It's a farc-ade!!

Just over 300 years ago the Bank of England was founded in what was the old Mercers Hall in London, and then moved to its present building in Threadneedle Street.

Current public debt stands at about £840bn. In the first 300 years of the Bank of England’s existence public debt rose to £300bn; in the last 10 years it has more than doubled. That is largely because of printing more money. By a government it’s called quantitative easing; by an individual it’s called counterfeiting. Henry VIII debased the currency by adding more base metal to the silver coins, such that when they wore down, it gave him a new name – Old Copper Nose. So it’s nothing new. Governments have been doing it for time out of mind. That doesn’t make it right, except that might is right.

John Mowlem rebuilt large parts of London, and carted the reclaimed bits back to his home town of Swanage; so much so that Swanage was known as Little London. There’s the clock tower (no clock now) that stands at Peveril Point; that used to stand at the end of London Bridge, commemorating the Duke of Wellington.

And then there’s the facade of Mercers Hall, (you know, the original Bank of England) which was reclaimed and now adorns the facade of Swanage Town Hall, surely the most impressive small town hall facade in the land. But that’s all it is: a facade.

So is printing money. It brings to mind that old definition of corporate advertising: its bit like peeing in your pants. You get a nice warm feeling but no one notices any difference. Except in Iceland, where everyone has been asked to pay about 40% of their salaries to us and the Dutch for their banks’ mistakes. No warmth at all, and they have noticed the difference. The temperature has dropped here too, and soon we will notice the difference when we have to pay all this back.

Behind the impressive Swanage Town Hall, down a short narrow lane, is the town jail. No hint of facade here; its four stone walls, and a thick wooden door. Trouble is, it only houses one, and there’s such a list of candidates!

7 out of 10 cats prefer....

It’s one of those blind taste tests – Costa Coffee did it, Pepsi did it. And everyone finds that 7 out of ten prefer the promoting brand...

So why does Coke still outsell Pepsi? Were Pepsi skewing the results? Or is it more about how people make decisions? Do they make them blindly?

Of course not. It’s not just about the product. Pepsi had to find out the hard way that it’s about the image that comes up in the customer’s mind - the idea, the concept – not just the product. Granted, you do need to have a good product, but that’s not everything. People in America were buying Coke because it represented an idea to them – Coke was baseball games and apple pie and a flag waving on the front porch and families sitting down together for a meal and having a laugh with friends and Christmas gifts and leaving out cookies for Santa. When they looked at the two cans at the grocery store, the colours and images and feelings that came when they looked at the Coke can were why they chose that one – not first the flavour when they opened it later.

Completing technically accurate accounts and tax returns is important to me and my clients, but it’s not the image my clients have of me. It should be about how they feel when we meet, or ring up, email, letter – communicate. And it’s the same whatever you do. It’s about the customer journey – how they feel. Do they feel happy, relaxed, at ease, confident in you? Because they should – at every part of the customer journey – from initial contact right through the experience. You can have produced the best, more accurately machined, shiniest widget – you could be so proud (rightly) of your technical ability, so you think your clients should be too – but if they see untidy, late, uncommunicative – they get a different impression. And they won’t buy. The difference between good technician and good business person is a whole new subject!

Here’s another story – Scandinavian Airline Systems were awful at customer service (I’ve flown them) and were losing money hand over fist in the 70s and 80s. The new CEO instigated what is now called a Coffee Stain Survey. They found that if the passengers, when they flipped the tray in the seat back in front of them found a coffee stain, they assumed that the engines hadn’t been serviced properly. They reasoned that if the airline couldn’t even be bothered to clean the trays, they may not look too hard at more important things.

Do your own Coffee Stain Survey. Walk the customer journey. And have a free eBook – Customer Care – Why Bother? It’s on the website – www.hixsons.co.uk. It’s your lifeblood.

Queens Speech - letter to Santa!

So you need a new law to get pupils a good education? Or one to halve the debts the Government has built up?

It's like saying that I will get up at 7 o'clock every morning - just do it man!

No fiscal Golden Rule has remained unbroken, and now we have the news that borrowing is nearly the same level as this country's GDP. Include unfunded public sector pensions, and its twice GDP.

Which means that spending will be cut, and tax WILL rise. Maybe some inflation too - after all VAT goes back up to 17.5% on 1 January (Happy New Year from Team GB). The highest rate of income tax is already set for 50% from April 2010. Maybe it will go higher yet.

And - to depress us more - analysis of all the recessions in the last century shows us that they last between 47 and 55 months. We, by the way, are at about month 19. Nationwide expects house prices to move on down next year as unemployment drives demand down. More good news.

The next 6 months will be characterised by all the political parties spending most of their time and energy on getting elected, and NOT on sorting this out.

