By Claire West
Business Secretary Vince Cable today attended the first general meeting of Doing Business Together (DBT), a new forum whose aim is to improve the inter-relationships between national organisations involved in providing finance and credit and small and medium enterprises (SMEs).
DBT's grass roots forums are very much a confidence building exercise in explaining to businesses what they need to do to effectively manage their business better and then obtain the finance and credit on the best possible terms and conditions.
The Richmond Chamber of Commerce has been chosen for the first local forum because of its CEO, Anne Newton's desire to create an outward looking organisation that offers a platform for local businesses to interrelate and interact nationally.
This meeting is also an opportunity to expand DBT's existing Operating Principles to reflect issues encountered by providers of finance and credit when SMEs are wishing to access finance or credit. This forum provides an opportunity for all participants to identify concrete steps they can take to rebuild business confidence post the credit crisis. The aim is to equip all businesses with the financial skills required to first effectively run their own business and then communicate effectively with their own financial network. This does not just mean with their bank and other lenders but to credit rating agencies, trade credit insurers and supply chain managers. All require a much more regular supply of up-to-date financial information so they have the necessary confidence to do business with that SME.
These goals will not be achieved instantly and will require regular on-going meetings with small and medium-sized enterprises and their financial advisers - usually their accountant - to ensure that the relationship between SMEs and their finance and trade credit providers, is one of profitable partnership through a shared commitment to the principles of honesty and transparency.
Organisations who today met with over 100 local Richmond based SMEs included the Department for Business, Innovation and Skills (BIS), the British Bankers’ Association, Barclays, Lloyds, HSBC, RBS, Santander, Institute of Credit Management, Forum of Private Business, ACCA, Institute of Financial Accountants, Euler Hermes, Chartis, Coface, Marsh, RKH, Dunn & Bradstreet, Graydon and Asset Backed Finance Association.
The recent CBI/ACCA SME survey concluded: "Not even businesses under the VAT threshold are so small or so insular that they can avoid reporting to someone on a regular basis. In the recovery, creditors are increasingly looking for more, and more current, information on which to base financial decisions — and so do SMEs themselves, which often penalise customers for providing them with ‘incomplete’ data.”
Only when SMEs present their financial case credibly, can the financial network on which they depend — banks, asset based lenders, credit rating agencies, trade credit insurers and supply chain managers - support them on appropriate terms and provide the engine room of the UK economy with the growth stimulus it needs.
DBT wishes to develop a programme to work with national bodies such as the Department of Business Innovation and Skills and the British Bankers' Association to work with local business organisations to establish local grass roots forums that will help UK SMEs understand how best to access the liquidity they require to run their businesses an thereby grow the UK economy.
Business Secretary Vince Cable said: "Small businesses will be crucial to driving economic growth but they can only do that if they can access finance when looking to expand. These are difficult times for our small companies in accessing finance so it is important that they know the most effective methods of applying and understand the range of options available.
"Doing Business Together is a fine initiative for getting business and finance institutions on the same page. There it too much misunderstanding and even mistrust between banks and their clients, which creates a barrier holding back firms, banks and the wider economy. The Operating Principles of Doing Business Together describe how these barriers can be broken down by taking a few clear, commonsense steps. I will be watching its progress with interest."
Zac Goldsmith MP for Richmond Park commented "I'm thrilled to support this cutting edge campaign to help improve the relationship between lenders and SMEs. That’s obviously crucial in these difficult times where finance and credit has been restricted for two years. The fact that DBT has the support of everyone from the Forum of Private Business and Federation of Small Businesses to the CBI, from Richmond’s Chamber of Commerce to many of the main banks, and now the Government, shows how seriously this is being taken.
DBT supporters want to encourage SMEs to boost their chances of obtaining the finance and credit they need by maintaining up-to-date accounts. It is logical that when risk underwriters have clear information on where a company is heading, they are more likely to be confident in its capacity to survive and even flourish."
DBT has created its Operating Principles (see below) for use by both SMEs, their advisers and the providers of finance and credit should also facilitate the implementation of the 17 action points of the high level BBA's Business Finance Taskforce, which were recently announced. All attendees - especially SMEs and their financial advisers - of this Richmond Forum will be making their own recommendations on the best ways to expand on these Operating Principles so they can become standard for 'doing business together' in the UK.
Christopher Poll - Chairman and CEO of Future Route/CreditPal founded DBT "in an attempt to close this gap between SMEs and the finance and credit industry by facilitating an increase in awareness that will hopefully result in improved trust and understanding. He added "I am hopeful these endorsements of DBT's Operating Principles will be the first practical step in strengthening these individual financial relationships that are so vital if Small and Medium Enterprises are to recover and grow."
