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In 2011, Cyprus introduced a law whereby all companies incorporated in the Republic were required to pay an annual levy to the Registrar of Companies of €350. What was intended, however, to be a temporary measure to help depleted state finances remains in place today, with no signs of the Cypriot government having any plans soon to repeal it. This is very short-sighted of them, and discourages inward investment in a country, whose economic credibility was so damaged by the 2013 bank bail-out and the resultant 10% haircut on investor deposits. Given, therefore, that the deadline for this year’s payment is fast approaching, it is surely time to revisit this issue and question the net benefit for the country of the continuation of the levy.

Per the current legislation – reflected in Article 391 of Cyprus Company Law (as amended Law No. 6 (I) 2013) – it is obligatory for all companies registered in Cyprus, whether active or dormant, and including non-profit companies, to pay an annual levy of €350 to the Registrar of Companies. All payments need to be made by 30th of June for the relevant years, with late payment attracting penalties escalating from 10% to 30%, depending on how overdue is the payment. In the worst case, the Registrar can decide to strike a company off the register in the event of non-payment.

While this levy has become an important and regular source of income, however, it should be argued that it has outlived its use – if it ever had one. When it was originally introduced, it was presented as a temporary measure, not something intended to be a regular part of the corporate tax landscape.

Businesses do not like it. It can be administratively difficult to collect and, for small businesses at least, a drain on cash flow. For those who own a number of companies, the sums involved can mount up as well. It also discourages the formation and registration of companies. Potential investors will hold off if they do not expect to begin trading immediately, as the levy applies to all companies, irrespective of status.

What the government fails to realise is the negative impact this tax has on business, and the business community. It harms Cyprus and its competitiveness compared to other tax regimes which do not impose such annual penalties on companies. This is especially unhelpful for a country desperately trying to regain it financial credibility and attractiveness after the unprecedented damage done by the 2013 bail-out. Foreign investors need reassurance after the hair-cut on bank deposits imposed 4 years ago, not an annual levy that is effectively a tax imposed on all Cyprus companies.

Perhaps it should not come as a surprise that the Cypriot authorities are too short-sighted to see the error of their ways. After all, this is the same government that imposed an additional income tax burden on private sector employees and self-employed individuals (the so-called special contribution) until it was abolished from January 1st this year. In other words, they chose to penalise and discourage the wealth creators in society by taxing them more so as to help fund a bloated public sector.

Arguably, the maintenance of the annual company levy is a continuance of the same policy, whereby the private sector and the self-employed bear a disproportionate share of the Cypriot economic and tax burden.

Abolishing the levy would go some way to show that Cyprus is open for business again, and restore some faith among a very disillusioned international investor community. The government would lose the annual €350 from each company, that is for sure. However, the increase in individuals and companies investing in Cyprus, would surely more than offset this in the form of increased revenue from corporation tax and VAT. It would also encourage more business to open offices and businesses in the country, creating more jobs, and, again more revenue from income tax (and, at the same time, lowering unemployment costs).

If the annual company levy ever had a use, it has now surely outlived it. The wisest course of action would be for the government to announce the abolition of the tax by the end of this year, signalling that Cyprus is a serious destination for external investment again. Unfortunately, it is likely that the current short-sighted and blighted policies will remain in place for some time to come yet.

 

 

Starting a business without a business plan is like starting on a trip with no idea where you are going or how to get there. Unless you are addicted to risk or don’t care about the outcome, you would do some research and preparation before setting out on your journey. The same logic applies when starting a business. You might have a great idea for you new business but, before investing your time and money, it is much wiser to make the effort to scope the idea out. Is it feasible? What are the risks? How difficult will it be to establish yourself in the market?

A business plan is not a static document but should be a blueprint for your business as it grows and develops. It should be updated and modified as your business evolves, as the economic and industry landscape changes, and as your objectives are redefined.

There are a number if reasons why a business plan should be prepared.

• To test the feasibility of a business idea

A business plan allows you to test the feasibility of a business idea before you devote valuable time and money on it. Working through the business plan methodically and objectively, can help you identify at an early stage if the idea or business concept is impractical or unlikely to succeed. Often analysis of the market or competitive environment will reveal that your business idea or model is not robust enough to survive. Don’t ignore the warnings! Discard the idea and move on to another – and hopefully better – one.

• To identify opportunities and obstacles

Writing a business plan makes you focus on both the objectives and the details of your new business. It forces you to define and clarify both the operational and financial objectives of your new business, as well as the practical details, such as budgeting and market planning.

