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SCHOOLWEAR ASSOCIATION
FINANCE
Slower than a
Time for
snail on stilts
some
good housekeeping
David Burgess (right),
Printwear & Promotion welcomes the Institute of
Chairman of The Schoolwear
Chartered Accountants in England & Wales as a
Association, brings us the
regular columnist. This month, Clive Lewis, the
latest on the association’s
ICAEW’s head of SME Issues, offers advice on
battle to have VAT reduced
carrying out a financial health check.
on badged, upper body items
Small businesses must keep a close eye on current and future financing while
of school uniform.
credit is tight. It is no good putting your head in the sand. The most important
thing is to raise the issue at every management meeting and not let it out of
your sight.
Last week I had one of those days. You know For small businesses to survive and prosper in these challenging business
the ones I mean. My drive into work reduced conditions, they need to ensure that they have more than sufficient finance in
to a crawl thanks to seemingly unnecessary place. Just as credit card companies are cutting consumers’ credit limits and, in
roadworks, deliveries delayed for no apparent some circumstances terminating facilities, banks are likely to be reappraising
reason and a queue so long in the sandwich the extent of overdraft and loan facilities made available to businesses.
shop at lunchtime you would have been Recent ICAEW surveys suggest that more than a quarter of businesses have
convinced they were giving away gold bars. For the first time, however, none difficulties in raising finance. For high growth businesses the figure rises nearer
of this bothered me. No, I haven’t converted to Buddhism but I have recently to 50%. There are a number of things you can do – one of which is to control
discovered that when it comes to sloooooooow nothing quite compares to the expenses.
European Union. Firstly, set out in writing what is allowable in terms of guidelines for staff on
As regular readers will know, in 2007 The Schoolwear Association launched its expenditure for transport, entertaining clients and training courses. Secondly,
Untax Our Teens campaign. School uniform items in sizes deemed, many years make sure all expenditure is checked and authorised. Thirdly, keep separate
ago now, suitable for children under 14 are zero-rated for VAT, however, any budgets for travel, entertaining and hotels within the accounting system and
larger sizes leave the parents liable for the full 15%. We think this is crazy regularly check the expenditure against budget figures.
and, in an ideal world, would like to see all badged school uniform zero-rated. Company credit cards can be used to aid control and accounting of staff
Sadly this is not legally possible and the best we could hope for would be a expenses as the business receives a separate account for each cardholder but
reduction to 5% VAT which would still represent a saving of up to £20 for the will have an overall credit limit. Firm guidelines on expenditure allowed on the
average parent. card must be in place and the monthly statements vetted and approved.
Over the course of the last two years we have met numerous MPs, MEPs, Other tips include:
Ministers and education groups who are all prepared to support our campaign 1. Make sure that all types and sources of finance have been fully considered
and two Early Day Motions (EDMs) have been tabled in Parliament as a result. because the right financing structure is vital. You must ensure that your
We are definitely making headway. company has the right mix of equity and debt finance. There is an array of
All VAT decisions of this nature, however, have to be made by the European potential financing options available, including equity finance; debt finance;
Council, rather than the British Government, and this is where we move from bank overdrafts; leasing, hire purchase and contract hire as well as factoring
smooth sailing to treacle wading. No decision after all can be made until all and invoice discounting. Choosing the most appropriate can be time
27 member countries to come to a unanimous consensus. As John le Carre consuming, but having the right financing in place can be the difference
said, a committee is an animal with four back legs… between surviving and not.
So earlier this year the EC reached a conclusion about reduced VAT rates. On 2. If there is a conflict between profitability and cashflow take the cashflow
this occasion, school uniform was not one of the items selected for reduced option.
rates but then neither was any other product. Instead, they selected only 3. Invest time talking to new sources of finance. You might need them if your
services such as hairdressing for reduced VAT rates in order to create more current providers prove difficult.
jobs. At this juncture we should point out that we have subsequently found 4. If you have a term loan or overdraft be aware of any covenants and
that the first proposals for reduced VAT – of which hairdressing was one – constantly monitor how close you are to breaching them.
were submitted to Brussels over ten years 5. Regularly update cashflow forecasts.
ago (this is not a misprint reader!). 6. Put cashflow and financing on the agenda for every management meeting.
The fight to have VAT reduced on badged, 7. Prepare thoroughly if a review is coming up on any of your financing
upper body items of school uniform is not facilities.
one the Schoolwear Association has taken 8. If limits might be threatened "think the unthinkable" regarding the sale of
on lightly. We were aware going into this assets.
that it will be a long-term campaign and 9. Talk to financiers before you get into difficulties otherwise you devalue
now we know what we’re up against. This future forecasts.
campaign remains a priority for the 10. If you are "cash rich" draw up a list of ways you could use surplus cash for
Schoolwear Association and, as such, we the longer term benefit of the business.
are continuing our lobbying programme It is vital that your financing arrangements are regularly reviewed. It is
and by the time this issue has gone to worthwhile periodically checking with existing and potential new finance
press, we will have held a meeting with the providers to make sure not only that facilities are adequate but allow for future
Department for Children, Schools and business developments.
Families.
www.schoolwearassociation.co.uk For more information visit www.icaew.com
| 16 | June 2009 www.printwearandpromotion.co.uk
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