Why you should check company accounts before taking on new business
New business is the lifeblood of every company. The desire to find it can, at times, become all-consuming and you don’t just have to be working to targets or commission to slip into a ‘succeed-at-all-costs’ approach to winning work.
This rush to find work can easily lead businesses to take on new work before proper due diligence has been carried out. The result can be late payments, written off debts or even, in the most extreme cases, criminal activity taking place at your expense. Ironically, by trying to ‘keep the wolf from the door’, hasty companies might actually be letting a different predator in through an open window instead.
It happens more often than you might think. According to the FSB, the average amount owed in late payments to UK businesses is more than £30,000. To a small business that’s a huge amount of money which could be being used for recruitment, capital expenditure or business investment.
In fact, one in four small businesses actually go bankrupt if they were owed more than £50,000 in late payments. Its members range from sole traders to SMEs right across the country - no one is immune to the danger of rushing into a business deal too quickly. Despite this, when we recently asked some of our users about their levels of financial risk we discovered that only a quarter of them were insured against bad debts.
Company accounts - the information is at your fingertips
Checking out a company’s accounts online is easy. Every business’ accounts are filed with Companies House; small businesses which turn over less than £6.5m can file abbreviated accounts while bigger businesses file full company accounts. These are then in the public domain and available to anyone (If you’re dealing with smaller businesses, you can check their abbreviated accounts instead). Credit checking websites allow you to find any company in the UK, the EU or anywhere with digital records - you can either pay individually to download each report, or if you regularly take on new clients or suppliers then memberships give you unlimited access.
The warning signs: what and how to spot them?
Check out how many years the company’s been trading for. Age does not necessarily equal wisdom, but it’s a good early indicator if they’ve been around for decades. Compare its assets to its liabilities; if the latter is higher that the former for one year, take note. If liabilities have been higher than assets for multiple years, that’s a strong indicator that a company could have large bank loans outstanding, unmanageable wage costs or mismanagement.
Are the business directors easily accessible, and do any of them have a large number of closed or resigned directorships? Have they, or any directors they’re related to been involved in companies that are now dissolved? Of course there are many different reasons for this having happened (administration, wind up orders or voluntary liquidation etc) but it’s vital to be aware of this.
Checking out company accounts before embarking on future business deals won’t protect you completely, but it will make a big difference. It forearms you with points to raise during business negotiations where, if you don’t get satisfactory answers to your concerns and you feel the risk is too high, you can choose to walk away.
Most importantly, it keeps you aware of the dangers so you’re more likely to be alert to suspicious activity. It’s a small extra task that could help avoid big potential consequences.
Chloe Webber is operations director of Company Check
Read the July EURO 2016 issue of Business Review Europe magazine.
UK office space slashed as hybrid working looks set to stay
With hybrid predicted to be the working model of the future, and businesses both large and small announcing that WFH will continue for employees into the future, the traditional office space is being re-thought.
Businesses are both questioning how much space they need for a hybrid working future, especially if it means they can potentially save money, and what form that space should take.
UK firms slashing office space
Back as early as February, HSBC – whose real estate footprint currently stretches to around 112 football pitches worldwide – said it would be cutting its post-COVID office space by half globally and by 40% in London over the next few years, as it looks to implementation of a hybrid working model in light of the pandemic.
Lloyds Bank followed suit. Following an internal survey where 77% of employees said they wanted to continue to work for 3+ days a week post-pandemic, the bank announced it was also moving to a hybrid model, and so looking to cut its office space by 20% over the next two years.
In fact, the latest research from consulting firm PwC reveals that a third of organisations surveyed (258 of the UK’s largest companies) believe they will reduce their office footprint by more than 30%.
The findings of PwC’s Occupier Survey indicate there is likely to be a sizeable fall in occupied office space with half of executives surveyed saying that despite taking into account mass vaccinations, employees will continue to work virtually 2-3 days a week.
And companies continue to announce the hybrid working model for their employees. Accountancy firm EY has just announced that its 17,000 employees are moving to a hybrid way of working, WFH for at least two days a week. This follows PwC which in March said workers could stay at home for half the time and KPMG which this month said it would expect employees to only work two days in the office every week.
More collaborative work spaces
However, what’s also clear from PwC’s research is that the role of the office is not going to disappear completely, but instead adapt to a new way of working, with half of all organisations with more than 100 employees saying they have a real estate and workplace strategy that considers the long-term impact of COVID-19.
“We may see an increased demand for flexible space as many businesses operating models may well need that option if holding dead space is to be avoided,” says Angus Johnson, UK Real Estate Leader at PwC UK.
According to the survey, more than three quarters of respondents said they are likely to reconfigure existing office with 43% of financial services firms stating that they are extremely likely to do so as a result of the pandemic.
“It’s also clear that the nature and purpose of office space is going to change. As occupiers seek new, different space to meet their accommodation needs, environmental aspects will be increasingly important. If the real estate sector is to truly succeed as a more dynamic, greener industry it’s imperative that creative thinking comes to the fore.”
And companies are already thinking creatively how they can utilise office space in a hybrid future. So while HSBC is cutting a significant amount of office space, it is not downsizing its prestigious Canary Wharf headquarters, and instead reimagining the space. In April, CEO Noel Quinn announced the firm was embracing an open plan floor, with no designated desks or private offices, and instead using hot-desks in line with the future hybrid working style. “My leadership team and I have moved to a fully open-plan floor of the building in east London with no designated desks,” he said on LinkedIn.
Lloyds also reported it was adapting its office space, so that rather than individual offices, it will have a more collaborative workspace. And just last month, KPMG announced it too was ditching desks and individual offices, and replacing them with meeting rooms and conference halls for a more collaborative workspace.