Expenses are not just a parliamentary issue

For several weeks in the early summer, pubs and dinner parties echoed to frenzied discussions of one key topic – the vexed question of MPs’ expenses.

The expenses issue is not one that affects politicians alone, however. Now, a report from fleet management company Lloyds TSB Autolease, released in June, has shown that just one in three senior managers and directors have cut back on their business expenses and benefits in the face of the economic slowdown. In particular, it showed that just one in 10 bosses have taken on a cheaper company car in an effort to reduce their business expenditure.

According to Corporate Sales Director Claudia Rose, “If one thing can be taken from the survey, it’s that there are potentially enormous business savings to be made on personal expenses and benefits such as business travel and company cars. Now is the opportunity to act.”

Writing on the Director of Finance Online website (www.dofonline.co.uk ) Tim Hardcastle, Chief Executive of expense review consultancy F2X, suggests that this is just a small element of a far wider issue. “Despite the fact that we’re in the midst of a recession, companies are still mismanaging their business expenses, with expense spend up to 40% higher than it should be,” he says.

He advises that “operational expense processes should be transparent, auditable with delegated authority and automated wherever appropriate”.

More specifically, he recommends that businesses should thoroughly review all their accounts payable, and address each in turn starting with the highest spend areas. As he says, “Make sure you have the best possible contracts in place for the best deals.”

Most important of all, though, are the policies and authorisation procedures that a business should have in place to make sure that the right sums are being spent in the right areas. “Clear expense policies are vital, setting out who authorises expenses, what value they can authorise and who is overseeing these policies,” he says. “Informally ask questions to determine if the authorisers check the expenditure, follow the policy and keep costs to a minimum.”

Just as it appears that the MP expenses row will eventually result in a better, fairer and more open approach at Westminster, the recession may also result in a more efficient and rigorous approach to expenses that will continue to stand businesses in good stead once recovery takes place.

NHF accuses energy companies of overcharging some customers

In a June report, the National Housing Federation (NHF) has calculated that energy companies have been overpaid by some £460 million over the last three years by customers on pre-payment meters.

Some 12% of customers, often those who can least afford such additional financial stress, use this method of payment.

The NHF, which based its calculations on figures released by energy regulator Ofgem, believes that the overpayment is due to higher charges imposed on metered customers by the energy companies.

It says that this might be in breach of EU rules, suggesting that those affected may be entitled to claim refunds.

He advises that “operational expense processes should be transparent, auditable with delegated authority and automated wherever appropriate”.

NHF Chief Executive David Orr has accused Ofgem of being “asleep on the job”, adding: “It is an absolute scandal that Ofgem allowed energy firms to overcharge customers to the tune of £460 million, and potentially breach EU rules for so many years… It must urgently start defending the rights of ordinary people, instead of protecting the profits of big business.”

Anyone who believes that they have been overcharged by their energy supplier, or any other provider, may benefit in the first instance from taking professional advice on whether or not they can successfully reclaim any sums that they have overpaid.

A positive outlook drives good business

Four out of five CEOs of small and medium-sized businesses who were surveyed for an April report by the Institute of Leadership and Management are optimistic about the future – so it is unsurprising that a significant proportion of them also identified a positive outlook as the single most important personal quality in helping them survive recession.

The report, called Delivering in a Downturn, said they want “managers to be confident, optimistic, positive and have a can-do attitude, and believe that there is a strong association between positivity and solution-driven hard workers with a winning mentality – people who are more likely to fight for a company’s survival.”

Equally, the CEOs highlighted the dangers of pessimism. As the report says, “It paralyses organisational decision-making processes and hinders chances of survival. Optimistic organisations are better positioned to take advantage of opportunities presented during a recession.”

So the message is clear – a positive attitude about the future feeds the energy and enthusiasm that enable challenges to be overcome and ambitions to be achieved.

Further Companies Act changes are due in October

The Companies Act has been in existence for some 150 years, but the sweeping changes that received Royal Assent in 2006 will not be fully implemented until October this year when the final alterations to its 1300 different provisions will finally come into force.

The changes due this autumn to the Companies Act 2006 include areas such as:

• The formation of companies
• Companies’ constitutions and capacity
• Company names and business names
• Re-registration of companies as a means of altering status
• Protection from disclosure of residential addresses of company directors
• Shares and share capital
• Company charges
• Dissolution and restoration to the register
• Unregistered companies and overseas companies
• The registrar of companies

Recognising the complexity of the changes that are yet to come, many solicitors and other professional services firms will be running seminars and other events to explain their main impact on running a small or medium-sized business. Ask your solicitor if they are planning to do so, or set up a special meeting where you can discuss what the changes will mean for you and your organisation.

