went into administration earlier in the year.

It could be a case of the fittest surviving and prospering but it takes a brave investor to try and discern the wheat from the chaff. Be careful.

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Scandalous Accounts

December 13, 2011 By

There have been many famous accounting scandals in the last few decades, and most of us have heard of some of the major ones such as Enron and Arthur Anderson. America seems to be the biggest playground for up-to-no-good financial wizards, but maybe that’s just because the country is so large. Financial scandals make news headlines because of the vast sums of money involved, and the numbers of people affected. The public also has a huge capacity to devour gossip and so the more outrageous the details the better the story. Some stories even make it from article to book status would you believe! Fact is often so much better than fiction.

In years gone by before computer records, tracing any accounting discrepancies would have involved trawling through paper records – unless the perpetrator destroyed them first that is. These days with sophisticated computer technology and automatic back-ups in every office, fraudsters could not possibly cover their tracks via the office shredders even if they wanted to. Forensic accounting files into the goings-on of suspect businesses can take years to put together, and the resulting court cases go on forever and a day too. Costs incurred can run into the hundreds of thousands if not more with many people’s careers being made or destroyed in the process.

Increased information gathering and storing is great for the investigators, but it also makes it easier for the criminals to access data in order to steal it or falsify the contents. If there was such a thing as a shredder confetti cut computer programme than I guess there are certain individuals out there who would be purchasing advance copies to hide their activities. Let’s just hope no bright spark operating on the dark side decides to invent one… fingers crossed for all of us!

Filed Under: Facts About Accountancy Tagged With: , ,

Do you need to hedge?

December 12, 2011 By

Do you need to hedge currencies and don’t really have a good grasp on how to go about it? There are lots of good reasons to hedge currencies. Obviously, if you’re involved in any kind of importing or exporting business, you should think about hedging if your exposure in any one area is too great. There have been some pretty seismic currency shifts in recent years and if the Eurozone crisis is telling us anything, it’s telling us that there’s more turbulence ahead.

No-one really knows which way the chips will fall here. If they did, they’d be sipping a cocktail on a yacht in the West Indies, chatting with George Soros and Warren Buffett about where the world’s currencies are going next!

Hedging currencies may also be wise even if your business has no international trade exposure and buys and sells all its wares in the home country only.

Let me explain; imagine you’ve been merrily going about your business in the UK only – buying and selling just within that country for the last decade or so. The fact is that you’ve lost a lot of money in real terms versus the bulk of Europe which has been in the Euro or pegged to it just by virtue of the fact that sterling has weakened.

You may think this irrelevant but it’s not. Had you chosen to hedge 10 years ago by buying Euros with some of your sterling – and you now decided to unwind that hedge, you’d be quids in. Simply the opportunity cost of not hedging was, therefore, costly.

There are very easy ways to hedge. One that’s very easy is to take an online tutorial with sunbirdfx.com and maybe even to open a demo account to see what kind of trades and currency hedges are possible for your business.

The American dollar, sterling, the Euro, Japanese Yen, Canadian dollar, Australian dollar and the Swiss franc are all very readily and easily tradable and the website even shows you how to develop strategies to maximise or minimise your risk depending on your preferences.

This article was written by David, who fancies himself as a bit of a finance whiz. He often checks out sunbirdfx.com to keep up to date with the latest news.

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FOCUS 31 Languages of the World

November 22, 2011 By

FOCUS 31 Languages of the World If you've always dreamed of speaking a foreign language then Focus Multimedia's 31 Languages of the World for the PC is just what you're looking for! 31 Languages of the World gives you the tools you need to experience languages they way they are spoken by native speakers, and it's all done in a fun and interesting environment. You'll pick up listening, reading and speaking skills quickly and easily, while having fun in the process. With up to 5,000 words per language and a variety of different activities supplied on the 2 CD-ROM discs included, the world is your oyster! 31 Languages of the World even comes with speech-recognition technology to make sure you pronounce each word correctly. Start something new and learn a foreign language with Focus Multimedia 31 Languages of the World !

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Improving company communications

November 22, 2011 By

For a company to be effective, then one of the vital elements is good communications – between staff, the managers and the boss, as well as with external customers and suppliers.

We all communicate in different ways many times during the day. It may be through a phone call or email, or face-to-face meeting.  Sometimes there’s a more subtle form of communication – just the way people carry themselves or eye contact across a room.

Good communication can ease the flow of a working day, and of course the opposite is true. If you’re misunderstood then it’s bound to cause problems somewhere along the line – whether it’s a straightforward error on an order, or causing someone offence and not realising it, which may mean losing a sale.

As a manager, you can help to improve communications within your company. Bear these suggestions in mind.

Be genuine

Be honest and straightforward when dealing with your team and your clients. Don’t make promises you’re not going to be able to keep.  Make sure you keep people’s attention when you are speaking – so there’s no danger of them switching off halfway through.

Feedback

To get the best out of staff, they need to know their hard work is recognised.  Arranging regular feedback sessions will help staff feel engaged and included about their own development, as well as motivated to do well for the company’s benefit.  Organising appraisals allows you to set your staff targets, and for you both to discuss any issues that have occurred.  The appraisal should feel like a neutral sharing of information, not something staff members have to fear.

