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Archive for February, 2010

Performance metrics measure chosen dimensions of an organization to allow management to assess its position and take appropriate actions to move it toward target. The key goal is performance improvement along a whole host of dimensions as selected by the organization’s leadership. Additionally, performance metrics assist management, increase an organization’s effectiveness, efficiency and internal control.

To be of most value to management, performance metrics should ideally be specific, simply measurable, inexpensive, easy to communicate, and capable of guiding action. Various software packages are available to help management collate, analyze and report data required for the task.

The use of performance metrics requires four steps – select key issues, important processes and customer outcomes that necessitate measurement; develop relevant metrics; define targets; and, finally, move performance towards those targets.

Perhaps the best-known performance metrics are those that relate to financial performance. For this purpose, management has available all the line items included in the externally reported statutory financial statements plus its internal management reports. Financial statement line items include well-known concepts such as total revenue, profit before interest and tax, interest expense, profit after tax, total liabilities, and net cash flow.

These financial line items, in turn, are used for financial ratio analysis. This technique involves relating two or more line items together in order to examine key areas of financial performance. These areas include revenue and cost behavior, balance sheet strength, capital structure, cash flow generation and profitability. The main audience for financial metrics is management and the owners of the organization, that is, the shareholders.

Beginning in the 1980s, organizations and their various stakeholder groups began to articulate a need for a broader set of performance metrics that reached beyond financial performance. They called for metrics that measured an organization’s performance with respect to customers, employees, and the broader community.

The balanced scorecard was rapidly adopted by many organizations in the private sector, government authorities as well as the non-profit sector. It remains an important performance management tool today.

Corporate governance, the environment, carbon emissions, and climate change have all became areas of particular focus over recent years prompting organizations to respond by developing metrics to communicate its performance on these matters.

Performance metrics quantified for an organization need to be routinely compared against its past values to ensure improvement is being achieved. Additionally, those metrics should be compared against peer group organizations.

THE CHALLENGE
In the midst of an era of rising taxes and cutbacks it’s no wonder new businesses are struggling to make ends meet. Whilst there are signs of a recovery, the challenge for new businesses is raising the finance to help their business grow.

BUSINESS PAYMENT SUPPORT SERVICE (BPSS)
On 24th March 2010, the Chancellor announced that the BPSS or Time to Pay (TTP) arrangements would be extended although for large arrears of £1m or more an Independent Business Review will be required. The TTP arrangements is an offering of assistance to businesses to pay their tax bills and includes VAT, PAYE, NIC, Corporation Tax and Income tax (for the self employed). Each repayment plan is tailored to meet the circumstances of the business.

WORKING CAPITAL
We should continue to look at internal liquidity to source finance.
1. Delay investment until absolutely necessary
2. Crank up credit control
3. Pay on time but never early
4. Bringing revenue forward is often the hardest obstacle to overcome but it can be carefully built into the business model by insisting on up front billing or stage payments.

ENTERPRISE FINANCE GUARANTEE SCHEME (EFGS)
The EFGS has been extended until 31 March 2011. The scheme has been created to support up to £1.3bn of new lending by banks, is open to businesses with a turnover of up to £25m, is designed to enable businesses to secure loans of between £1,000 and £1m, repayable over 10 years. The government guarantees 75% of the loan, with the banks covering the remaining 25%. Most businesses in most sectors are eligible for the scheme and the guarantees are available through the main high street lenders.

SECURED LOAN
Under normal circumstances you would expect a bank loan to be the cheapest source of finance. However, banks are demanding overcautious levels of security coupled with high lending rates. This is principally because banks still evaluate most loans as high risk and have a high degree of uncertainty regarding the underlying business cash flows. Interest rates on Small business loans vary dramatically and currently range from 5.5% to 11%AIR for loans of between £1,000 and £25,000 (as at 22/4/2010).

OVERDRAFT
Overdrafts are generally expensive so not normally advised as a long term source of finance. Rates can vary from 7.5% to 11% for a facility between £1,000-£25,000 and there are often hidden and repetitive arrangement fees coupled with the risk that the facility may be withdrawn at short notice. However for those that struggle to get other finance you may have little choice. Useful as a short-term solution to unexpected situations but long-term finance opportunities should be revised at the earliest opportunity.

EQUIPMENT FINANCE
Equipment finance is most commonly provided on purchase and can be raised against anything from a truck to a computer mouse. However equipment finance remains relatively expensive owing to a high administrative cost and the added security risks of theft, damage and fall in market value.

INVOICE FINANCE
Income factoring can be offered in several forms and factoring need not include all your clients. The highest service level would include credit control and total default risk whereas the simplest form would be an offering of finance against your debtors listing. Fees start at 1.5% above base rate and should generally only be considered for businesses turning over in excess of £100,000 and the costs should be carefully considered against the cost of employing the services of an accountant or credit controller.

LONG-TERM BUSINESS ANGELS
This form of funding is typically suited to a new company with a big idea or a successful small company looking to expand. Business angels typically see tens of investment opportunities a week which means they get to take their pick. Securing funding can be a project in its own right but solid proposals will attract interest.

FRIENDS, FAMILY & ASSOCIATES
The old adage is not to mix business with pleasure but in the good old days people were successful by doing just that. Many clients have started a business from a loan from a friend but the golden rule applies which is to establish what is expected of each other. Longer term investors may require an equity stake which will mean surrendering a portion of your profits. The advantage is that they will also take an active interest in your business and potentially help you on your way.

The level of crime being committed at cash point machines is growing. How do you recognise if the ATM machine has been tampered with and by using it without being aware, you could end up being the next target to card fraud. We learn people saying protect your pin, keep it covered when using your card at the cash point machine but we all probably become complacent, at looking at the machine and imagine its OK, its not going to happen to me.

Do you know if you cover your pin right? The cash point machine looked absolutely ok, just the same as all the other machines I had used before and everything was OK then. I went ahead and used the machine but my card was not returned to me.

The machine didn’t have a phone number to call for assistance. My card has a 24 hour helpline phone number but guess what, I can’t get to it because it is still in the machine.

I could see the card but I couldn’t grab it to retrieve it. The only way to stop your pin number being recorded if a machine has been tampered with is by ensuring that it is covered. Ensure you stay at the machine and it is not abandoned. Pull and twist around the hole that your card slides into and see if there is anything unfamiliar or unnatural. Does anything move a little or flick off?

This scam works by using an extra cover where you place your card in and it will have an extra piece of card on to stop your card from being returned to you. If you can see your card but can’t get it, it will be better although a big pain, to force your card into the machine instead of the danger someone else going off with it.

Sometimes you can see some light shining at the top of the machine signage which fools you to think this is lit up when in fact it is the recording part of the scam craftily hidden. Take a look to see if you can see any cameras or small holes which could be spying on the pin pad.

You could report your suspicion that the ATM has been played with to the police who could offer you help and assistance.

By being careful and watchful of any signs of tampering with ATM’s, you can avoid becoming the next victim as well as all the inconvenience and trauma suffered.