Which mean that businesses who are getting by (just) will be further weakened. Many more will fail, especially in the next 3 months. The remainder will see their tax bills rise.

That is, unless they do something about it - to survive (even grow as some of our clients are doing) and minimise their tax. I have lots of cunning plans!

After all, it's not about cheating the taxman - it's about having enough cash to survive. I'm expecting a busy few months. I just don't want to hear people tell me afterwards - "I wish I'd taken your advice". Take it now!

Confidence tricks – has the recession been caused by over confidence?

NatWest has surveyed nine thousand young people about salary expectations. Because of the recession, expectations have dropped. Instead of expecting to earn £70,000 when they are 35, they now only expect to earn £54,000. How’s that for confidence – when an average salary for a 35-year-old is just under £24,000?

In an international study, American students who ranked last in maths abilities ranked first when they asked how they felt about their maths abilities. Their positive thinking had completely deluded them about their actual abilities.

But we want to be confident, and we want our children to be confident as well. We are told regularly that thinking good thoughts will bring good results. Well, we have thought good thoughts over the last decade and look where we are now. We have assumed that the boom would continue. We have closed our eyes to history. And I don’t mean by that the previous centuries, I mean the previous few decades which we have lived through. Why did we assume that the last recession would never be repeated? History does repeat itself.

Yet confidence, and in particular financial confidence, and more particularly the bankers and financiers who broke the system, has at least in part caused the problem that we are now going to be living with for the next umpteen years.

Just because I’m an accountant does not make me a pessimist! It might, I hope make me a realist. That’s that old definition isn’t it – a pessimist is a realist described by an optimist!

Apart from the financial implications of my clients’ actions, I deal with their personal objectives and to some extent their emotions. They are all interrelated. I’ve even done courses and taken qualifications in an attempt to understand why people act the way they do, and to try and find ways to change that when necessary.

As a country we are determined to fill our lives with self belief and good thoughts as a method of driving ourselves towards good outcomes. I think we have caught this disease from over the water. There is a whole industry which started in the United States and is now throughout the Western world which peddles the mantra that if you think bright positive and optimistic thoughts good things will be drawn to you without any further effort on your behalf. It’s not positive thinking, it’s magical thinking.

I do believe that you can influence the way that you act and hence your outcomes by the way you think. And I help people with this. But I do not inculcate them with a belief that they can overcome any obstacle just by wishing it so. I try and give them a realistic outcomes and realistic plans to achieve them. Plans which can be amended and adapted to fit changing circumstances.

As a society, we have not done this in recent years. We have assumed the best, and even worse, assumed we had to do nothing to achieve it.

Individual self-esteem is a good thing based on realism. Perhaps more of this would lead to a community with more chance of achieving realistic goals and with more sense of purpose and values.

Individually, and in businesses, be realistic (not pessimistic!), set realistic goals with some slack in them, and enjoy what you’ve got.

Why banks repackage assets, and what it means for us

It's all about de risking the bank's balance sheet. It's so difficult to decide when bankers really make money because the financial instruments they use are so complex. And look how many dodgy securities they are sitting on at the moment.

So what's a poor banker to do to improve matters? How about selling some of these securities to a brand new offshore company, and lending the company the money to buy them? It gets over the following problem: you have to write down your securities if you don't think you're going to collect on them, and that makes a hit on profits, and worries people. But if you have lent money on a house for example, as long as the repayments are still being made, even if the house is in negative equity, you don't have to write it down on your balance sheet. so if I were a banker, I would be delighted to sell a dodgy asset and get a loan in exchange which I don't have to write down. Is

And this is what has just happened. Barclays had just sold $12 billion worth of securities to a brand new company and lent it just about all the money to buy them. It's bought itself some time. Banks need all the time they can get at the moment.

What does it mean to us? Well, the bank gets a bit safer. That's good. But if the bank has lent its money to this company, it can't lend it to us. So credit has just got a little bit more difficult, and a little bit more expensive all round. and that means that the value of assets you buy with this credit is likely to fall to prop up the price of the assets that Barclays now don't think they will collect on. this deal was done under very, very favourable terms to the lender. Not the actions of a bank that thinks that its assets are worth what it paid for them.

Anyone think that the recession is over?

6 killer facts in micro enterprise learning and support.

A|ll from the UK Sector Skills Body for Enterprise

Fact:

Over 95% of enterprises (4.5 million) in the UK are micro enterprises with fewer than ten employees. A fair share of government skills and support funding to start ups, self employed and micro enterprises will provide the best returns for the economy, employment and society of any UK sector.

Yet 95% of government funding for business skills and support goes to the 5% with 10 or more employees

Fact:

Over three quarters of these businesses have no employees beyond the people running them and only just over a quarter of these businesses are based away fom the owner’s home. They may be hard to reach but SFEDI Advisory Board Members do and can help them. It is vital that we do, for the UK employment rate.

