Interesting News

News Bulletins

November 2011 - E-NEWS

Please browse through this month’s articles using the links below and contact us if any issues or questions arise.

Use your data protection knowledge, businesses told

Businesses are becoming more aware of their obligations under the Data Protection Act (DPA), according to new figures from the Information Commissioner's Office (ICO).

Data published on 21 October found that showed that nearly three-quarters of businesses surveyed were now aware that the DPA requires them to keep personal information secure, up by 26 per cent on last year's figure.

But public confidence in the security of personal data was down, with less than half of the individuals surveyed believing that organisations processed their data in a fair and proper manner and almost three-quarters of individuals that online companies failed to keep their details secure.

The number of data security breaches in the private sector was also up on the previous 12 months, with 58 per cent more breaches reported to the ICO so far in 2011/12 than in the same period last year.

Information Commissioner Christopher Graham said: "I'm encouraged that the private sector is waking up to its data protection responsibilities, with unprompted awareness of the Act's principles higher than ever.

"However, the sector does not seem to be putting its knowledge to good use. The fact is that security breaches in the private sector are on the rise, and public confidence in good information handling is declining.

"Businesses seem to know what they need to do – now they just need to get on with doing it. It's not just the threat of a £500,000 fine that should provide the incentive. Companies need to consider the damage that can be done to a brand's reputation when data is not handled properly. Customers will turn away from brands that let them down."   

Link: ICO survey

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Cost of business rate appeals backlog soars

Delays in dealing with business rate appeals are costing businesses £300 million per year, according to new research.

Business rates specialist CVS revealed in October that there was a backlog of more than 328,000 business rate appeals at the Valuation Office Agency (VOA), which calculates business rates and council tax in England and Wales. A third of the appeals date back to the 2005 business rate valuation.

CVS said that tens of thousands of business ratepayers who had paid too much in rates were now unable to get back the money owed to them due to an inefficient appeals process.

It said that at the VOA's current rate of performance, it would take another 2.4 years to clear the backlog of appeals against rate valuations carried out in 2010 and that by holding over appeals from 2005 to consider alongside those from 2010 the VOA was making the backlog worse.

Don Baker, national head of rating at CVS, said: "the moment, businesses need all the revenue they can get and the VOA's inefficiency is penalising companies unfairly and preventing those companies from recovering money that is rightfully theirs.

"This is weakening the financial health of a large number of SMEs across the country and damaging businesses' ability to invest and grow. Urgent action is needed to clear the backlog and to give SMEs a fighting chance of leading the recovery.

"Every day the appeals backlog continues to grow and the delays are harming businesses' ability to invest and contribute to local economic growth. The Government is championing a growth agenda and looking to private sector firms – and that means SMEs in particular – to stimulate investment. That policy and the VOA's current performance are completely inconsistent."

Link: Business rates guidance

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Patent documents go online – and free

Innovative UK businesses are set to benefit from a free system to access information on patents launched by the Intellectual Property Office (IPO).

The new, online service, called Ipsum, will remove the cost to businesses of requesting patent documents and the government estimates it could save UK business up to £100,000 a year.

Previously each document requested by a business would cost £5 and by the time it had been delivered it might already be out of date. Ipsum is updated in real time so businesses will now have the up to date information on patent applications they need.

The service is open to anyone, benefiting businesses researching patents, patent attorneys working for clients protecting their IP rights and potential inventors looking for the best way to find information on patent applications. This can help them understand why a patent was granted or rejected or know more about particular patents.

Launching the new service on 6 October, Minister for Intellectual Property Baroness Wilcox said: "The service will give businesses, universities and consumers instant access to the information they need so they can understand the progress of patent applications and save money.

"Patent examiners around the world will also benefit as they can now immediately understand why the UK Intellectual Property Office did, or did not, grant a patent. This could help reduce the global backlog of applications benefiting UK business hoping to get their patents processed in another country."

Link: Ipsum website

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Effective sales planning

The ability to predict realistic sales levels is essential for a business. Not only does it enable you to identify and deal with any possible cashflow issues, it also makes it easier to plan for growth, to exploit openings in the market, and to manage operations and production.

A sales forecast provides a business with just such a capability. It sets out the level of sales that a business can reasonably – a key word, here – expect to achieve. The more detailed a forecast, the more accurate and practical it will be.

Preparing the ground

To create an accurate and working sales forecast, a business needs first to assemble some basic information covering past sales. This information should include:

  • The numbers of customers gained and lost in the last year
  • The (seasonal) periods (if any) when sales rise or dip
  • The value of sales made to each customer
  • Specific product or service sales that are growing, flat-lining or declining
  • The impact of national economic circumstances
  • Cyclical purchasing trends
  • One-off events (bad weather, for example)
  • The impact of particular measures that have been taken to push sales, such as a marketing campaign.

But don't limit your analysis to the income generated by those sales. Take a look at the volume too. This will give you vital information about possible production levels in the future, and about the costs that such operational matters as delivery, stock holding, and employment resources will involve.