External communication

Although most companies focus on their customers, it’s important to view other stakeholders equally importantly.  There are partners, suppliers and investors to consider.  Also take into account how your business is perceived by the wider community. In a David Lichtenstein interview, the US property developer was asked how he felt about the losses his business was sustaining during 2008. Instead of just agreeing that things weren’t looking good, he turned it into a positive, saying “If I can keep our losses at 1, 2 or 3 percent, I think that’s wonderful in this economy.”

Recognise success

When things go well, make a big deal about it – and this isn’t just about company success. If a member of staff has done particularly well, let the rest of the company know. Recognition of achievement encourages better team working and will improve the performance of the whole company.

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Ditch the Plastic Bag

November 11, 2011 By

If you are one of those sole traders who keep receipts in a supermarket carrier bag then shame on you! It is time to get serious. Not many people actually like dealing with a years worth of paperwork all in one go, and if you have left it that long then you are probably right at the bottom of that list. Take the time to keep on top of your basic admin and save yourself from a truly unpleasant task.

If it all gets too much and you have to admit that this is never going to happen then enlist the assistance of a willing family member, or bite the bullet and engage the services of a professional book keeper. Not only will you benefit from a better awareness of the profitability of your business dealings but you will also most likely become more efficient in other areas too. You may not pay much attention to security issues such as identity fraud right now, but you can bet your life your accountant has a state-of-the-art confetti cut shredder and is just itching to use it on your mountain of filing!

There are other benefits too. Everyone needs to keep up with national insurance and tax issues and if this is not naturally on your radar then at least you can rest assured that such matters are being well taken care of. Imagine a world where your in-tray gets emptied and you know exactly what your financial position is every month?! You know who you are Mr Scatty Entrepreneur – you might be amazing at what you do but if your books are not in order then you may as well get the paper shredders on the whole lot right now.

Make your New Year’s resolution to get sorted out once and for all – you won’t regret it!

 

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How gearing affects profits

November 9, 2011 By

You’ll often hear accountants and investors talking about “gearing” in relation to a company’s accounts usually – or sometimes their own investments.

So what is gearing, exactly and how does it affect the bottom line?

Let’s consider an easy example. If a company can borrow money at, let’s say, 5% per year interest but can use the money it borrows to generate returns of 10%, then it can comfortably cover its interest whilst retaining more profit itself. Obviously, it makes sense for such a company to borrow money if it can continue to borrow and continue to make profits which are higher than the borrowing costs.

The continuity, though, is crucial. The more the company borrows, the higher its gearing is and it has to keep up payments. Otherwise, it risks bankruptcy – or going into administration for a listed company. In other words, continued expansion and success becomes ever more critical, the higher the gearing.

A company’s gearing is usually expressed as a percentage figure, by dividing debt by equity (equity being the company’s fundamental value). So let’s say you run a property company with around £10 million in assets and no borrowings, then that company borrows £10 million for further expansion, then the gearing is now 100%)

In other words, 100% of your company’s employed capital is now derived from borrowing.

Quite how this affects the profit figure will, of course, depend on the ROCE; return on capital employed – or how well you can utilise the cash versus the interest you have to pay back on it. In other words, the lower the percentage gearing figure, the more financially sound the company generally is. On the downside, though, very lowly geared companies generally aren’t as exciting as they aren’t expanding as quickly – but in the bad times, that’s a bit more comforting!

This article was written by David – a financial blogger. He is interested in telling you about everything from the latest payday loan to the newest financial service for SMEs.

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Boost your firm’s data protection and green credentials by shredding

September 23, 2011 By

All types of companies, including accountancy firms, have to try their best to protect the data and personal information they hold on their clients and customers.

Firms which fail to comply with the rules and regulations within the Data Protection Act 1998 will find they can now be subject to fines, which can be seriously damaging to a firm’s business and reputation.

Bearing this in mind then, accountancy firms need to have some kind of security strategy in place to protect confidential data both online and in paper format.

On the internet, there are numerous threats including malware and viruses to contend with, while the risk of theft is still present when handling paper copies of information.

Companies must ensure their data protection is decent both on and offline, or else they risk being hit by a hefty fine.

When dealing with paper copies of information, a shredder could come in handy to dispose of the data. You could consider something like a confetti cut shredder, which will make sure the information on the data you’re getting rid of is no longer comprehensible.

As an added bonus, shredding paper will help to boost your firm’s green credentials. You’ll be able to recycle shredded paper, meaning you’ll be doing your bit for the environment, at the same time as lowering the chance of your data being lost or stolen.

When it comes to data you’ve already started storing on a computer, there are number of measures you can consider to protect the information.

You need to be sure your computer keeps malware and viruses out, as otherwise your information could be at risk from hackers. It’s crucial to encrypt records as well, as sensitive customer data could fall into third-party hands accidentally otherwise.

It is important for all accountancy firms, regardless of size, to make sure they protect all of the valuable and confidential data in their charge.

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