Special feature 10 traps for businesses
Monday 13th November 2017 @ 09:31 by Adam Higgins
Business Glossop Chronicle

Such is the nature of running any business, managing the administration side of things can be an arduous job. 

There are also many challenges and important aspects to consider to enable the business to grow and be as successful as possible.

The Chronicle spoke to Jessica Greenhalgh (pictured), a solicitor at Glossop law firm Davis Blank Furniss, who has issued some useful and wide-ranging advice for business owners and entrepreneurs.

Covering everything from data protection to thinking about the future, here are her 10 Traps for Businesses…

1) Failing to consider structure

When starting up a new business, you rightly focus on service delivery, cash flow, appropriate work force etc. We see many businesses over look structure resulting in unnecessary tax payments, excess administration and professional fees. Take time and advice early on about the best vehicle for your business. Consider whether you should be a sole trader, limited liability company or partnership. If you have inherited a business or bought an off-the-shelf company, tailor it to what your business needs and make sure it is set up to minimise tax and protect key assets. If it is a limited company, check whether your articles of association actually allow you to do what you are doing and want to do. I often see old articles that restrict a company’s borrowing abilities, which can cause problems when finance is needed.

2) Failing to establish your relationship with business partners

Most businesses are a collaboration of people bringing the best out of each other. Although those relationships often start well and may continue to be harmonious, we frequently see business partners tied up in acrimonious battles because they did not communicate their expectations for the business. The clearest way to deal with this is to enter into an agreement with your business partners that covers how you plan to deal with the main areas of the business going forward. A well-prepared agreement should make a dispute less likely as it clearly sets out how the business is run and the owner’s respective rights. This sort of agreement would cover off what roles you are expected to carry out, who has control of the business, how to draw income, in what circumstances you can exit the business, what happens if an owner dies and how conflicts are resolved. It does not have to be long – often the shorter and more straightforward it is the better.

3) Commercial Contracts

Time and again we see clients wanting to know how to get out of contracts that have become unprofitable or unsustainable. Although it is tempting to enter into a lucrative contract with a good contact without considering the paperwork, it can provide big problems in the future. Issues we see in contracts are:

  • That they do not reflect what was actually agreed commercially.
  • The business is unable to get out of it if it becomes uneconomical/ the relationship breaks down.
  • Confidential information and IPR is not protected.
  • Liability is not limited.

Even if you are not in a strong negotiating position, you should at least ensure you know the risks when entering into the contract so you can plan it into your business plan. We can help by providing an overview of the key areas of risk or we can amend and renegotiate the contract itself. The earlier we are involved the better.

4) Terms and Conditions

Businesses often use terms and conditions they have taken from another company’s website that are not tailored to and do not properly protect that particular business. Terms and Conditions are a document worth spending some time on as they can be used multiple times and are an opportunity to put forward your own terms that best protect your business. If you already have a set of terms consider whether they:

  • Properly set out how and when you get paid?
  • Set out how you can exit the agreement.
  • Limit your liability?
  • Allow you to take back the goods if you don’t get paid?

Good terms can protect your business and help you to enforce contracts.

5) Confidentiality/Intellectual Property


Businesses often enter situations where they need to share key information. This may be when entering into a joint venture or negotiating a sale. Do not get carried away with the process and engage in a data sharing process until you have the appropriate confidentiality or non-disclosure agreements in place, particularly if you are engaging with a potential competitor in the market.

Intellectual Property

Protect the IP in your business. Ensure that your employees job description is appropriately tailored to ensure you own the IP they generate. Take particular care with consultants who own all Intellectual Property they create – enter into an appropriate consultancy agreement and ensure you obtain a written transfer from the contractor/consultant as otherwise they will retain ownership.

6) Financing

This is key to help grow and sustain any business. Businesses can end up only looking for finance when they are in desperate need. This places them in a weaker bargaining position. Plan ahead, review the facilities you have in place, review what’s available in the market, if you are a company remove unnecessary charges that are registered at Companies House and make sure you have a stream of income to secure cash flow.

7) Credit Control

Bad or non-existent credit control plans are common place and can be extremely detrimental to the cash flow of a small business, particularly when contracting with larger companies. There are ways and means to reduce bad debts and reduce the time in which creditors pay. Consider upfront credit checks to establish whether your customer can pay – if the results are negative ask for payment upfront. Put in place a debt collection process and train your staff on how it works so that debts are chased at appropriate times and not forgotten about. A common obstacle in the Credit Control process is with individuals not wanting to damage a customer relationship, particularly when the payment delay is an administrative one in a large company. We find this can be addressed by sectioning off a separate ‘credit control team’ so it is out of the hands of the individual who needs to maintain the customer relationship.

8) Data Protection

Data protection is becoming a more centralised issue for all business with the new rules coming in next year, these are the General Data Protection Regulations (GDPR). With increased awareness in society and higher sanctions business cannot afford to turn a blind eye. Personal data can include names, email addresses, home addresses, dates of birth etc. – I see countless businesses who don’t think they hold or process any personal data but that is rarely the case. Now is the time to prepare for the upcoming GDPR. Review what data your business has, consider whether it needs consent to hold that data and look into training staff and revising policies.

9) Employment/Staff

Many claims arise out of inconsistent treatment of employees and with Employment Tribunal fees being found ‘illegal’, employee claims are likely to increase. Make sure that you have contracts in place to set out the basis of your relationship. It protects the Company’s position. However, make sure they are drafted for your organisation and not a cut and paste job. If they don’t fit your business you’ll end up on the back foot. Restrictive covenants are also useful to help protect against your competitors. Implement staff policies so it is clear how you want your employees to act in the work place – set-out how the internet should be used and what your disciplinary process is. Undertake appropriate checks on employees and ensure they have the right to work in the UK – big penalties are going to be introduced in April 2018. Consider whether Director’s Service Contracts are appropriate.

10) Succession Planning

We have seen that worst case scenario where the owner and key person in the business unexpectedly dies or loses capacity with no one to step in and continue the running of the business in their absence. Plan for the future of your business, whether it is for your retirement, for sale or just in preparation for the worst case scenario. Surround yourself with a well trained team that can pick up the work and consider EMI Options to incentivise employees. Put processes in place that can run without your sign off. Consider up-to-date wills, business agreements (and if it is a limited company, articles of association) so that your share in the business can easily pass to the right people and consider Keyman Insurance.

You can hear more from Jessica on the Business News today (Monday) from 11am to 3pm on Tameside Radio 103.6FM.