Accounting for changes in circumstance

It is unlikely that the months of the year ahead will exactly replicate the year that has gone. A business, therefore, must make certain, well-informed estimates, and assess any possible changes to circumstances that will affect the volume and value of sales. Such estimates, based on both past sales and on any realistic ambitions for growth your business has, will create the framework for the sales forecast.

There are a number of areas where you must take a balanced view of probable developments. These include:

  • Judging market trends (is the overall market likely to grow or contract; is your share of the market set to expand or decline?)
  • Calculating the effect of any planned changes to the  business (if you are going to be putting up prices, for example, you will need to examine the impact this will have on both sales values and sales volumes)
  • Looking at the effect of staffing changes (will you be investing in more sales staff
  • Assessing the impact of any changes to the products or services your business offers (some new products may take time to achieve their potential sales levels; some products may be approaching the full limit of their sales reach; while sales of other, older products may already be on the point of falling).

What about seasonal trends? Factor in surges and falls in demand. This will be critical when it comes to the delicate balance between income, paying supplier bills and stock holding (if a sales forecast isn't accurate you could find yourself with too much stock on your hands but without the customers to buy it).

It is important to assign a definite value to each of these assumptions if the sales forecast is to be meaningful.

Creating a sales forecast

Step one in drawing up a sales forecast is to estimate market demand. Market demand for a product or a service is the total volume that would be bought by customers, in a defined market or geographic area, and in a defined time period.

Step two is to work out the share of market demand that a business actually commands, be it on a national, regional or local scale. For example, if a local bicycle firm believes that the overall bicycling market in the town in which it operates is £400,000 and its income is

£80,000 per year, then it has £400,000 divided by £80,000 or 20 per cent of the market.

Step three is to establish an expected level of business sales based on a marketing plan. Will, for instance, that bicycling business be developing its website; will it be focusing on one product line (off-road bikes) at the expense of another (thinwheeled track cycles); will it be targeting increasing consumer awareness of ‘green' travel; will it be attempting to spread its sales across a broader area of the year; will it be dropping its prices in order to lessen the impact of dead stock; will it be changing its stock management so that the shop is either extending or contracting its range; will it be questioning its dependence on the sales of children's bikes?

The sales forecast

The more detailed a forecast, the more accurate and practical it will be.

It can help, for example, to separate products out by market, area or customer. It is also very useful to calculate the percentage chance of any given sale actually occurring, as this will have an impact on its predicted value. Bear in mind that the likelihood of making a sale to an existing customer is higher than converting a new customer, so the chance of the sale happening in the former case is correspondingly higher too.

Specifying the types of product each customer may purchase will give a business the opportunity to predict possible supply issues and anticipate both potential shortages and gluts, and to achieve a better balance between stock build-up and sales.

It is important to bear in mind that a sales forecast is not a sales target – a figure aimed at defining, or encouraging, the sales effort over a given period – or a sales budget – a figure used to cover current purchasing, production and cashflow decisions.

The secret is to focus on the sales you actually believe you will make rather than on an ambition for sales. Otherwise the forecast becomes a marketing plan, establishing goals instead of concentrating on the specifics of sales based on particular circumstances. Remember that the purpose of the forecast is to help you gauge sales on a month-by-month basis and to help you control cashflow.

Realism

It is absolutely essential to make sure that every figure is based on realistic assessments and not on projected or hoped-for increases in sales. While optimism has its place, over-estimation of sales will end up burdening your business with expectations that could harm, not enhance, its performance.

For this reason, all the figures should take into account what the business is capable of achieving in terms of productivity and capacity. If you are not planning on taking on more staff, don't assume that productivity will rise by a significant amount. If you are not going to invest in a new plant, don't assume - whatever the level of demand in the market - that output is going to outstrip your firm's ability to manufacture.

Once the sales forecast is determined, try to avoid the temptation to tinker with the figures too much (although some adjustments may need to be made if predictions appear to be off the mark). Comparing actual sales figures with the forecast will give you an accurate indication of how well (or not) the business is performing. It will also allow you to make adjustments to operations and to formulate plans – a boost to marketing spend, a switch to alternative sources of custom, a change in pricing policy – for correcting any downturn or for exploiting any upturn.

It is vital also to consult with your sales staff as you draw up the forecast. Allocating them targets they know to be impractical will be counterproductive. And for an objective viewpoint, why not get the advice of your accountants once the forecast is complete – this can offer a very useful counter to any rosy-tinted (or self-effacingly modest) assumptions on your part.

Summary

Sales forecasting is crucial to a business. It is both an aid to growth and an early warning sign that problems need to be addressed. The watchwords are realism and a willingness to adapt to the information the forecast may be giving you about the performance of your business.

If you would like our help in constructing the sort of sales forecast that will give your business the best opportunities for success, please contact us on 023 8046 1200.

To download this as a factsheet click here.

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