Tricky business conditions can make it seem impossible to create a financial life jacket, while risible interest rates make it seem pointless. However, it can be done and will help you steer a steady course
Some printers laugh; others are insulted; a few look at you as if you’ve had your head in a bucket of solvents. Save money for a rainy day? You must be joking, they say, it’s been monsoon season for the past three years with no sign of a rainbow – every day is a rainy day.
The reality of dwindling margins, falling prices and higher operational and purchasing costs has indeed made saving money secondary to just making it to the end of the month without a ‘final reminder’ coming through the letter box. Printers are becoming short sighted by necessity.
However, some argue that, even in these difficult times, saving money – to cover a lean month, for emergency repairs to kit or buildings, or for extra kit to cover a contract – is not an impossibility.
That saving money is difficult at the moment is something no one is disputing.
"There are very few conversations being held about ‘what shall we do with all the spare cash’," says David Bunker, business development director at Close Brothers Asset Finance. "This is the worst recession in living memory, so spare cash is rare."
"All businesses try to put money aside, but building up a nest egg for a large project is unlikely now for most companies," adds Paul Calland, director at H&H Printers.
The problem, of course, is that for most printers there have been too few good months over the past three or four years to generate enough of a float to take the business through the more frequent lean months. It’s an issue that BPIF chief executive Kathy Woodward argues is putting too many print businesses in jeopardy.
"There are too many printers operating right on the edge, so the sudden major breakdown of machinery or bad debt drives them to the brink of their bank lending or breaches their banking covenants," she says.
She explains, though, that the situation is not as bleak as many would have you believe. She argues that many print businesses are trying to save and that many are succeeding.
"While the resounding cynical answer from most to the question of whether they are putting aside money would be ‘I wish’, in reality, most businesses are attempting, throughout the year, to build sufficient surplus cash to cover unexpected occurrences," she explains.
One printer successfully saving money for the future is Rushden-based commercial print outfit Stanley L Printers. Established in 1916, it has sailed through many a financial storm and managing director Linda Watts says it is the company’s concentration on putting money aside that has seen it emerge triumphant each time.
Even in the dire economic conditions of the past two years, Watts has managed to maintain this policy of saving money for the future. She has done so by scavenging for cash throughout the business. Part of it comes from increasing efficiencies and being as lean as possible, but it also comes from an extremely close eye on every outgoing.
"We have made some amazing savings over the past two years and so been able to put money aside, just by being frugal and looking at absolutely everything we spend in minute detail," she says. "For example, I am not one for budgets: if you give someone a set figure, they will just spend it. Instead, anything anyone wants they have to make a case for it. So if the marketing director came and asked what the marketing budget was, I would ask them what they thought they needed. We then decide whether that money is worth the end goal. It doesn’t matter how small the sum saved, it all mounts up – out of acorns trees do grow. You should not be flippant or blasé about putting smaller sums away."
Bunker agrees that looking closely at outgoings can realise money that can be channelled into savings. He says that at Close Brothers Asset Finance, for example, helping businesses consolidate loans has been a successful way of reducing outgoings.
"Consolidating loans into one simple agreement on equipment can release much-needed headroom to allow businesses to put money aside for bills, an increase in work or repairs or even a deposit on new investments," he explains.
Woodward says the BPIF offers advice on many other routes to find cash to put away for savings funds. Its qualified associate consultants advise on the financial products and grants available, as well as savings that can be garnered from the likes of operational efficiencies, material waste, environmental savings, tax credits and insurance savings.
Many printers, though, will claim they’ve done all the above already and therefore their options for creating a savings fund are nonexistent. Calland, however, disagrees. Earlier this year, his firm, Cypher Digital, was acquired by large commercial print business H&H Printers. This experience of becoming part of a larger company has demonstrated to Calland that less formal tactical partnerships than his own with other companies could give real long-term savings for small and medium-sized businesses.
"Being part of a larger business has given us so many opportunities for savings," he explains. "We now have much more buying power – when the acquisition went through, our paper was instantly heavily discounted because of the bigger buying power of the group as a whole. We also had better access to finance and better access to resources – we now have access to two salespeople, which we could not afford before."
These benefits do not necessarily need to come through acquisition, he argues, and could come through a less formal tactical partnership between well-fitting print businesses. Linking with another company to merge some of the admin roles and to share resources, and using the purchasing power of the joint operations, is a viable way of securing long-term prospects and further generating savings if other options have been exhausted. Admittedly, however, it won’t suit everyone.
While undoubtedly difficult, then, savings can clearly be realised in a number of ways to ensure money can be put aside for long-term security. But finding the money is not the end of the headache. As Watts and Woodward explain, the banks are not incentivising saving.
"The thing that puts people off saving is that the rates you are getting from the banks currently for saving money are appalling," says Watts. "We are certainly not getting the returns on our money that we used to."
"The difficult thing at the moment is that bank lending is punitive yet the return on business accounts is minimal and other than placing your money at risk there isn’t a way around it," agrees Woodward.
Indeed, not only are the banks not lending currently, but the rate of interest on savings is so negligible it is unsurprising many don’t see the value of storing cash for the future.
However, Mark Bampton, head of business savings at Nationwide Building Society, says part of the problem is that businesses are failing to look beyond big-name banks to the hundreds of other savings account options available on the market.
"It is important that business owners take their time, shop around and choose the right account for them," he says. "The business savings market, at present, is highly concentrated, with the top five deposit-taking institutions accounting for more than 90% of the market. This isn’t necessarily a healthy position for either the market or business savers."
He says that Nationwide is trying to entice customers away from those institutions with a recently launched range of "competitive instant-access and notice business savings accounts" for small and medium-sized businesses. However, with rates ranging from 1% to 1.6% gross PA/AER variable plus fixed-term bonds with rates ranging from 1.5% to 2% gross PA/AER, they’re hardly going to get printers fizzing with excitement.
As well as poor savings rates, staff unrest is a potential spanner in the works.
Deferred salary rises, a lack of reinvestment in kit or training, or strategic partnerships all have the potential to cause problems with staff, and so explaining the reasons for every decision fully and openly is key, says Watts.
"When we have a good month or two, of course the temptation is to spend the money, to offer the wage rises people have not had for three years, and to update the kit," she explains. "However, you have to think of the long term – I am responsible for the workforce and their families and so I save that money in case the next month, or the next year, is difficult.
"You need to explain that thought process to the staff so they understand why the money is not being spent."
Woodward adds that companies should not fear being open, either.
"I think employees would rather work for a robust organisation and understand the realities," she says.
One of those realities, of course, is that for some companies that have exhausted all avenues, saving money is going to be a dream and nothing more. Yet there is scope for many businesses currently not saving money to do so.
The returns on a standard savings account may be small, and generating the savings is a tough task, but there are viable and productive routes forward that can, adopting Woodward’s words, get printers out of the mindset of a "sprint to keep your head above water" and into one of creating "a business fit for the marathon".blog comments powered by Disqus