Navigating the Digital Frontier: Challenges and Opportunities for Businesses

Welcome to the Summer 2024 issue of In Business, the first issue to be published since our new coalition government took office. So will this government have a positive effect on businesses and business owners in our region? The Conservatives have dropped their plans to raise the inheritance tax threshold to £1 million, while the Liberal Democrats have agreed to scrap their 'mansion tax' on properties worth £2 million or more. Out also has gone Labour's planned 1 per cent increase in national insurance contributions, but only for employers. Employees can still expect to pay 12 per cent, from April 2023. While all the political posturing goes on we’ve still got businesses to run! In this issue we look at some practical aspects of employment law and offer some invaluable tips on how to conduct disciplinary investigations. Our friend Wendy Bowers at So Business Solutions Ltd divulges her seven steps to business success and we find out how Lancashire based CXL helps people to achieve their goals. Finally Stephen Gregson, our corporate services director, explores whether resilience is a major factor in business survival. I hope you enjoy reading this issue.

Data management

Many businesses are affected by data corruption but a good data management strategy can minimise the risk of damage and keep your business functioning if something does go wrong. Why do I need a data strategy? If you are unfortunate enough to lose your data you will need to re-enter information into your system, duplicating work already done, which will be time consuming and costly. If data needs to be fixed off site this could leave you without vital information for a significant period of time. During this period employees may be unable perform their main role. Data will often need to be checked and reconciled following corruption. Unchecked data may not be reliable, which could cause additional problems. Unreliable data can affect the accuracy of reports, for example your VAT return, resulting in penalties. What causes data corruption? Corruption can occur for a number of reasons for example:

• Power cuts and surges

• Software crashing • PC locking problems

• Conflicts with third party software

• Hardware or network problems How can I tell if my data is corrupt? Your data might be corrupt if you experience any of the following:

• Unexpected behaviour in the software you use

• General protection faults • Forced software closures

• Incorrect information being produced What can I do to prevent loss of data?

Making regular backups is vital to your data management strategy and data backups should be performed routinely. Your accountancy software should have a backup and restore option to allow you to do this easily. Both Sage Accounts and Sage Payroll software have a backup and restore option as well as a ‘check data’ facility. A comprehensive backup routine The more backups you have, the safer your data is against loss. A suggested routine is as follows:

• Back up at the end of each day, labelling the media Monday, Tuesday, Wednesday, Thursday and Friday. Re-use these disks weekly.

• Back up at the end of each week, labelling the media Week 1, Week 2, Week 3 and Week 4. Re-use these disks every four weeks. Backup media There are various media you can use, each having their own merits, costs and storage capacities. These include CD and DVD, USB flash drives and zip disks. We recommend backing up your data to a media that is reliable and adequate for your business.

Seven steps to business success 

DURING its first year, So Business Solutions Ltd won an International Recognition award for best new business idea, was placed runner up in the Lancashire Evening Telegraph Innovation awards, and had one of its directors nominated not once, but twice, for most inspiring business woman in the North West. So… what is So Business Solutions all about? Wendy Bowers, director of finance, explains: “For years I have worked at directorship level in manufacturing, law, distribution and healthcare and I have always explained business in plain English. It is very satisfying when clients say they really get it, so I decided to take this service to a wider audience, launching ‘So’ last June. Wendy is an active and influential ambassador for local business and is very happy to pass on to our own readers her recently published Seven Steps to Success, a common sense guide for any business owner.

The Seven Steps To Success Step

1: ENJOYMENT There is no point building a business you don’t enjoy wholeheartedly. You need to keep going when it’s really tough so you have to love what you do

2: PLAN You cannot get where you want to go if you don’t know how you are going to travel. Have a realistic plan with forecasts and update at least every six months.

3: FINANCE You will need capital to grow – either your own or borrowed, grants or equity finance.

4: SUPPORT Use your peer group, find anything free, mentoring, workshops, networks etc. Step 5 : TEAM Build the right team – understand the triage of management when you are starting to grow, use consultants to buy in skills.

6: SELL Understand your market, continually research, continually ask for feedback from customers, keep fresh with regular training.

7: INNOVATE Always be ready for change, never stop thinking about new ideas, new ways to sell your products. Sound, practical advice indeed, and part of the success formula which has, over the last nine months, guided So in the delivery of workshops and support to over 250 businesses in Lancashire and helped clients raise more than £250,000 in grants and loans.

Summer Roadshow Moore and Smalley are working with Wendy and So to hold a seminar at our Blackpool office on July 6, 2023, a two hour event which is part of the So Summer Roadshow, running across the North West until September. These seminars combine practical business advice with an inspirational speaker. There is the chance for networking and delegates will have access to the So business experts from both the public and private sector.