Furthermore, in creating the business plan you will be able to identify both potential opportunities and obstacles in advance, allowing you to formulate plans for dealing with them, meaning that you are better prepared for upsides, and downsides, when they arise. This means that your start-up phase should be smoother, with fewer unforeseen challenges.

• To secure funding

Most businesses need operational and start-up capital to fund their growth, usually in the form of bank loans. However, having a well-developed and robust business plan is usually a prerequisite before any established financial institution will even consider lending you any money. If you are not prepared to spend time on a business plan that lays out the idea behind the business, the market, the industry, the economic and competitor environment, the risks and opportunities, and to demonstrate that it is financially viable, then don’t expect any bank to risk their money lending to you. Banks have become very risk averse. The onus is on you to demonstrate that your business is a safe investment for them.

It is not just in the start-up phase that you may look for bank funding. You may need new equipment, want to offer a new service, or enter another and different market. In such cases you may well look to bank loans to help you achieve these aims. But again, without a business plan, don’t expect a bank to lend to you.

• To attract investors

Apart from banks or other financial institutions, there are other people who may choose to invest in your business, like venture capitalists or business angels. However, like the banks, they will expect there to be a solid, well-argued and robust plan for them to study before they consider investing in your business.

Expect them also to scrutinise your plan and quiz you in detail on it. Make sure that you can defend your assumptions and that you have spent enough time defining the market and analysing the competitors. A potential investor is going to need convincing that, not only is your business idea sound, but also that you have the necessary business acumen, understanding and commercial awareness to implement it.

• To facilitate business planning

Not only is a business plan an essential tool for a start-up, but it should also be an important planning mechanism for an established business. A viable business evolves, changing, growing (and sometimes contracting) as time elapses. A business plan needs to be dynamic, revised as new goals are set or the economic or competitive landscape changes.

Revising and updating your business plan on a regular basis helps you see what goals have been accomplished (and which have been missed), what changes need to be made, and what new opportunities may have arisen since you started the business.

• To aid with the sell or closure of a business

A business plan can also be very useful if you decide to sell your business, or close it – for whatever reason. A well thought-out plan can assist with the sales process, helping to ensure that you get as good a price as possible for the business, or helping to ensure that the transition to the new owner is as seamless as possible. And, if the decision is made to close the business, the plan can reflect the strategies and timelines for dissolution and withdrawal from the market.

Whilst writing a business plan can be time consuming, it should be regarded as an essential task if you want to have a business that will not only survive the start-up phase, but will go on to grow and prosper. Not only will a well developed plan help you determine the feasibility of your business idea, and identify opportunities and risks – and develop strategies for dealing with them – before they arise, but it will also help you plan for the future as your business evolves. It is also an absolute prerequisite if you want to apply for a bank loan or get outside investment from a venture capitalist or business angel.

If you are worried that you lack the financial skills or knowledge to construct an effective business plan, engage an experienced financial consultant to help prepare it for you. However,don’t neglect this very important task. If you don’t know where you are going, how do you expect to get there?

 

 

 

One of the major reasons small businesses fail is due to fact that the money coming into the business is less than the cash going out. To anticipate problems in advance and know when cash is likely to be tight, it is important to prepare a forecast for your business and update it on a regular basis. Failure to prepare such a forecast leaves you at the mercy of events, and deprives you of the ability to make contingency plans – such as obtaining short-term loans or deferring planned expenditure – should sales be weaker, or costs higher, than expected.

Forecasts should be prepared on a regular basis and, at least for a small business or start-up, it is recommended this should be monthly, until such time as the cash flow has stabilised, or the business established itself (and even then regular forecasting should be a prudent course of action exercise for the wise business owner). The ideal situation is to have a rolling monthly forecast, with quarterly or even annual projections as well, although the further into the future  you are planning, the less detailed and more “big picture” your estimates will be.

Key elements of a cash flow forecast are:

• Sales

Forecast sales for a period based on how much you actually expect to collect from your customers, not how much you are likely to invoice them. Accounts receivable are a problem for many small businesses, and late payment, or a failure to collect what is due, often puts cash flow under pressure. So be realistic and only include what you can reasonably expect to collect in the period.

• Costs

Try and include as many costs as you can think of in your forecast. Whilst it is easy to think of the larger items, such as salaries, stock or equipment, it is equally easy to overlook some of the smaller expenses, such as monthly software subscriptions, or courier costs. Small items can mount-up, and, in the long run, amount to significant amounts so make sure you always include them.

Costs should be included on the basis of when money changes hands, not when they are invoiced. For example, if you have a monthly software subscription payable one month in arrears, the May 2017 cash flow forecast should include the April, not the May, subscription.

