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As part of wider forthcoming research into UK supply chains, the Federation of Small Business (FSB) has released data that shows many small businesses are unprepared for disruption from internal and external factors.

SMEs lack disruption plans

The research revealed that 65% of small businesses and the self-employed do not have any plan to cope with potential disruption to their business operations or supply chains, yet they’re often the most vulnerable to such risks due to their size and lack of resources.

The FSB wants more to be done by larger companies in supply chains to help smaller businesses with forward planning, and for support channels backed by central Government and local authorities to emphasise the need for smaller firms to have continuity plans.

Reducing and preparing for disruption risks

You can purchase business disruption insurance, but prevention is better than cure. So, let’s look at the disruption risks in order of their prevalence in the FSB’s survey and see how your small business could avoid or prepare for them.

Customers who fail to pay for services or goods (51%)

Make your pricing clear so that there won’t be quibbles later, e.g. make it clear if your price includes VAT and the terms and conditions of any discounts and offers.
As regards your customers, if they’re a company placing a large order, consider checking company records with Companies House. Check them out on the internet and see what people are saying. If someone else has had a problem with them, chances are they’ll have complained about it somewhere on the net.

If you’re not getting paid, there are legal steps you can take. All UK companies have the statutory right to charge interest on late payments and a debt recovery fee, and it’s worth reminding customers of this on the bottom of your invoices and in any payment reminders.

If you don’t have an agreed payment date, the law says the payment is late after 30 days for public authorities and 60 days for business transactions after either:

The ‘statutory interest’ you can charge your late payer is ‘statutory interest’ – this is currently 8% plus the Bank of England base rate (however, you can’t claim statutory interest if there’s a different rate of interest in a contract). You can also claim a debt recovery cost on each debt/unpaid invoice, which varies according to the size of the debt.

You can find out more information about both debt recovery fees and statutory interest on the Government’s webpage, Late commercial payments: charging interest and debt recovery.

The loss of key members of staff (37%)
Pay attention to staff morale and wellbeing, and ensure you’re paying as competitive a rate of pay as you can manage. Be approachable and be willing to offer all the flexibility you can in working arrangements.
Of course, however wonderful their workplace, role and pay are, some employees will move on. Ensure that skills and knowledge of day to day operations are shared and documented, so that others can take over their responsibilities, and that employees can’t lock down data or programs you can’t access.

Cybercrime (17%)

Cybercrime can have a massively damaging effect on your business. You can lose data, your intellectual property, your digital infrastructure, the trust of your customers, your business reputation and a great deal of money if your business suffers a cyber-attack – not to mention finding yourself legally liable for loss or damage suffered by your customers, suppliers or business partners.

If you’re not sure how to go about ensuring your business is cybersecure, the best place to start is on the Government’s cyber essentials website.

Transport problems (15%)

Rising congestion is a problem not just in the UK but in the majority of developed countries. Congestion can affect the arrival of your supplies, the delivery of your goods, and the ability of staff and customers to make their way to your door.

A 2015 US study by Boston Consulting Group and the Grocery Manufacturers’ Association found that driver shortages, rising congestion and delays were seriously threatening the delivery times, inventory management and service levels of many CPG (consumer packaged goods) companies.

To solve these problems, flexibility is key, as is thinking outside the box.

Where delivery is concerned, research all your options, from small independent companies or self-employed couriers to major players. Forming partnerships with other businesses and sharing transport costs could mean less outlay for you (and maybe, one less van or lorry on the road).

Consider your supply chain too. Ensure you have back-up suppliers, preferably in different locations to your usual ones, in case there’s a problem with the companies, their transport, the roads or the weather.

Encourage car-sharing and the use of public transport or bikes among your staff (some companies offer perks for this environmentally friendly behaviour!) and consider flexibility with hours if it makes using public transport easier. Letting an employee go 15 minutes earlier every day might mean they can just make that a train that will get them home an hour earlier, rather than standing on a platform for 45 minutes.

“One key step towards ensuring a business is prepared for any supply chain difficulties is continuity planning,” says FSB national Chairman Mike Cherry. “This includes identifying the most significant risks to a business’ commercial operations and creating a plan to mitigate those risks should any of them materialise.

“The costs that businesses face when their supply chains are impacted can be severe and therefore it is crucial that we stress the importance of planning for the future.”

Severe weather (13%)

Whatever your beliefs about global warming, the increasingly erratic and extreme nature of the weather in recent years is undeniable. That’s led to disruption, particularly from snowfall and flooding.

In an ideal world, your business premises would be in a location that makes it less prone to flooding, but it’s not always possible to find premises that fit that bill – or to move to them once you’re established somewhere else.

What you can do is:

Mike Cherry said: “Given the likelihood that an enterprise will encounter some sort of business interruption issue more than once in their life, it is key to resilience that firms are encouraged to consider all risks that they could face.”

 

If you’re now feeling overwhelmed, convinced that your business is woefully unprepared for all these potential disruptions, don’t panic!

Take things one step at a time. Assess which of these disruptions is most likely to affect your business and tackle that threat first.

About The Author

Karl Bilby

We work very closely with our expert accountants to bring you the latest factually correct tax and accounting news. We also enjoy writing about small business news that we hope you find useful!

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