Licensing, registration and inspection
It is amazing how many businesses require some form of licensing, registration or inspection. Bed and breakfast establishments, for instance, may need to be inspected by fire officers, to be registered with the local authority, and may even need planning permission and official approval of their signs from local planning officers. That’s before they start taking on catering, in which case there is another host of rules to contend with. These rules have been set up for the public good, wisely or otherwise. But many people do not know about them. Unfortunately, ignorance is no defence and you could end up being fined heavily if, for instance, your kitchen is not up to environmental health standards for a catering business, or if you are an unregistered childminder. If you make toys which do not comply with safety standards or sell clothes without the correct labelling, you could also end up in hot water.
As a general rule, it’s a good idea to find out about what red tape is involved before you set up a business. Your local authority is a good place to start. Tell them what you want to do and they will put you in touch with the relevant person : the local trading standards officer for instance, if you plan to make and sell goods; the Social Services Department if you plan to run a childcare facility or nursery. The local environmental health officer if you want to run some form of catering outlet.
However, if you plan to grow produce or package it — say for instance, you have a herb garden and want to sell your dried herbs, the Ministry of Agriculture, Fisheries and Food has all the details of what you can and can’t do. If you plan to set up some form of manufacturing process your local branch of the Health and Safety Executive are the people to contact. They can also be very helpful if you plan to take on employees. If your local authority cannot help for any reason, then your local Business Link or TEC are also good sources of information.
Bad debts
Bad debts are the nightmare of every small business. It isn’t possible to avoid them, but it is possible to minimize the risk. Firstly, be sure that when you agree to sell any goods or undertake any work, you issue a very clear statement of your terms and conditions. This should include how much, when and by what means you are to be paid (e.g. if you expect a deposit, you should spell out its exact amount, and the amount of the balance to be paid later.) For instance, many guest houses insist on a 10 per cent deposit on booking and a 50 per cent cancellation fee, if cancellation is within a fortnight of the intended stay. Although, legally a contract can still be binding if it is made orally (e.g. over the phone), it is always best to put things in writing — a short letter confirming what has been agreed can avoid disputes later, or help to resolve them in your favour.
Many businesses require payment up front — therapists generally work on a per session basis, for instance, and most craftspeople and mail order companies will expect payment in full at the time of ordering/delivery. Although there are some businesses where payment is generally made after the services have been performed, you must have a clear contract before you undertake the work, or you will find all sorts of problems later on. If your customer has not sent you a contract — or if its terms are unacceptable and you have not yet agreed to them — then you should send them one. It could be as simple as a letter stating clearly what the work is to be undertaken, how it is to be done and when, what the price is, and when and how it is to be paid.
It might seem somehow ‘unfriendly’ to put your agreement on such an official footing and several people have expressed this reservation to me. In response, I’d say that it is not so much unfriendly as professional. Secondly, would you rather be friendly or paid?
However, if all else (including repeated phone calls, pestering and an angry letter from your solicitor) has failed, court action may be your best bet. There are several ways to pursue this. If the claim is relatively small, you can pursue the debtor through the small claims court. This has a current ceiling of claims for £3000. The procedure is relatively simple and you probably will not require a solicitor to help you. Your local Citizens Advice Bureau is a good place to start for more details of the procedure. They may also be able to advise you as to your chances of getting the money back. (Difficult if your client has done a moonlight flit.) Look them up in your phone book or Thomson Directory.
If, however, your claim is for more than £3000 or the debtor claims that your service was unsatisfactory and puts in a counter claim, you will need to go to a higher court and may decide to engage a solicitor. If not, it is well worth talking to the Citizens Advice Bureau about presenting your case. You may be lucky and find that your debtor pays up once your summons (the first step in taking court action) has been issued. You should try to ensure he also pays the cost of the summons, of your solicitor and any interest that was built into the contract. Alternatively, he may fail to put in a defence or to appear in court, in which case judgment is likely to be in your favour. In the worst case scenario, he may choose to defend himself and you may have to slug it out openly in court.
Whether you feel it is worth the risk of losing your time and money (and if you are not in the small claims court of having to pay the other side’s costs), as well as gaining possibly adverse publicity, is up to you. But it is well worth thinking over before making the decision.
If you are dealing with a large company, one way to embarrass them into paying up is to issue a winding up order which can be used for debts of over £750. Your solicitor will tell you how to go about it. If alas, the company that owes you money has gone bust, you will need to join the list of creditors. Again, a solicitor can help ‘you do this, but your chances of recouping the whole debt are slim. Incidentally, many companies delay payment for as long as they can — i.e. until you make a fuss. Asking for your money from a reputable company shouldn’t make you unpopular. Even if it does, you have to ask yourself am I prepared to work for this company for nothing and retain their goodwill and gratitude — or would I rather be paid ?
It is galling to have a bad debt, but even more galling if you are expected to pay tax on it. Alas, the Inland Revenue does not accept extra-slow payment as bad debt. However, if a company which has gone bust owes you money, they may well accept that you are not going to be paid. This is one of those technical areas where advice from a solicitor or accountant who specializes in tax could be very useful.
Thinking about exporting?
This is a major step for most small businesses and requires a lot of foresight and planning. If you are a one-man band, working from home, you must expect to need some help, paid or voluntary, once you get to the point of exporting your products. You may, for instance, need to employ someone to act as a translator for you in your business dealings, or even to help you suss out suppliers or the competition abroad. You may also want to employ a local agent or advisor. The first step is to get in touch with the people who can help. This includes your regional government office. Their number can be found in the phone book and they are sited in major centres. Alternatively, you could talk to your local TEC or Business Link as many are starting to employ export advisors. Both will give you excellent advice on how to do further research into your market. The Department of Trade and Industry can also supply a great deal of help as they operate many schemes, often in conjunction with the Foreign Office. These include the chance to exhibit at trade fairs abroad, to take part in overseas marketing initiatives and to get information about trading conditions in the country you plan to export to. There is also a know-how fund for firms who want to trade in Eastern Europe. Your local Chamber of Commerce will also be able to help and you may find that the country you want to export to has its own trade association with a base over here. (Contact their embassy to find out.) Your bank may also be able to help you if they have an overseas department.
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