• VAT

Irrespective of whether you are registered for VAT or not, your cash flow forecast should reflect receipts and payments inclusive of VAT, as these are the amounts that will actually be paid into, or out of, your bank account.

If you expect to have to make a VAT payment to your local revenue authority, then this should be included as a cash outflow in your forecast in the period when you are due to make the payment.

In terms of VAT refunds, care should be taken before including these in any cash flow forecast. In the first place, whilst revenue authorities are usually very happy to receive money from you, they are less willing to pay it out, so there may well be a long delay before you get any refund due! This is typically the case in Cyprus, for example. Secondly, the authorities may choose to challenge the amounts to be refunded, so don’t assume you will get back all the money you have claimed.

• Other items to include in a cash flow forecast

A cash flow forecast should include all the cash that moves in or out of a business bank account, even if some of these items have little to do with the daily running of the operation. On the income side, apart from customer sales, this may include bank borrowings or loans from family members or friends. On the debit side, this will include taxes, bank loan or interest repayments, and money spent on new equipment – capital expenditure.

 

While preparing a cash flow forecast and keeping it up to date may seem a burdensome task for a small business owner, it is actually a very important way of measuring the health of your business, and making sure you will not only survive, but prosper, in the future. If you feel that preparing such a forecast is outside your comfort zone or core competence, hire an experienced financial consultant like AJD Consultants to set this up and maintain it for you. Not only will they help with the mechanics of the exercise but they can also help interpret it for you and identify likely problem areas.

Whatever course of action you take, don’t neglect this task. A well maintained cash flow forecast could be the difference between business survival or failure.

For more information on how AJD Consultants can help with the preparation and maintenance of your cash flow forecasts, please contact us for an informal discussion.

 

 

 

Many small business owners are used to doing everything for themselves – from sales and marketing, buying and logistics, IT and finance – switching hats at will as they address each task that arises. However, because they are so used to multi-tasking, they don’t realise they are wasting valuable time on complex tasks that are outside their natural area of expertise. Better to engage a consultant to handle some of these tasks, so the owner can concentrate on what they do best – growing the business.

Engaging a business consultant can create value for a small business in a number of ways.

• Saves time and money

Many small business owners waste valuable time doing complex tasks – such as VAT returns and bookkeeping – which are outside their area of expertise. It is better to delegate such jobs to an expert, freeing the business owner to concentrate on more valuable tasks – such as growing the business itself. Furthermore, an experienced consultant can offer advice and strategies on key business issues such as controlling costs, increasing efficiency and cash flow management, often a major challenge for any small business.

• Provides expert advice when needed

By engaging a suitably qualified consultant, a small business owner can get the benefit of their expertise and knowledge immediately. Whilst the consultant may not know your industry or sector in detail, it is likely that they have experience of similar firms in similar sectors, and will be able to bring you their insights and judgments, and practical suggestions for improvements with minimal briefing required from you.

A consultant can also provide an objective, third-party view on business challenges or issues that you face, and offer a valuable sounding board for new ideas. Small business owners are often mired in the daily challenges of running their business, and having an outside voice can provide a much-needed sense of perspective, and an alternative viewpoint as to the way forward.

A small business consultant can also provide help in assessing and evaluating your business strategy, processes, exposure to risk and much more.

• Offers flexibility and avoids the expense of hiring

With a business consultant, you may only need their advice or assistance for a short period of time, or for a specific assignment. In such a case, you can conclude their engagement and you no longer need to pay for the service. Contrast this with the cost and time involved in hiring staff on a full-time basis. Staff are usually the largest expense item for any business, and the hardest to cut if times get tough. Not only are you required to pay staff salaries and related costs – tax, social security, health insurance, pensions etc. – when you hire them, you are also committing to managing, training and developing them, as well as increasing your bureaucratic burden with additional payroll reporting.

Terminating your contractual relationship with a consultant is usually easy and straightforward. Getting rid of a staff member, however, can be expensive, take time, and, depending on the circumstances, legally and emotionally, painful.

Even if you decide to hire a consultant for an extended period of time – as an interim manager, for example -it still gives you more flexibility than making a permanent staff appointment.

• Allows you to meet changing workloads

As discussed above, hiring full-time staff should be avoided until you can be sure that your business can sustain the cost. But, if you find that demand suddenly increases, or you want to offer new products or services, could you deliver given your existing resources and manpower?