Moving people forward

In the first of a series of profiles on Moore and Smalley clients, In Business discovers more about how social enterprise CXL is helping businesses and individuals to succeed.

With services ranging from advice for school leavers, to helping businesses develop leadership skills, Lancashire based CXL is one of those organisations that’s hard to sum up in just a few words. Essentially, it’s a social business that helps people succeed in finding work and assists employers in developing their workforce and business. That’s still not a concise description, but spend a few minutes talking to Bhups Gohil, CXL’s partnership director (Corporate Development), and the organisation’s passion for helping people to achieve is crystal clear. “We’re all about moving people forward and helping them to get training and employment,” says Bhups.

“Our job is to support the front line delivery of training and employment services to young people and adults in a way that has a positive social impact on communities, businesses and individuals.” CXL was set up three years ago when local authorities were given responsibility for delivering the government’s Connexions service. Prior to this, its predecessor, Connexions Lancashire Ltd was responsible for the delivery of the Connexions service to the Lancashire sub region. The organisation is funded by Lancashire County Council, Blackburn with Darwen Borough Council and Blackpool Council, and helps around 10,000 to 15,000 people on a monthly basis. For example, one of CXL’s objectives is to help reduce the NEET (young people not in education, employment, or training) rate through services such as careers advice, supported apprenticeship programmes, and a recruitment and jobs vacancies service for 16-19 year olds. For the last three years, CXL has met and exceeded its target for helping to address the NEET rate in Blackburn and is also supporting progress in other areas of the county.

For adults CXL advises on matters such as changing career, writing a CV and improving numeracy, literacy and basic computer skills.“One of the issues we deal with is when we have local employers making redundancies,” says Bhups. “Often we deal with adults who have worked for the same company for 20 or more years in the same job. It can be difficult for those in this situation to find alternative work because they may only have narrow skills set, their confidence has been knocked, and they haven’t written a CV or attended a job interview for years. “The challenge for us then is how do we get this person to a stage where they are desirable to an employer again? This might involve helping them write a CV, teaching computer literacy and providing further training.” CXL also has much to offer businesses through services such as skills analysis and psychometric testing which aid firms in making better recruitment decisions.

It is also an accredited centre for the Institute of Leadership & Management, and runs numerous ILM courses for businesses to develop their staff and create the managers of tomorrow. It also offers access to funding to enable business growth and delivers the LEAD programme, the high value leadership development programme funded by the Northwest Regional Development Agency (NWDA). Gary Collinson, managing director of Blackburn-based Botanical Group Services, a commercial landscaping maintenance company, is just one of the many business owners to have benefited from LEAD. He said: “The learning has genuinely been inspirational and I'm now looking at leading the business rather than managing it day to day. I'm already implementing strategies which have been inspired by the course with some very positive results. I believe this will take Botanical to the next level.” The current economic conditions highlight the importance of services like those provided by CXL, but it’s not all about the tough times according to Bhups.

“When companies are downsizing we can go in and help support that organisation’s people, but the same goes for when companies are growing and want to develop key people – we help them do that too.” Bhups, who performs very much an FD’s role, is tasked with ensuring these services are delivered with maximum value for money. “Operating as a social business we must demonstrate value for money in everything we do, both in good times and bad. It’s an extremely rewarding role and it doesn’t matter whether you’re on the front line, or in a more strategic role like myself, seeing the impact CXL’s work has on the local community makes it all worthwhile.”

Employees in disguise?

HM Revenue & Customs (HMRC) have two proposals on hold which could affect up to 1.5 million self employed freelance contractors and consultants and the people who provide their work. HMRC often view freelance self employed work as “disguised employment” allowing the worker to pay less tax and national insurance contributions than they would if they were an employee. In addition, one man band personal service companies (PSCs) often give shares in their business to family members.

This allows them to spread business income to family shareholders, bypass the PAYE system, and further reduce tax payments by taking payment as dividends instead of paying salaries. A recent Freedom of Information Act request shows that in the 10 years since ‘IR35’ rules were introduced to counter disguised employment by PSCs an average of £1.5m per year has actually been raised in taxes. This falls a long way short of the £220m per year which was forecast at the time. So it is not surprising that HMRC want to clamp down on such activity. The two measures on hold are ‘false self employment’ rules which apply to the construction industry and ‘income shifting’ rules for everyone else. Employed or self employed? There is no simple test of either status to help clients who offer work to self employed freelance contractors. HMRC always assess the client, NOT the self employed freelance contractor, for tax and national insurance in self employed status disputes. Many clients simply insist on paying ‘Fred Ltd’, instead of ‘Fred’, to avoid any risk of tax and national insurance under the PAYE system.

