The small business community will be particularly keen to hear what measures the chancellor announces to support them through the recession.
According to a recent survey by Intuit, three-quarters of small businesses believe the government should do more to help them during these challenging times. While government schemes and initiatives to provide additional funding for small businesses have been widely discussed, the bottom line is that they haven’t been effective, and this has led to an increasing sense of disillusionment.
In the same survey, more than half of respondents felt that none of the key initiatives for small businesses outlined in November 2008’s pre-Budget report had benefited them. Instead, small businesses said the issues that most affect them, and which they would like to see the Budget tackle, are unfavourable bank charges (50 per cent) and late payments (40 per cent).
Respondents also indicated the five most popular measures they would like to see included in the Budget. Top of the wish list was a reduction of employers’ National Insurance contribution rate, which 46 per cent per cent of respondents selected. While this is seen as a small contribution by the government, it is clearly an expensive and hidden tax that is squeezing small businesses.
The second most popular measure (33 per cent) is a tighter control over bank charges, which is hardly surprising considering the way banks have hiked rates since the start of the credit crunch. Tax relief dominated the wish list with a further deferment of the rate increase of corporation tax (27 per cent), while an extension of VAT reduction to 15 per cent for a further 12 months (21 per cent) was also seen as a welcome reform. Finally, 21 per cent felt that a measure to ensure late payments are reduced was necessary, reflecting how this continues to be a problem for small businesses.
Clearly, small businesses face a number of challenges in the current economic climate and the Budget presents the government with an opportunity to address their pain points. But small businesses can also help themselves by adopting best practice in financial management.
This involves being aware of how much money is being spent, tracking VAT and making accurate returns, and identifying potential cash flow problems before they occur. This calls for processes to monitor and track finances, as well as to prepare a cash flow forecast. By following this best practice and implementing the relevant processes, small businesses can turn their fortunes around before the government decides to take action.
Diana Flier, compliance analyst at accountancy software specialist Intuit UK, has over 20 years’ experience in payroll systems and processes. She is also an active member of the Business Application Software Developers Association