Bringing in a small business consultant is an easy way of meeting such challenges and responding to fluctuations in supply and demand, ensuring you can respond to the opportunities that arise, without increasing your business risk in terms of your fixed cost base.

 

Consultants can offer a range of solutions for small business owners, from short-term assignments to longer-term interim managers, with services ranging from technical tasks such as the completion of VAT returns and accounting, to advice on how to improve business processes and efficiency, through to more strategic roles such as business development, or preparation for a business sale or IPO.

Whatever your needs, an experienced business consultant can meet them, giving expert advice and skills when required, providing flexibility whilst avoiding the expense and burdens associated with hiring full-time staff, and enabling you to meet changing workloads and demand. Above all, using a consultant can give you back valuable time, which can then be devoted to what you do best – growing your business.

For more information on how AJD Consultants can help grow your business, please contact us for an informal discussion.

 

 

 

A recent study has found that more than 80% of all startups and small businesses fail due to poor cash flow management. That means that, however brilliant your idea or business model, however profitable on paper your enterprise, however good the quality of people with whom you work, if you cannot manage your cash flow, you will not survive.

There are a number of common mistakes businesses make when it comes to managing their cash flow.

• They are too optimistic. Whilst a positive outlook and never-say-never attitude is important for any business owner and entrepreneur, over optimism can be a major weakness when it comes to estimating the strength of your business, especially when it comes to sales. Forecast sales based on real, historic data where available, rather than using wild assumptions and hopes. Where there is no historic data available, such as in the first months or year of business, apply a heavy dose of pessimism when forecasting initial sales or revenue. The worst that can happen is that you completely underestimate your sales or revenue. Much better, and safer, than the opposite.

 

• Over spend during the start-up phase. While the expression “you have to speculate to accumulate” can be a truism in business, there is a tendency to over spend when you are just starting out, and to put your cash flow under pressure from the outset.

Fancy offices and premises, expensive computers and servers, top of the range accessories, equipment and advisers are all affordable for a successful, established business. For a start-up, however, they can be a costly luxury which could be avoided. Work from home, or rent office space in the cheaper suburbs rather than a town or city centre. Minimise expenditure on IT and buy only what you really need, using sales and promotional offers to get as big a bargain as possible. Outsource website design and IT and server maintenance to third party providers. Avoid “big name” lawyers, accountants and auditors. Local consultants offer much better value and often are of an equal, or even superior, quality and skill,

Above all, do not hire staff until the business economics fully support it. Personnel costs are usually the largest expense in any business and the hardest to reduce when times get tough. When you hire people you not only have to pay their salaries and related costs such as tax, social security payments, health insurance and pension provisions, you are also expected to make a commitment to them in terms of time, career development and training. Better, in the early stages at least, to use consultants who will bring existing expertise and knowledge, with no training need on your part, and where a contracted relationship can be concluded easily, without the sometimes protracted legal consequences associated with terminating an employee.

Avoid unnecessary initial expenses, minimise waste and outsource all but the essential tasks in the early months.

 

• Fail to proactively manage receivables. One of the biggest reasons many businesses find themselves in cash flow difficulties is the late payment of invoices by customers. This is a problem which besets businesses of all sized and in nearly every industry and sector. The impact, however, for small businesses can be fatal, directly affecting its ability, in turn, to pay salaries, suppliers and other stakeholders, sometimes forcing them into bankruptcy.

A small business needs to have clear payment terms for sales invoices, with penalties for late payment and/or the threat of work cessation for ongoing projects. Giving discounts for early payment could also be considered.

However you tackle it, the most important factor is to take a proactive approach to receivables. Many small businesses are so grateful to have a customer’s business that they are nervous of offending them by asking payment of what is due to them! This gives all the power to the client, and, in many cases, they will take advantage of this, either consciously or not. The result is that their cash flow benefits at the expense of yours.

Much better to establish a proper, commercial relationship with your client from the outset. Set out your invoice terms and policies, and respectfully, but firmly, make sure that you stick to them.

 

• Have no “rainy-day” cushion. No matter how carefully you manage the business, setbacks occur which can affect cash flow. A sudden drop in sales, an unexpected cost, a natural disaster like bad weather or a flood, a public relations or marketing issue. All of these events can put your business model under sudden pressure. If you have a cushion of savings on hand, these unexpected occurrences can be survived, at least in the short-term. However, if you are living a hand-to-mouth existence, a sudden downturn or expense could signal disaster.

The best way to cushion yourself from these “rainy day” events is to have a least 2 months’ operating expenses in reserve. This will allow you to ride out any unforeseen storms without an immediate impact on your business. It will also give you time to try and find some additional funding if the problem causing the cash flow pressure looks likely to continue beyond the short-term.