Not having employees or conventional business premises seems to make them invisible to government enterprise skills and support policy. Yet if they were not in business on their own there would be nearly 3.3 million more unemployed. Our unemployment rate is only at the current level because there are over one million more self employed people than in the last recession.

Fact:

Enterprise owners and the self-employed account for one in seven of the people in work. Self employability and enterprise skills are as important as employability and sector specific skills and lead to most net new jobs growth.

Enterprise owners will account for one in five people in work by 2020 and one in three by 2050. Nearly all the net new jobs growth in the private sector comes out of the growth in self employment and micro enterprises.

Fact:

There are almost half a million new enterprises starting each year. Providing effective start-up support can halve the rate of early business failure. We believe that government should fund a minimum level of start up training and support to everyone at pre-start for their new enterprise. Running your own enterprise requires specific skills and know how – just like any other career.

In England there is no government policy to ensure all those starting up get the skills coaching and business support to ensure they have the best chance of surviving and thriving in their new career. With the right support over 85% will still be trading in 3 years time and 6% of them will become substantial businesses. (Inbiz)

Fact:

Almost two-thirds of people running small businesses have no prior business/ management experience and less than a third of these have any formal business training. 12% have no qualifications and 55% have a highest qualification below Level 3. At least 200,000 adults and their enterprises could benefit each year from achieving an enterprise qualification which would be of value for all their working life.

Assisting prospective micro enterprise owners with the skills coaching and business support they need would mean a minimum of 100,000 new level 2 business enterprise qualifications, 30,000 new level 3 qualifications and 5,000 new level 4 qualifications per annum.

Fact:

Almost all these people say they develop their business abilities by learning from their own experiences and half learn from other enterprise owners. Enterprise learning and support needs to be experiential, active and integrated into the everyday practicalities and problems to be solved in starting or running your own enterprise.

We have researched, defined and proven the skills and know how needed to start up, survive and thrive. We know how to engage with prospective and existing micro enterprise owners. We know how to quality assure and recognise the appropriate enterprise learning and support. We have private and social enterprise sector backing and we’d like government to meet us half way.

The Missing Madoff Millions! How to avoid fraud in your business

Many will have been shocked by the news from the US of the missing Madoff millions - or rather billions. One of the features of this scandal was that a high proportion of his investors knew Mr Madoff personally and trusted him with their money. It perhaps underlines the dangers of thinking you know someone and, in consequence, perhaps not being as careful as one might otherwise be.

Some form of fraud or theft could be happening in your business right under your nose. Are your internal controls strong enough to catch it?

Often small business owners only find out about fraud and theft when it’s too late. And very few businesses are able to fully recover, if at all, from an internal theft. Having good internal controls means you can focus on doing what you do best, building your business.

We’ve seen it in our clients – it’s happened to them, so I’m keen it doesn’t happen to you. It’s generally perpetrated by someone you know well and trust, and in these times of economic pressure, people will do things which are out of character, so you need to be extra careful.

Here is a useful checklist to help you think about the risk of fraud in your business.

Fraud Checklist

Fraud is a potential threat to every company, including small and medium entities. The risk of fraud can be managed. The following is a checklist of simple and affordable measures on managing the risk of employee fraud, including some technology-based measures that can be adopted when the threat of fraud is higher.

Accept the idea that fraud is commonplace and can happen at any business.

Set an appropriate ethical example for employees to follow, and treat them with respect and fairness, including fair play.

Ask your employees to identify ways in which someone could commit fraud at your company and the ways to avoid it.

Develop a code of conduct that explicitly prohibits employees from committing fraud, conflict of interest and other illegal acts. Ensure all employees, vendors and customers get copies of it. Consider having key employees provide annual confirmations of their compliance and have a clear company policy on time and expense reporting.

Adopt a “trust, but verify code”. If you need only one bookkeeper, conduct a careful background check before hiring. Take note of employees who appear to live substantially beyond their means.

Verify the credentials of all new vendors before they are authorised to supply the company. Periodically review vendors to identify possible improprieties.

Make sure all disbursements are properly approved.

Protect yourself against cheque alterations by adopting electronic transfers for large payments, using direct deposit for payroll, placing a financial limit on cheques and implementing up-to-date cheque security measures.

Review original bank statements before your bookkeeper does. Keep an eye out for unexpected overdrafts or declines in cash balance.

Make sure bank statements are reconciled each month and that an expert adviser, such as your accountant reviews the bookkeeper’s work periodically.

If something seems odd, whether it is a disbursement to an unfamiliar vendor or unexpected costs, consider the possibility of fraud.