Managing your legal risksLet's be frank, being in a small business is a risk balanced with reward. It is recommended that you seek professional business legal advice for any important decision that you make - at LawBite you can ask us a question and receive a free 15-minute consultation with an expert LawBriefs lawyer. In this final part of the LawBite SME Roadmap we take you through:
The vital importance of cash flow and credit control. Insurance to protect key parts of your business. How to avoid, defend and win legal disputes. How you can approach exit strategies to your maximum benefit.
Credit controlOne of the biggest threats to an SME is a lack of cash. Even businesses with great ideas, products and staff can suffer from cash flow problems. A robust credit control policy is essential in managing this part of your operation. You should always ensure that you check your customers’ creditworthiness. As part of this, your customers should complete a credit application form before you begin to do business with them. Once you have the form you will need to check the information using the following sources:
- Register of Judgements, Orders and Fines (www.trustonline.org.uk)
- Insolvency Registers (www.insolvencydirect.bis.gov.uk)
- Companies House (www.companieshouse.gov.uk)
- Bank references
- Trade references
- Status reports from credit agencies
- Clear credit terms and limits
- Retention of Title clauses
- Termination clauses
InsuranceControlling credit and making sure that your insurance is correct is a vital part of your business as it grows. You should use insurance policies for the most vulnerable parts of your business. Insurance is the way to address many of the potential risks that your business might face. Whatever type of insurance you decide to get make sure to always shop around for quotes, be aware of exclusions and any excess amounts. Employers’ liability insurance Any business that has workers must have employers’ liability insurance under the Employers Liability Act (1969). It covers you against claims by employees who’re injured at work or suffer a work-related illness. The key issues are:
- level of insurance cover
- certification of insurance
- keeping a record and previous certificates
- using an authorised insurer
- status of workers
- Directors’ liability insurance
- Professional indemnity (PI) insurance
- Product liability
- Business interruption
- Credit risk
- Key person
DisputesTop 5 tips for dispute management Inevitably any business will at some point be involved in a dispute of some description. It goes without saying that the avoidance of disputes is generally the best course of action for your business, but in cases where that is not a realistic option, here we will outline what steps you can take to increase your chances of winning. These are our top tips to avoid disputes:
- Prevent contractual problems from escalating.
- Know under what legal basis you’re entitled to claim.
- Work out in advance what it’s going to cost you.
- Manage the legal process efficiently.
- Don’t forget there are other ways to resolve disputes such as mediation and arbitration.
- Action for an agreed sum - where you claim the disputed amount as debt
- Damages claim - compensation for losses caused by a contract breach
- Specific performance - a court decrees that the party must meet contractual obligations
- Injunctions - another remedy where damages are not sufficient alone
- speak to the other side, before writing anything down
- negotiate firstly
- have clauses within the contract which encourage negotiation before more formal measures
- establishing a duty of care
- proving a breach of the duty of care
- demonstrating loss
- follow the deadlines for serving documents to the other side
- state specifically whether you’re denying any claims against you
- keep an eye on the costs
Exit StrategiesTop 5 tips for selling your business
- Choose the right buyer.
- Talk to at least two interested parties at the same time.
- Be prepared for due diligence.
- Understand different ways your business can be valued.
- Make a clean break - minimise earn-out periods and warranties.
- Company details and structure
- Share capital
- Financial accounts
- Current contracts
- Litigation and disputes
- Warranty and indemnity insurance cover
- Disclosure letters
- Qualifying wording
- Time limits, the legal default is six years
- Financial limits
Journey furtherFor expert business legal advice and a free 15 consultation, please do enter an enquiry or call us today on 020 7148 1066 to speak to a member of our friendly Client Care Team. SME Roadmap Part 1 SME Roadmap Part 2 The author of this blog post is LawBite’s Michael Jaiyeola. The article has been adapted from ‘Law For Small Business for Dummies’, by Clive Rich, LawBite Founder, A Wiley Brand
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