Earlier this year, Russel Griggs - Chairman of the CBI SME Committee became DBT's chairman because “Doing Business Together personifies everything that all businesses should be doing today which is working together to find the solutions we all need to successfully grow our economy into the future. While SMEs will have to adapt to the new economy and the changes in information provision that brings so will others and we will only succeed if we all sit round the same table to do that.”
Support for Doing Business Together from Government and major finance associations:
Mark Prisk MP - Minister for Business and Enterprise
"It's great to see the banking industry, business bodies and accountants coming together to support our businesses to develop their financial management capabilities. As outlined in our recent Green Paper, Financing a Private Sector Recovery, greater trust between banks and businesses is needed to improve the lending environment. Private sector-led initiatives such as this one are a welcome step in the right direction."
British Banker's Association - Business Finance Taskforce report
“We have started a programme of work — Doing Business Together — to recommend good practice, working with the wider credit industry and business groups, including the Confederation of British Industry, the Forum of Private Business and accountancy bodies. The objective is to improve financial management capability and presentation and use of financial information. Working together, we aim to help businesses enhance their access to finance, their credit ratings and terms. We recommend that this work is extended and the Taskforce banks will engage — through the BBA — to launch a broader initiative in early 2011.”
Kate Sharp - Chief Executive Officer of the Asset Backed Finance Association (ABFA)
"The aims of the Doing Business Together group have never been more appropriate. The past two years of restricted credit is forcing businesses to a higher plain when it comes to financial awareness. Whether the aim is to borrow money or simply maintain their own credit rating, businesses need to be smarter and better prepared than before. When a commodity as essential as credit becomes scarce it will be those companies that are financially astute, both in terms of their own business performance and in terms of the types of finance available to them, that will succeed."
Support from members of DBT’s Operating Principles Panel, which includes key UK finance and credit industry representatives:
Stephen Pegge - Head of External Affairs for Lloyd Banking Group Commercial (in his position as Chairman of the British Bankers’ Association Small Firms Advisory Panel)
“Banks, business groups, accountancy bodies and other parts of the credit industry have worked closely together in the interests of SMEs to encourage and enable better access to and use of financial management tools that can improve business performance and ability to access credit on the most competitive terms. As recovery takes place, it is critical that SMEs are financially well managed and they can present the right information for lenders and other business support professionals. It is also vital that banks will do all they can to support this, as committed within the report of the Business Finance Taskforce.”
Andrew Leck - Head of ACCA UK
"For more than a hundred years, ACCA has championed the growth of small and medium-sized enterprises (SMEs), which either employ or use the advice of more than half of our membership. This has always meant working to improve SMEs’ ability to access finance, and we have worked to raise awareness of their diverse funding needs, point out market imperfections and advocate changes in business practice or government policy where necessary. We are pleased that the cross profession Doing Business Together group has established clear principles that will help improve the delivery of financial information and ultimately improve the finance options for SMEs. The priority now should be to demonstrate to SMEs the importance of financial information when seeking finance and for us all to take a more proactive approach to ensuring the access to finance door remains open."
Philip King - Director General of Institute of Credit Management
"Supply chain finance is a major contributor to SME liquidity. Credit professionals rely on up-to-date monthly management information either directly from SMEs or indirectly through credit rating agency reviews in order to support trade credit insurance. The ICM has taken a leading role in establishing Doing Business Together's Operating Principles. The next priority has to be ensuring these principles are understood by all parties — be they the producers, the users, or the subject of accounting information - from the grassroots upwards."
Phil Orford - Chief Executive of the Forum of Private Business
"The credit crisis has necessitated that SMEs always be on top of their own financials, especially managing cash flow and debtors more closely. If we are to see private businesses driving a private sector recovery, there is an even greater need for business owners to provide their suppliers, creditors, banks and credit rating agencies with accurate and up to date management information. Without this discipline, businesses will simply not be able to access finance on the best terms to fund their growth. As a founding member of Doing Business Together I have helped devise the Operating Principles that are the first part in a longer education and awareness programme on how the business world now operates."
Xavier Denecker - Managing Director of Coface UK and Ireland
“Besides audited accounts, management accounts may increase trade credit insurers' trust. When risk underwriters are provided with clear information on where a company is heading, they are more likely to be confident in the capacity of its management to weather bad times and take advantage of favourable market winds.”
Simon Streat - Managing Director of SME Experian UK & Ireland
“In a climate where a healthy credit score is more critical than ever before, it is essential for any business to understand its credit status and take steps to positively influence it. Many businesses do not appreciate the importance of knowing their own commercial credit score or the influence they can have on it. Sharing monthly management information could play a key role in ensuring SMEs are in the best possible position when it comes to securing credit, business loans, tenders or business services. We have already been working towards creating awareness among SMEs with our Credit Review Service, and we support the launch of the ‘Doing Business Together’ group’s Operating Principles.