This shifts the problem to ‘Fred Ltd’ who must decide if ‘Fred’ is self employed under 'IR35' rules by asking “if it wasn’t for ‘Fred Ltd’ would ‘Fred’ be an employee of the client?” Each case is open to interpretation and HMRC may hold a different opinion with regard to status. If HMRC find a business has fallen foul of the rules they will not only be liable for the unpaid tax and national insurance but interest and penalties on top. What should I do? If you provide work for self employed freelance contractors you may wish to follow the lead of most major companies and insist on paying ‘Fred Ltd’ rather than ‘Fred’ or at least ensure the contract of service includes an enforceable indemnity which requires the self employed freelance contractor to make good any loss from any HMRC investigation If you are self employed make sure your contract covers the ‘big 3’ tests of self employment (as well as having your own public liability and other insurance) which can be summarised as follows:

• No personal service – i.e. the right to send and pay a substitute

• No control – i.e. the right to decide where/when and especially how to do your work

• No mutual obligations – i.e. the right to refuse work offered to you We will have to wait to see what our new coalition government does with the HMRC proposals on false self employment and income shifting, but in the meantime if you need advice on any issue raised in this article then please do get in touch. Stop Press - 'IR35' rules to be reviewed The Coalition 'programme for government' confirms "we will review 'IR35' as part of a wholesale review of all small business taxation, and look to replace it with simpler measures that prevent tax avoidance". If you have any concerns over the issues raised in this article or would like an update on any future amendments then please do get in touch.

Resilience

First, a confession: I always see the glass as being half full rather than half empty. But even the most optimistic of souls would admit that 2024 will continue to bring challenges and risks for those businesses which have survived thus far. In a previous issue I looked at the need to develop the characteristic of preparedness. Preparedness to effectively deal with, or dodge, problems and to take advantage of the opportunities that will emerge over the coming year. I’ve been thinking about this further and wonder whether, for preparedness to be achievable, perhaps it must rest on a foundation of resilience. But what does resilience mean?

Is resilience a strength or rigidity, resisting the battering sea of challenges like rough hewn granite cliffs? Or is it marked more by suppleness and flexibility, in the way a river flows around over or under obstacles in order to reach its destination? Is there a definitive answer? Does it depend on how you interpret the word itself? This brings me, a little clumsily, onto the idea of business resilience. What does a resilient business look like? Is a business resilient if it has the most robust IT / business systems disaster recovery plans – yet has been allowed to become undercapitalised?

Is it resilient if it has cash in the bank and no debt, but is dependent upon one customer? Is it resilient if it has a diverse customer base yet has inadequate and incoherent management systems, controls and reporting structures? It would be great if there were a simple answer to the question of ‘What does the resilient business look like”? Well, in fact, there probably is: it must have large cash reserves, no debt, efficient cost base, secure lines of supply, diverse customer base, capable second tier management, efficient effective and robust IT management systems…oh yes, and operate in a sector which is not subject to cyclicality and where the business has identified a niche with high barriers to entry A simple answer yes; a realistic one? For most, no. While there is quite a bit of material on what resilience means to the individual and to the wider economy, there is less available in relation to what it practically means in a business sense.

We are only given limited help if we turn the question around and try and define the resilience characteristics the business should exhibit in relation to specific challenges or threats. The problem here is, as Donald Rumsfeld might say “unknown unknowns”. Arguably the acid test of business resilience is to see how it fares when it is faced with some unpredictable threat or challenge and clearly these can’t be specifically planned for. Positive thinking So is there anything positive I can say? I think that there is. It is most important to cultivate resilience as a frame of mind and where this has been done by businesses over the last 18 months or so it has given rise to practical measures to improve strength and adaptability.

Examples include retaining a critical mass of key employees, yet still cutting wage costs, by moving onto part-time working; clearly identifying business critical investment needs as opposed to desires; and in some cases, a renewed focus on delivering high quality client service and support. While every business will have areas which would benefit from development, I do think that business resilience is fundamentally based upon the principal attitudes of the people who make up the organisation. Not that self-belief is the answer to every problem faced by the business, far from it, but to shamelessly borrow from Gandhi: “Strength does not come from physical capacity. It comes from an indomitable will.

 Disciplinary investigations

THE investigation process is a crucial ingredient in dealing with potential disciplinary matters as an inadequate investigation may render a dismissal unfair. It is therefore essential that managers understand the essentials of a properly conducted investigation. Managers should be conversant with their own company procedures as well as ensuring they operate within the ACAS Code of Practice – available from www.acas.org.uk.