• Fail to use a cash flow budget or forecast. Setting realistic sales targets, maintaining a tight control on expenses, proactively managing accounts receivables, and having a rainy-day cushion all help a company’s long-term  cash flow. But, unless you track and monitor this on a day-to-day basis, your business could still founder.

Using a cash flow statement and forecast will not only help track revenue and expenses over a specific time period, but it will also enable you to identify “pinch points” and likely problem periods. For example, if supplier payments will become due for inventory before the resultant sales of that stock, then there could be a problem paying bills on time.

Proper cash flow forecasting and tracking helps you plan ahead and make contingency arrangements, rather than simply reacting to events as they happen. Without such tools in place, you are just guessing and hoping you are going to have enough cash in hand to meet the bills that become due. Not an enviable position to be in for any business owner.

If you feel you lack the skills, knowledge, or experience to monitor and forecast your cash flow properly, consider hiring expertise such as AJD Consultants. They provide highly qualified, expert advice and knowledge to small businesses and entrepreneurs. They will provide the tools to monitor your cash flow projections and needs, as well as offering advice to to how to improve your business performance, profitability and processes.

 

Cash flow management is one of the greatest challenges of business ownership. The statistics prove the likelihood and the high cost of getting it wrong. But, if you can be realistic in forecasting sales, maintain a tight rein on costs, actively manage your receivables, keep a suitable “rainy day” cushion and, above all, monitor closely and forecast your cash needs, you will be well set for long-term business survival and success.

 

 

 

The popularity of inflated job titles shows no sign of abating. Companies and individuals continue to award themselves epithets which, whilst seeming to suggest increased market value, in reality, fail to demonstrate people’s strengths and expertise. Furthermore, by elevating the status of even the lowliest employee in a firm, companies run the real risk of undermining the position of those whose skills, expertise and experience have merited a senior role. If everybody is a manager, officer or executive, how can you differentiate those whose contribution is critical to the success of an organisation, from those who are just bit-part players?

The reality is that most such titles do not stand up to close scrutiny. A Director of First Impressions is still a receptionist by any other name, a Vice President of Environmental Operations just a cleaner, and a Chief Customer Officer a dressed-up Customer Services Manager. Scrape beneath the service, find out what somebody actually does, probe their skills and experience, and the truth beneath the gloss will soon emerge.

Job titles are often not compatible across companies or industries. Traditionally titles like Managing Director and CEO, or Finance Director and CFO, were interchangeable, depending on which side of the Atlantic Ocean a firm was based. However, now with the proliferation of titles such as Director of Life Enhancement, Knowledge Navigator, or Quality Control Officer, there is no continuity and no common basis of understanding as to what role somebody is actually fulfilling or what skills or expertise they bring to the position. An officer in one firm may be equivalent to a manager or even a junior employee in another.

Awarding somebody a job title which inflates their role and seniority does nobody any favours, and can often undermine both that person and the organisation in the eyes of outsiders who can quickly perceive the harsh truth behind the veneer.

In the early 199os, the UK abolished the distinction between Universities and Polytechnics, so that almost all higher-learning establishments now call themselves a University. However, the change fooled few. Any employer worth their salt can distinguish between candidates that come from the traditional universities with their history of learning and achievement, and those that went to one of the former polytechnics, which favoured technical learning over academic attainment.

We find ourselves in a similar situation with regard to job titles, where people are “compensated” for the lack of achievement in their careers with an inflated position or title. The problem is the Emperor has no clothes. Look below the surface and there is either nothing or very little. Unfashionable though it may be, however, it is time to take a stand, eliminate the corporate mumbo jumbo, and restore sanity to job titles.

When hiring somebody new, a recruiter needs to look beyond a candidate’s current title, and see what they have actually done. What are their formal qualifications, with whom have they worked and in what positions, how many years direct experience do they have, what or who have they managed? If the decision is made to hire somebody, don’t perpetuate the inflationary job cycle. Award them a job title that corresponds to their skill and experience, and respect the boundaries between positions in a firm, so that the more senior and highly ranked employees are both externally and internally identified as such.

By refusing to perpetuate the cycle of job title inflation, companies can begin to strike a blow for common sense, and a realignment of job descriptions which adequately convey an individual’s real experience and talents. Let’s get back to awarding people job titles that truly reflect their skills, experience and real value, both internally and externally. Not only will we help level the corporate playing field, but also allow us to properly acknowledge and reward those that deserve it on the basis of merit.