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Would you start a business in the UK?

A detailed analysis of last week's pre-Budget shambles of a speech (mercifully I missed it)   by Gordon Brown prompted an insightful response from Anne Porter. The core of her argument said:

"What is more important though, is an accountant’s ability to carry outproper “what if” analysis based on what will almost certainly becomelaw. This is important not only for those companies which haveunderstood what the Government is trying to achieve but also for thosewho will be oblivious to its consequences on their business, whetherpositive or negative. It is this sort of foresight and service thatsmall businesses need and should expect.”

But we live in uncertain times. Clarity is essential for solid advice and there really is no point in offering tax advice if it has to be caveated because of government uncertainty in the current climate. That may sound extremely negative but clients don't care if the government can't make up its mind. They expect you to find ways of resolving problems in ways they understand. In clients eyes, you're supposed to be a magician.

Even so, I believe the UK remains one of the best places to set up business anywhere in Europe. If you don't believe me then ask yourself why so many French and Belgian businessmen are turning up on the UK's shores, often in high profile positions.

France (where I lived for a number of years) offers a slew of incentives for new business - especially where there is a technology or agricultural component. But they cane you on the way with huge social security contributions and a myriad of other 'taxes' that make innovation almost impossible at the level it really matters - the SME/SMB. It is often too hard financially to stay in businesses. That's why the French business failure rate is so high. Of course the lifestyle can compensate, but that's not much good if you're struggling to pay bills in a country where credit is not easy to obtain.

Technorati Tags : startup+costs, European+taxation

Talent spotting

Practitioners' Diary is always a fun read and looking at the numbers, it is one of the most popular items on AccountingWeb. No surprise there. Here's a real live, walking, talking accountant in practice feeding back to the readership all the things we know about but in a way that has the ring of truth. (Aspiring practice bloggers take note.)

 

What caught my eye was his lament about replacing a secretary. He says:

 

"Had an email this morning from   our new secretary to say sorry but the job wasn't demanding enough for her, so   she was quitting. Just what I needed. "

Two things attracted me to this:

1. Firing the boss by email...talk about revenge of the techno-generation. I   wonder if the email was sent from a Blackberry?
 
2. The requirements for attracting talent are rising almost daily. It's not   enough to offer a competitive pay packet. Today, candidates are as likely to   want to know what you're plans are to innovate. They're interviewing you at a   time when real talent is short in supply. If you want to be the best, then   hiring the best isn't an option. It's what gives Microsoft bosses sleepless   nights while theiur talent gets pulled to Google.

Wha'ts your policy on bringing in the brightest young things you can find? Afraid they might be better than you? Fear not. It's the skill of great leaders to surround themselves with people who are better than they.

Technorati Tags : talent_hunting, HR, staffing_problems

 

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Pricing strategies

One of the most common problems I hear about is the pressure on fees. What I don't know is whether this is a pressure on rates per hour or overall rates for work done. There's a big difference. Some practices, offer fixed prices across a menu of services. The idea is to create certainty for clients. I like that model. It means I get rewarded for the effort I put in. Even when there may be SNAFUs waiting for me.

 

Curiously though and despite the fact most firms have a good idea how much to quote a given client, there is enormous resistance to giving up hourly rate pricing and a reluctance to quote. Per hour pricing causes huge problems because it limits the amount a practice can earn to the available hours. It has nothing to do with value. It is both uncertain for the practice and for the client. It doesn't allow for flexible planning or budgeting and tells you little about how to manage growth.

 

I recall running tax avoidance schemes for which I got paid £1,500 a shot based on £100K profit at risk. These schemes could be put in place and then replicated 6 times a day. The number was restricted by the physical activities involved in the scheme that had to function in a specific order and which relied on third parties providing assistance. How's that for value pricing? 1.5% of turnover?

 

I'd be delighted to sell bread and butter services at a fixed rate. And I'd make sure they were lower than most of the competition. Because then I'd be at the start of following the Wal-Mart pricing strategy. Which has everything to do with value and customers.  