Protection against ‘social engineering’

An international telecoms company highlighted in May this year an emerging technique that is enabling criminals to bypass even the most hi-tech protection systems to steal confidential business information.

Research from Siemens Enterprise Communications has warned against the growing threat of ‘social engineering’, in which a criminal gains the confidence of people within the targeted business. According to Colin Greenlees, a security and counter-fraud consultant with the company, “The scary thing is that it’s all simple stuff. It’s just confidence, looking the part and basic trickery such as ‘tailgating’ people through swipe card operated doors.”

In a week-long experiment, a Siemens employee used such techniques, not only to enter a FTSE-listed company’s offices without being challenged by security guards, but even to base himself in a meeting room where he worked for several days, to access the company’s data room, IT and telecoms network and to persuade 17 employees to give him their usernames and passwords.

While big business is the primary target for social engineering attacks, there are still lessons to be learned by smaller organisations, particularly those that use contractors and temporary staff. Ensure that all employees are prepared to challenge people they do not know, and that you are fully aware of who is entitled to be on your premises at all times.

Insurance for micro-businesses

Under new proposals from the Law Commissions of England and Scotland, upcoming reforms to insurance law should treat very small businesses, with fewer than 10 employees, in the same way as it does consumers.

The reasoning is simple. Many of them are no more financially sophisticated than individual consumers, and comparatively few of them use a broker to arrange their insurance cover, with about half buying direct from insurance companies (FSA, 2007). Currently, however, they do not receive the same mandatory protection against unfair contract terms in their insurance policies that consumers enjoy.

Any such change would affect a great many organisations. According to Government figures from last year, there are some 4.5 million so-called ‘micro-businesses’ in the UK, providing jobs for over 30% of private sector employees.

According to Commissioners David Hertzell and Colin Tyre QC, “We believe it is vital to ensure that this sector of industry is protected by the law. We are eager to hear the views of all interested parties, in particular micro-businesses, on our proposals.”

The new proposals were published by the Law Commission in April this year, with a request for the views of interested parties by mid-July. We will report on further developments in a future issue of Right Focus.

Banks to be fined for poor customer service

November this year will see the Financial Services Authority (FSA) assume responsibility for the conduct of the high street banks, building societies and credit unions, when it intends to put into action its plans for fining those that treat their customers poorly.

Before this, it also plans to publish information for consumers explaining their rights and explaining the minimum levels of service that they should receive from their bank or building society. This information will be based on the FSA’s new rules, designed to ensure that customers are treated fairly, kept informed and can easily switch accounts.

It is even going to carry out a mystery shopper exercise to ensure that these standards are delivered and maintained.

According to Vera Cottrell of the Consumers’ Association, “The FSA has to get tough as a regulator and use its full range of powers to keep banks in check. If it relies on the industry to develop its own code, consumers could find themselves worse off.”

Know your rights when shopping

Most people have probably had the experience of attempting to return a faulty or unsatisfactory product to a retailer, only to be told that a refund or exchange is not possible.

The reality is, however, that a number of the most common excuses used by a retailer are unfounded.

For example, you do not need a receipt when you return a product. All you need is proof of purchase, which can also be demonstrated by producing a bank statement or credit card bill.

In addition, you might be told that your complaint is with the manufacturer, and that you will need to contact them. Again, this is not true. When you buy a product, you enter a contract with the retailer, and it is their obligation to make amends.

The third myth is that you cannot return an item bought in a sale; your consumer rights are just the same if you bought it at full price or a discount.

However, retailers have their rights too. They are only obliged to refund or replace a product that is faulty or is not fit for purpose, so you are not entitled to a refund if the item in question is perfect. But where goods are faulty, consumer protection legislation is firmly on the purchaser’s side.

FSA is set to protect consumers against insurance changes

Financial Services Authority (FSA) Chairman Lord Turner has attacked insurance companies for threatening to water down or increase the cost of the policies that 700,000 customers have taken out to protect their mortgage payments in the event of unemployment.

At the time of writing, several insurers are believed to be planning to follow the example of the Post Office, which in April reduced the maximum level of cover provided by its mortgage protection policy from £2,500 to £1,500-a-month and increased the delay between stopping work and receiving any money from 30 to 90 days.

As Lord Turner said, “Whilst it is natural for the industry to respond to changes in risk, this raises issues with both unfair contract terms, disclosure and our 'treating customers fairly' principles. How many consumers would have taken up this cover if they had known that at the very time they needed the protection the most, the price of it could significantly increase or the amount of cover decrease?”

He warned the industry that the FSA would certainly investigate the situation in the light of an angry response by consumers, and that it would “respond to people's expectations in that we will be more forceful in pursuing enforcement against reckless or abusive practices which cause customers harm”.