The Code provides recommendations about disciplinary investigations. Although the code is not legally binding, employment tribunals take the code into account and are able to adjust any award made by up to 25 per cent (up or down depending on which party is at fault) for an unreasonable failure to comply with any of its provisions. Who should conduct the investigation? Other than in the very smallest of companies an independent member of management must be given the responsibility for investigating alleged poor performance of conduct to avoid any suggestion of bias in the way the investigation is conducted. In very small companies the separation of the investigative role from the disciplinary decision stage may not be practicable.

In these cases the manager taking the disciplinary decision should try to avoid prejudging it as far as possible. Alternatively the company could engage an independent consultant HR/employment adviser to conduct the initial investigation. Key steps in preparing for the investigatory interview

1. Establish the general nature and background to the complaint.

2. Produce a detailed list of all relevant information required. Do not rely merely on witness statements.

3. Review the employee’s personnel/training file.

4. Consider any previous unspent warnings.

Some other key points

• The purpose of the investigative interview is to gather information, not to interrogate.

• Consider the type of people you are due to interview – what style will be appropriate?

• In addition to establishing the questions you want to ask, think about the questioning techniques you will use to allow you to direct and control the interview.

• Do not prejudge the interview. • Always provide yourself with sufficient time without interruptions.

• Make sure you have the right environment to ensure confidentiality is maintained. Interviewing witnesses It is essential to make full notes when interviewing witnesses. There is no fixed format for note taking but it is advisable to start with the date, the nature of the subject of the notes, and those present, with their roles and their initials to be used in the body of the notes

At the end of the interview the witness should be given the opportunity to read through the notes and sign them. Following the meetings with witnesses, statements should be typed up and the witnesses should be asked to check and sign them. Witnesses should be advised that if the case results in a disciplinary hearing, they may be required to give evidence. Witnesses should be aware that anonymity cannot be guaranteed unless there is a genuine fear of reprisal. An employee has no legal right to be accompanied at an investigatory meeting unless the company’s procedure states otherwise. Documents In addition to witness statements there can be a variety of other documentation that needs to be collected.

A typical example might be copy expense claim forms if there is an allegation of fraudulent expenses claims. Other examples could be letters, emails, timesheets and absence records. Bringing the investigation to a conclusion The investigating officer should compile the information gathered during the investigation and provide a full written report. This report will be provided to the person responsible for hearing the disciplinary case and submitted to the employee concerned in good time before the hearing date. The report should not be presented to the employee on the day of the hearing as he or she may argue that insufficient time has been allowed for them to prepare a considered response. If you have any concerns with regard to your employees then please do get in touch.

Smalleytalk

Professionals mastermind £500 quiz fundraiser Members of Fylde’s professional community raised over £500 for an international medical charity at a quiz evening hosted by Moore and Smalley. Nine local businesses took part in the quiz in aid of independent humanitarian medical aid organisation Médecins Sans Frontières (MSF). The quiz was held to mark the 15th anniversary of the Association of Independent Specialist Medical Accountants (AISMA). All AISMA members across the UK are helping to raise £15,000 this year to support MSF’s Surgical Project in Amman, which provides complex surgery to citizens wounded in Iraq. Teams from RBS, Barclays Bank, Lloyds TSB, Handelsbanken, The Co-operative, Napthens, Linder Myers and Yorkshire Bank took part in the quiz. Lloyds TSB were crowned winners and runners up were Yorkshire Bank. A total of £568 was raised on the night. Médecins Sans Frontières (MSF) delivers emergency aid in more than 60 countries to people affected by armed conflict, epidemics, natural or man-made disasters or exclusion from healthcare.

MakingNews

Moore and Smalley’s acquisition of Dean Burrows Stevenson made headlines in local and regional media, as well as accountancy and healthcare press. The story was covered in the online editions of Caring Business, Health Investor and Independent Practitioner. Several staff changes also made the news, with Rob Salter’s retirement and the promotion of Danny Houghton to business development partner. The firm also featured in media coverage of the management buy-out of Chorleybased conveyor belt supplier LVS IMAS Ltd. Moore and Smalley’s corporate finance team advised the management of LVS on the purchase. Stewart Case provided comment on the 2010 Q1 GDP figures, which showed the UK’s economy continued growing, albeit at a slower rate than Q4, in an interview with the Lancashire Evening Post. And finally, Dave Gleeson was quoted in a special feature in EN Magazine on the legislative changes introduced in early April. He outlined the changes to the minimum retirement age, which meant workers had to be aged 55 or over from April 6 to be able to access their pension.