 

Technorati Tags : Pricing_strategies, practice_management, Wal-Mart

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Pub VAT audits

Have any of you seen this about VAT visits and pubs? If not then don't be too ashamed at not keeping up to speed. It's buried inside the Government News Network site. Back to the press release. This has to qualify is one of the most badly spun pieces of double talk I've seen in years.

Unless I'm totally out of touch, then the last I heard, VAT exists to enforce collection, not provide help to businesses. How about this:

"We recognise that businesses need information and support, which is tailored to meet their individual circumstances. We have learned a lot about those needs through our VAT assurance visiting programme. We will be working with individual pubs and the industry as a whole, to help Public Houses pay the right tax at the right time, and to provide information about the schemes we offer, which can simplify VAT matters."

What a crock of shit - as our US cousins might say. But they let the cat out the bag when they add:

"The letters and advice will be backed up by a programme of visits to pubs by VAT assurance officers, some of which will be without an appointment. Visits like these play an important part in allowing HMRC to gain an understanding of how businesses work, and to address the specific problems and concerns of individual businesses."

But hang on. At the end of the release there are notes to editors where it says:

"The purpose of the visits is to check the books and records of the business and offer one to one advice on VAT matters"

So now you have it. They're doing VAT audits in disguise. But it's not that simple. Not only do they plan on spot checks, but in the process they'll be adding to their store of knowledge. But they don't have any. And what they do have is no good anyway. The last available public record of what Revenue Inspectors know about running pubs was based on data collected in 1987. And what they say is that:

"No two houses' overall rates of gross profit will be the same, as there are so many factors, differing from house to house, which affect the final result. Tenanted and managed houses with the same kind of trade, in the same locality, should have results falling in the same range, as should free houses in Scotland. Free houses in England and Wales should make more."

Now you know that, you can respond to the threat at a local level by reviewing your publican clients (if there are any left!) and advise accordingly through your community friendly website.

Fire and brimstone

Simon Sweetham has sparked a furious outpouring about the appointment of KPMG by HMRC to review the administrative burden faced by small business taxation. At a cost to all of us of £6 million. Here's some of the debate:

Simon opines: "But deep down it bothers me that the people doing this work are KPMG, and that they are trousering over £6 million in the process. KPMG know lots and lots about business – big business – and they know lots and lots about clever tax avoidance: but do they know anything about small business? Do they really know what the real problems are, and can they measure the very important stress factors which don’t obviously show up on the balance sheet ?"

Alastair Harris adds: "Any firm of accoutants earns substantial fee income from the tax system - sounds like a significant conflict of interest? Surely this would be better placed with an independent academic institution?"

Richard Murphy chips in with: "Candidly it sickens me that a contract of this sort goes to a firm whose American division has just been fined $456 million dollars to avoid criminal prosecution over abusive tax shelters, with eight of its former partners were indicted and with the firm needing an independent monitor....KPMG London will be saying this has nothing to do with them. But that's nonsense, as we all know...KPMG should be barred from all public contracts until they can prove they have mended their ways."

I've suggested an alternative approach. Bypass KPMG. Prove government wrong to be wasting money when this can be approached differently. Use the collective power of the 15,000+ firms in the UK to canvass and represent client opinion. It can be done very quickly, cheaply and effectively. Present those findings to both government and press. There are ways to do that. Don't make this a single purpose campaign but as a springboard for the voice of the silent majority who would welcome change where that change benefits everyone.

Secrets of success

Stuart Jones has an interesting post about research into what distinguishes success from failure in early stage business development. Of the 14 measures, half are finance and accounting related. The other half are a mish mash of product development, marketing, HR and other stuff.

There are fundamental problems with this research. I am assuming the idea was to elicit responses that would reinforce the financial aspects. There is no segmentation between service, manufacturing and other businesses. There is no vertical market analysis. As far as I can tell, the research is designed to reinforce the messages the profession dishes out to every spotty kid that comes through the door with an idea. There is nothing in the research that makes the role of relationship paramount.

