Profit after tax is NOT spend-able cash

OK, so I worked for five years for a firm of accountants in the City of London (Neville Russell, now part of Mazars), and I guess that gives me a head-start in understanding a set of financial accounts.

Let's take a step back. Anyone in the UK can get hold of the latest set of accounts and the Annual Return of a company from the government department known as Companies House.

• The Annual Return gives you a list of company directors and their home address, together with a list of shareholders (and their home addresses) and their shareholdings.
• The Financial Accounts are a much more complex, and the most frequently misunderstood document is the "Profit and Loss Account" which looks at how much money they got from trading, and the costs they spent while trading - such as buying the stock, paying the staff, the light and heat bill, etc etc. But it does NOT cover how they spent cash in buying assets, and it is quite feasible that and spare cash (and more..) could have been used in buying new equipment, new group companies and so on.

My point? Employees should not look at their employer's accounts and say "they made enough money, they can afford my pay rise" - an employee expecting any more than a pay freeze in this market has their head in the clouds, frankly. And past year's trading profits do not mean that the employer has cash surpluses available for distribution.

I survived Christmas without going to a shop

Those of you who read this blog will know that I like using the net a lot. So it will not surprise you that I did all my Christmas shopping online and never went near a shop. Amazon got their act together this year and delivery was spot on - even a late order for 6 items on the evening of Sunday 21st December arrived before noon on Tuesday 23rd. eBay shops were good, charity cards arrived by post and I sneaked some wrapping paper my wife had stored away in the loft after buying it in the January sales nearly a year ago.

Coming from a family of retailers, I got a fair amount of stick when I told them on 25th that I had not been to a shop this Christmas. "You should support the High Street", they told me, implying that the only way to ensure a retailer made money was people coming through the front door of a physical shop. It seems to escape some retailers that the as the recession hits deeper and deeper, the retailers who are most likely to survive are the ones with the lowest cost base - those with a virtual front door online open 24x7. It certainly does not need to be the only part of the mix, but it is very likely to be a key component.

None of us know how long or deep this recession will be, although most media columnists are erring on the side of caution, and realistic employees are more than happy settling for zero pay rises in the knowledge that they still have a job. Spending patterns are changing significantly with a much higher percentage paying by cash than shops have seen for years, and credit card payments taking a dent as inidividuals max-out their accounts. However, I also see big changes in web retailing - where the much lower costs leads to lower selling prices, in turn showing an acceleration in spending online over the high street.

Support retailers I did - supporting those with the vision to sell online.

Social Networking in a business environment - 2

Having written last week about LinkedIn.com, this week I turn to a more controversial site - Facebook. Up to perhaps a year ago, Facebook was largely dominated by the 14-24 age group, but a real sea-change has occurred and I would put the top end of the age range more like 60-70 ,although that may be stretching it a bit far.

Facebook is much more "social" in what it seeks to do, and includes much more on personal interests, online games and keeping up to date with what everyone is doing. So, you say, what's that go to do with business? Well, in these days of homeworking and disparate teams, Facebook is the glue that keeps such groups of people together. In my own team, for example, I have colleagues in UK, France, Finland, Spain, Romania and Egypt. Of these, I have personally met just one face-to-face, although that is being addressed early in 2009 with a plan to go to Cairo for a week. And, of course, I work from home.

So, excluding IM which we use for formal comms, we have no water cooler to chat at. Facebook is our virtual water cooler. Sharing photos, what you've been doing, forming groups etc gives a sense of belonging. Then extend that from business networking to the people you send your Christmas cards too - and instead of sending something once a year, you can keep in touch with them right through the year.