News in brief: planning, banks, cyber attacks, tech

News in brief
News in brief

Small businesses reminded to look at the big picture

SMEs could lose out on as much as £25bn in extra revenue in 2016 due to ineffective planning, according to research by the Centre for Economics and Business Research. More than 25% of SMEs questioned in the survey claimed that they do not have a business plan in place, have no basic objectives or targets and no plans to manage cash flow.

Whittingham Riddell tax partner Duncan Montgomery claimed that the key for SMEs is delegating work and loosening the reigns a little. “Simply put, you cannot do it all yourself,” he said. “Where business plans score is to keep different disciplines accountable for their part of an operation and build teamwork across an organisation, defeating a 'them and us' attitude. In smaller organisations, they give people the ability to take a step back and look at how things are going, see opportunities and develop the business.”

Another piece of advice comes from Haslers’ corporate finance partner Michael Watts, who suggests that it is important for SME owners to take time to look at the bigger picture and not get bogged down in the day-to-day running of the business.

SMEs are gaining confidence with their banks

An ongoing comprehensive survey of business experiences of banking services has found bank recommendation levels improving among small to medium enterprises. In 2015 26% of SMEs said they would recommend their bank to others, up from 23% in 2014. The detailed survey of more than 12,000 UK SMEs also found the firms most likely to report improved satisfaction tended to be younger and larger businesses.

Businesses created in the last five years, from 2010 to date, are much more likely to consider moving their business current account in the next six months, at 15%, compared with just eight per cent of firms founded before 2000 (and a national average of 10%). This is despite higher-than-average business current account satisfaction among younger businesses: 33% are satisfied with their Business Current Account, compared to the national average of 30%.

When comparing sectors, only 20% of businesses in the financial services sector are likely to recommend their bank against a 26% average for all firms. Businesses in mining, utilities and accommodation and food services were the happiest, with 31% keen to recommend.

Smaller businesses at greatest risk from cyber attacks

Specialist data protection and cyber-security lawyers warn that SMEs could suffer disproportionately in the event of a malicious data protection leak.

Moore Blatch recently carried out research amongst SMEs which shows that 76% of the companies surveyed are concerned about cyber-security, with 17% having experienced a cyber attack. However, the issue for SMEs could be far worse financially due to the often more personal relationship that they have with their customers and the less utility-based products and services they provide, compared to larger businesses.

The key issue is that, while hackers are most interested in financial information, new legislation allows a customer to seek financial recompense for the distress caused by the loss of all their data, which for many people might mean that the financial data loss could be a secondary issue compared to their purchasing behaviour. The legislation follows the recent Google Inc v Vidal-Hall case where it is was agreed that claims can now also be made for emotional distress caused by a breach of the Data Protection Act 1998, even though no financial loss has been suffered.

Lack of tech awareness sees SMEs wasting time with manual processes

Small business owners are struggling to plan for the year ahead because they are unable to monitor even the most basic factors including revenue, profit and their top-selling items, according to research from payments processor Worldpay.

Nearly half (48%) of SMEs cannot identify their top ten customers or their ordering habits while 40% cannot provide an up-to-date monitoring or forecast of revenue and profit.

A further 57% of small business owners are unable to pinpoint their busiest trading day of the month and furthermore 62% cannot identify their top three selling items.

Worldpay claims a lack of awareness among small business of the tools and technologies available to help them plan means many see no alternative but to persevere with time-consuming manual processes, which they struggle to keep up to date.

The payments processor found one in five small business owners admit they still use nothing more than a pen and paper to run their business, with the average owner spending one day a week on admin.

UK banks charging hidden transfer fees for international payments

UK banks charge SMEs nearly £4bn in hidden transfer fees each year to make international payments, according to a study commissioned by online currency exchange and international payments service Money Mover.

The study found that 96% of the revenue for a bank for an average transaction of £75,000 within the EU comes from the margin that banks add to the exchange rate they receive from the money markets – known as the ‘spread’. The charge is hidden in the exchange rate, therefore the SME will never see it - even though it makes up the majority of the amount that the bank charges the SME. The average total transaction cost charged by a bank to a SME customer on a transfer of £75,000 is 2.4%, or £1,822. Of this cost, £1,807 is based on the spread, which is hidden from the customer.

Overall, SMEs will pay between 1.1% and 3.7% of the transfer amount due to spread. This hidden charge is in addition to the upfront fee that banks disclose when making a transfer. Including fixed fees, the highest rate charged is 3.% per transfer and the the lowest is 1.14% for transfers in excess of £100k.

Commenting on the findings of the study, Money Mover CEO Hamish Anderson said, “When it comes to international payments, it’s clear that the UK’s major banks are overcharging and underserving their SME customers. The UK’s banks are collectively failing to give SMEs the knowledge, transparency and visibility that they need to make an intelligent and informed decision. This lack of transparency is not only unfair and uncompetitive, it’s also costing the UK’s SMEs precious cash in unnecessary fees.”