I recently read that people now expect to run through a series of monogamous relationships during their lives. If true, then what does it say about our most cherished relationships? What does it say about trust or our ability to remain loyal? Now add 'business' to the monogamous relationships expression. Does that sound familiar? Are you life loyal to your car? Your bank? Your hairdresser, suitmaker, airline, coffee shop, newspaper, brand of toilet cleaner....the list is endless

I would argue that in a world where our attention span is defined by the speed at which we channel hop during the blipverts. Where terrorist attacks are recorded on cell phones and then transmitted to Big Media by the man in the street. Where passengers on a stricken airline are phoning out a blow by blow account that's being transmitted over Sky in real time. Where the central resource for disaster relief and information is centred on the Internet. And where a ballpoint pen can wreck a reputation in weeks. Something fundamental has changed. We have a lot of work to do on our relationships.

And that means going back to basics. If you ask any new business person what they want more than anything. It's stability and some sort of certainty in a risky world. I never met anyone who wanted to go into business for the adrenalin rush that accompanies fear and uncertainty. And they know they'll only earn stability by being considered a loyal, fervent, trusted resource in their inter-connected network of people. With whom there is no relationship without conversation. It's that simple. It's not rocket science.

But you already know this - it's what you wanted as you accumulated clients. Or have you forgotten? Do you still believe that half the measures of success are financial? Financial success is the outcome of deep, trusted, almost intimate relationships where conversational exchanges define our reality and trustworthiness. With everyone in our network of people..

Being a good citizen

Many of you support local causes. It's a great way to use your position in the local community to demonstrate that the community is genuinely important to you. It also shows that contrary to popular belief, professional accountants are more than stiff, boring, bean counters but people with real passion.

If this is you then take a look at Patient Opinion. It's a brilliant example of how this kind of medium can be used as a way of garnering information that not only gets attention but which can be used to influence local (and regional, maybe even national) opinion while providing the basis for serious analysis in support of a cause or issue. Ok, it isn't perfect and is only useful for a relatively small percentage of citizens. But...

Ask yourself whether this is the kind of project you'd like to kick start? Do you have a real expert in the field who'd take up the baton? Could you get a local council to show case internet terminals at local libraries with this kind of thing on their welcome page?

What a difference it would make to your image while you lead local debate.

Standards' convergence

Standards convergence, especially between US GAAP and IASB is going to be tortuous. It's important that UK professionals not only take notice, following US sources as well as UK, but contribute to the debate. Perhaps this is where our upcoming podcast led Compliance Monitor could help - serving as a beacon for debate. We'll see.

There are fundamental differences between the US code and that used in the UK. In the US they are much more rules driven than principles led. It fits their culture perfectly. This is one of the contributing factors behind so many of the US fraud and accounting scandals along with a whole lot more heavy fines and criminal prosecution cases. Theory suggests the US will move towards IASB by 2007 but don't count on it. There are huge commercial vested interests on Capitol Hill. And from what I'm seeing, there's already a degree of back room horse trading going on.

The US profession knows things have to change or its image as a trusted resource will become a thing of the past. I have already talked about some of the issues inside US companies at Bazaarz. There PwC is under the spotlight.

But at home, any re-adjustment to standards (on top of anything that comes down the pipe for SMBs) could have a devastating impact on your clients' perceived financial health. Here, the people most interested will be finance houses and HMRC - in that order. You now have a choice. Sit back and wait for the tide to wash over you or take an interest, developing a plan to communicate to your finance connections. Believe me when I tell you they've no idea what'll hit 'em.

But a passive stance isn't appropriate for this kind of issue. I count myself as fortunate enough to have contributed to the debate on IAS39. I said at the time, the idea was fundamentally flawed and so it has proved. In this current debate I can easily envisage a situation where FASB argues its laws are based on principles and therefore if there's going to be any change, then it will be Europe that moves and legislates. Does that make convergence an inevitable fudge? I don't know. We're already impacted by SarBox, whether we like it or not. So if convergance matters to you in terms of increased compliance or rejigged processes - all at your cost - along with the obvious client communication problems, then I would have thought this represents an issue worthy of debate rather than imposition.

As you might notice from the number of assigned categories, I have a feeling this could be like a pebble dropped into a pond. Numerous professional ramifications.