The business MOT

Your banking arrangements:

1. When did you last see your bank manager?A I never see my managerB Within the last 12 monthsC Absolutely no idea

2. What are your banking fees?A Haven’t a clue but far too muchB Less than last year I always negotiateC What fees?

3. If you have an overdraft, are the core borrowings increasing?A I am always exceeding my overdraft facilityB No my overdraft is something I dip in and out ofC What exactly is core?

4. When was the last time you courted other bankers?A The other banks aren’t interested in my businessB I beauty parade my business to alternative bankers every three to five yearsC As if I would go out with a banker!

5. Would your business benefit from more working capital?A I could always use more moneyB I am confident I have all the funds I need at the momentC How do you get your capital to work exactly?

6. Have you ever considered confidential invoice discounting or factoring?A I really don’t know what this isB Yes but its not applicable to my business at the momentC Why should I discount my invoices?

Your management information and systems:

7. When did you last have a proper board meeting?A I’m not sure we have proper moard meetings though we do meetB We meet as a board every monthC I guess the chat in the pub doesn’t count!

8. Do you use a non-executive director?A I would like to but don’t know where to find oneB Yes I find them hugely valuableC I’m not letting some stranger onto my board

9. How often do you produce a set of management accounts?A When we have time it’s not really a priorityB Every monthC We don’t. Who needs more paper!

10. Do you track your KPIs?A We would like to but not got a clue how to!B Yes we have half a dozen which we review monthly as a BoardC What!?

11. Do you monitor your debtor, creditor and stock days?A How do I do that?B Yes and we incentivise our staff on improvements against theseC What on earth would I do that for?

12. How accurate is your budgeting?A It’s hopeless. Frankly, we have no real idea where we are goingB It’s good but in any case we always reforecast after six months into the budget yearC Must polish my crystal ball!

Planning for the future:

13. When do you update your business plan?A I haven’t done this since I started the companyB The board has an away day every year to revisit our plan and we review every quarter if we are on trackC Are you suggesting we actually write something down!

14. My key management team share my vision for the future of the business.A I’m afraid to discuss these plans in case it scares them offB All my key staff have "buy in" and are committed to the planC I don’t have any management never mind key ones!

15. I am aware of who may be interested in acquiring my business.A VaguelyB Absolutely and we ensure we remain as attractive as possible to themC Who’d buy my business!

16. I have a clear succession plan in place for my top team.A I haven’t got the time or money to invest in thisB All my top staff are committed to their own development and those of their teamsC Why do I need that, I’m immortal!

17. I have put in place appropriate staff incentive and retention schemes.A I need to understand what options there areB We are considering an EMI scheme and a phantom share scheme to ensure our key staff are retainedC We pay them a wage don’t we!

18. I have planned for my unexpected death and the impact on the business.A Not really but I suppose it would just pass to my familyB Yes and have put in place shareholder protection insurance and a shareholders agreementC I’ve already told you, I am immortal!Taxation:

19. I am confident that my business and I are both taking advantage of all legitimate tax allowances.A Well my auditor has never suggested I do anything else so I suppose soB I have a thorough review of my tax every year with my specialist adviserC No idea, I know I pay too bl**dy much!

20. I have no concerns about being exposed to a Revenue or Customs investigation.A It’s all so complex I’m almost certainly falling foul of it somewhereB Yes and in case of any problems I have an insurance policy in placeC Have you got a number for the witness protection department?!

21. When I come to sell my company, I know just what I need to do to pay the minimum tax on the gain for me and my family.A What’s selling my business got to do with saving tax for my family?B Yes indeed this forms part of my ongoing discussion with my specialist advisorC I will become a tax exile – Jersey here I come!

22. I am aware of the tax position on my motor fleet.A Well partly but frankly, I can’t see what I can do to improve itB Yes and I am in the process of changing my fleet into the cars that give me and the driver the best tax breaks possibleC I just pay the tax reluctantly and to h*ll with it!

Financial future planning:

23. Managing how I take my remuneration in terms of my current and future needs is something I plan for.A I never have enough money to be flexibleB I manage my income through the PAYE system, dividends and pension paymentsC Cash works for me

24. I have set up a SIPP so that I can use the funds to invest in my business premises.A It sounds very complicatedB It works very well and means if my business doesn’t succeed for whatever reason, at least I have comfort that the premises are protectedC Is this something to do with the pub?

25. If either myself or my key staff die, I;m confident the business will not fail due to the financial difficulties it would face.A Isn’t it impossible to protect against such an incident?B I have taken key man insurance on my life and my key staff so that at least the business will receive a lump of cash to help fill the gap left by our lossC It won’t be my problem will it!

26. My staff pension scheme is the best my company can afford.A I do the stakeholder pension scheme but can’t afford anything elseB Yes I have a great contributory scheme in place its been very helpful in attracting and retaining staffC What pension scheme?

27. My personal and business mortgage gives me flexibility to overpay when I can afford.A I wasn’t aware these were a choice?B Certainly the interest only product allows me to pay off capital sums and even swap to another lender without penaltiesC Face it, all deals are a rip off

Now having completed the survey, count up how many As, Bs and Cs you have and check the comments below.

Mostly As: You seem to know what you’re doing – but don’t get complacent. The world has changed beyond recognition over the past few months. What you think you know probably isn’t enough to take you through this looming recession. Keep learning, talk to your peers and stay on your toes.

Mostly Bs: Impressive! You have your finances under excellent control and you understand the value that good management information systems can add to your business. Well done you! But remember: many major banks are now publicly owned. You’ll have to put a different spin on your case for funding. Keep up the dialogue with your investors. For them, no news is bad news.

Mostly Cs: For goodness sake, take your head out of the sand. Any idea how much time and money you are wasting? Of course you haven’t! At this rate, the chances of you having a future is fairly limited. It’s crucial you pay some attention to your business. You’d better get on the blower to MGR’s head of corporate finance Jo Haigh on 0207 6449 674/07850 475878 or email her at jo.haigh@mgr.co.uk for some urgent help.

MGR is a London-based accountancy and financial management firm. Picture source

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